The Chairman of the United States Delegation (Willoughby) to the Secretary of State
140. Norval called on me Friday, stating he would go to London Saturday to participate talks with British. Wished to obtain my reaction certain ideas which he had as to possible solutions South Africa problem. Said first South African sterling as well as dollar resources exhausted and for next 6 months would therefore be no discrimination (but this not borne out by Pretoria’s 54, May 211) However, would be necessary to reach agreement now with United Kingdom on course of action at end of 6 months. He thought of 3 alternatives:
- Same as original South African plan (Annecy’s Unnumbered May 11).
- Extend Category (A) in Plan 1 to include goods of somewhat lesser degree essentiality. To purchase these all gold plus hard currency earnings plus an equal amount soft currency would be set aside. Imports would be on basis of price and nondiscriminatory. All hard currency would be first used up, whether for purchases in hard or soft currency area. After this exhausted, the soft currency allocation would be used in soft currency countries. A reduced Category (B) would remain as in Plan 1. Would probably be a token import provision in Category (B).
- Only gold would be available for Category (A) which would be limited to goods strictly essential (nondiscriminatory imports). All remaining goods would be classified according to degree essentiality, perhaps 6 or 7 classes. Hard and soft currencies would be allocated to each category in proportion to total amount available and hard currency so allocated used only in hard currency countries and soft currency in its area.
We gave Norval our personal views as follows: Difficult to see now what type of control plan necessary in 6 months. Fundamental point remains that discrimination must be justified on basis of GATT provisions. If balance payments position justifies discrimination at end of 6 months, US will have no grounds for objecting. Reemphasized present indication is discrimination not justified. Regarding his alternative proposals, we said No. 3 seemed least discriminatory though a variant of this plan would be preferable, i.e.: not to set gold apart but to allocate (1) all gold plus hard currency and (2) all soft currency among the several categories of goods, allowing use of any currency within each category for imports regardless of source (Norval said reason for separating gold from hard curency was to encourage exports to US since imports of all but strict essentials would under Plan 3 be permitted only up to amount of hard currency earned by exports). We made it clear this represented only tentative first reaction without careful study and particularly without adequate consideration as to relation of such a scheme to provisions of Articles 12, 13 and 14 GATT, with which it might or might not be consistent.
Norval expressed appreciation our views and said would give possibilities further consideration. Emphasized his suggestions purely personal.
Sent Department 140; repeated London 9; Capetown 6.