Foreign Relations of the United States, 1949, Western Europe, Volume IV

841.51/8–2649

The Under Secretary of State (Webb) to the Director of the Policy Planning Staff (Kennan)

secret

[Washington,] August 26, 1949.

Mr. Kennan: As I understand Mr. Acheson’s ideas on the British-Canadian-US talks as expressed yesterday,¹ they are as follows:

1. The problem can be broken down into those steps which must be done immediately and those things which can be done somewhat later. The idea primarily is that we can do little immediately to help the British but that they must take rather drastic steps which will create political problems for the government. Whether these steps lead toward a future constructive solution or away from it may depend on our own attitude and whatever hope we can give them as to a possible long-term solution in which we would participate in a way that would be constructive.

2. We should aim toward the issuance of a British statement of what they intend to do themselves; this statement to be within the framework as follows:

We recognize that the UK and sterling area must restrict its dollar purchases and also that this will provide difficulties for us as well as for them. We recognize that the need for this is absolute, that it is not a breach of contract, that it is taken in good faith, and such other preparatory material as would pave the way in the field of public opinion for the best possible acceptance.

We should also state that we have reached a common understanding that what each nation must do to meet the present situation is internal and that all that anyone of us can expect is that each will take full, vigorous and effective steps to meet the situation; that we are convinced that the UK is determined to take the internal steps which will enable it to earn more dollars so that they will have more dollars to spend and that they have stated that they will do the following (statement to be issued by the British).

3. I would reiterate that both Canada and the US believe that in this statement the British are doing all that is possible immediately.

4. As to the long-term problem, we recognize that a part of the British problem comes from the necessity of financing other countries whose needs we all recognize. We are willing to take the view that this is a common responsibility and accept a large share of the responsibility for solving the problem. We also recognize that since sterling and the dollar are the only two world currencies we should provide some machinery for constant study and recommendations as to the steps to take in meeting the financial needs of the world with a stable currency. Therefore, we create a permanent combined board to work continuously on this problem.

5. We recognize also that as a part of the long-term problem the world needs more US goods and we want to sell more goods to meet this need. We recognize also that the wide gap between exports from and imports to the US may be narrowed both in our own interests and in the interests of stable world trade. Therefore, in addition to other specific measures which will have some immediate benefit to the British dollar position, we are setting up a US commission to study the problem of balance of payments and making every effort to find new markets in this country for goods which other countries need to export.

James E. Webb

1. Presumably Webb was referring to Secretary Acheson’s daily meeting on August 25, attended by Acheson, Webb, Rusk, Jessup, Kennan, Nitze, Gross, and Humelsine, at which military assistance and the British financial crisis were discussed. Nitze and Kennan were to prepare a paper based on the discussion. Memorandum of conversation, August 25, not printed (Secretary’s Daily Meetings, Lot 58D609, August 1949).