841.5151/6–2749: Telegram

The Secretary of State to the Embassy in the United Kingdom 1

top secret

2210. For Douglas eyes only from Acheson. After long discussion with Snyder and Hoffman, we three submit the following program for comment and suggestion:

Preliminary work to arrive at a coordinated governmental position will go forward this week.
Snyder and Martin will arrive Paris about July 4 for several days’ discussion with Harriman and others.
Snyder and Martin will proceed to London for discussions with British on 8th and 9th as requested by Bevin and then continue his trip as scheduled.

As we see these discussions on the 8th and 9th they will be to listen to any British proposals and to state the American position, which probably will be we should be prepared to agree to their proposals for the expansion of their trade by the creation of a wide non-dollar trading area (including some modification of our position as to payments arrangements), provided we can be satisfied (a) that the area will be a genuinely European (or wider) project and will not be dominated by the United Kingdom, and (b) that it will be self-liquidating rather than self-perpetuating; there must be assurances of drastic steps to reduce prices within the area so that it can become competitive with the dollar area. In discussions with the British, we should stress our conviction that devaluation is probably an essential element in the solution of their problem. They should not, however, be forced to devalue against their better judgment, or be given any excuse to justify devaluation to their public as something forced upon them by the United States.

Hoffman expects come over later but doubts availability until middle July.

We regard these discussions as mostly preliminary to further study and consultation on the complex problems involved. However, Snyder would be prepared to discuss how and where subsequent things will [Page 797] be done, including our feeling that further discussions should probably take place in Washington.

We should not request postponement of the announcement or action proposed by the British for July 5 and should not try to negotiate on the substance of their action before July 5.

In the meantime it would be most helpful if you can obtain the fullest details of proposed import restrictions and reasons therefor. Also it would help very much here if you can get the British to couple their announcement of restrictions with a statement of their desire to move immediately to improve their competitive position and to liberalize their trade by relaxing restrictions on imports from OEEC countries and sterling area countries in accord with the proposals they have made to the OEEC.

The manner in which the action is announced and the future program of which it is a part are of crucial importance. We must receive assurances, and the public must be advised, that this action is not a reversal of policy into the line of complete restrictionism, but that it will be coupled with intensive efforts to make United Kingdom exports competitive, to expand United Kingdom trade immediately with areas in which it is now possible for them to trade, and ultimately with hard currency areas.2

Problem is being discussed with Franks3 in hope he can help on form of announcement.

  1. Repeated to Paris for Harriman as 2297.
  2. In telegram 2505, June 28, from London, not printed, Douglas reported that he and Harriman concurred with the proposed timetable for the meetings. Douglas, however, suggested that no reference should be made to any particular measure which the British should take, but instead the United States should seek assurances that drastic steps would be taken “… to reduce prices, et cetera”. (841.5151/6–2849)
  3. Sir Oliver S. Franks, British Ambassador at Washington.