840.00R/1–2750: Telegram

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


394. For Hebbard from Treasury. For your info NAC2 took following action Jan 23.

“The National Advisory Council advises the Administrator for Economic Cooperation that:

  • I. The Council considers that in the estab of any European clearing union designed to further progress toward the objectives of econ integration and ultimate full convertibility of currencies the following conditions should be met:
    The operations of the proposed clearing union shall not conflict with obligations undertaken by the US and other member governments to the International Monetary Fund;
    The estab of the clearing union on the regional basis proposed shall not prevent any one participating country from moving as rapidly as possible toward full currency convertibility, nor prevent any group among the participating countries from moving as rapidly as possible toward full currency convertibility and closer integration, independently of the rate of progress evidenced by the other members of the clearing union.
  • II. In order to insure fulfillment of the foregoing stipulation the NAC recommends with respect to:
    Financial Operations of and US Contribution to a Clearing Union.
    • (a) The US might reasonably concur in any arrangements which the Administrator might work out with the European countries as to the provision of credits by participating countries in local currency which might be used on a multilateral basis.
    • (b) Conditional aid dollars might be made available to debtors in specific amounts which might be used multilaterally to cover ‘structural deficits’ with other participants. This money, as present conditional aid, might be supplied by the US.
    • (c) Provision might be made for dollar payments on an ‘automatic’ basis to be made by debtor countries through the clearing union to the creditor countries. Arrangements should be worked out whereby at the earliest practicable date, and not later than June 30, 1952, net dollar payments by debtors to the clearing union are at least equal to any net dollar payments from the clearing union to creditors so that the question of any US financing would not arise beyond that date. The ECA would fix a maximum limitation on its obligations for such financing.
    • (d) The US should not make any contribution to a fund from which loans would be made by a clearing union to debtors on a non-automatic basis in essentially the same way as IMF drawings.
      • (1) The ECA may, however, modify its allocation of aid to individual countries upon the recommendations of a clearing union, to take account of payments positions of such countries relative to the clearing union
      • (2) provided that no action should be taken by ECA upon any such recommendation involving a question of concern to the IMF until the IMF has had a reasonable opportunity to reach a judgment and to express its views and they have been considered by the US Govt.
    Management of Clearing Union and US Participation Therein.
    In order to avoid any possible US involvement in conflict of recommendations made by the clearing union on monetary policy and those of the IMF, the US should not participate in the management of the clearing union. This would not preclude a US observer in the union for the duration of the ERP period only; nor would it preclude US veto power on any use of funds contributed by the US under 1 above.
  • III. With respect to the memorandum of January 12, 1950, from the Managing Director of the IMF, the NAC instructs the US Executive Director to assure the Managing Director that the US fully recognizes the interest of the IMF in any European clearing union and also indicate the hope of the US that the IMF will proceed promptly with consideration of the relationship which ought to be worked out between the IMF and any European clearing union. As an immediate first step, the US will propose that a Fund rep be invited to participate in the meeting of the special comite of the OEEC which is now discussing the clearing union proposal.”

  1. Repeated to Paris as 367 for Tomlinson, Rome as 307 for Kamarck, Stockholm as 42 for Breithut, Cairo as 70 for Polk, Brussels as 106 for Wood, and Frankfort as 568 for Pumphrey.
  2. National Advisory Council on International Financial and Monetary Problems. The same abbreviation is used for the North Atlantic Council.