Memorandum of Conversation, by the Secretary of State



  • The Secretary
  • Foreign Minister Stikker
  • Mr. Hoffman
  • Ambassador Harriman
  • Mr. Fack—Assistant to Stikker
  • Mr. Edwin M. Martin—EUR/RA

Subject: Exchange of Views between the Secretary and the Netherlands Foreign Minister on Certain Aspects of European Association, with Particular Reference to Economic Problems

The Foreign Minister opened the discussion with an account of his recent visit in London. He found Mr. Bevin much improved in health since his trip to Colombo1 and with considerable enthusiasm about [Page 635] progress toward European integration. Mr. Bevin assured him that the British wanted a Payments Union and promised him a definite proposal to meet U.K. worries before he left London. Unfortunately this had not been possible and the Foreign Minister had received a cable from Bevin only yesterday indicating it would be a matter of a couple of weeks, presumably in view of the results of the election. He did indicate, however, that the Treasury had developed a plan which they hoped would be acceptable.

He found Sir Stafford Cripps considerably less enthusiastic but still pretty much committed to doing something to make the Payments Union possible.

During his visit he also discussed FINEBEL with Mr. Bevin and Mr. Cripps. He did so in the light of a French Cabinet decision, reported at the FINEBEL meeting in Paris by Mr. Schnider, to the effect that Germany could be included only if the British had no objections and if ECA was willing to provide additional dollars to cover potential deficits with Germany. He found Mr. Bevin more strongly opposed to FINEBEL than Sir Stafford, and interpreted this as a reflection of Mr. Bevin’s more active interest in European integration generally.

In discussing the FINEBEL situation the Foreign Minister observed that he did not feel the Italians were very enthusiastic about the arrangement and that the real impetus came from the Belgians and the French, but primarily the Belgians. He indicated that as a result of his discussion with Bevin, he and Harriman had agreed that the FINEBEL idea should be put on ice for perhaps three weeks.

I commented that this view had also been expressed to me by Mr. Bevin in a recent letter.

In response to a question from me as to the basis for British reluctance, the Foreign Minister referred as the primary factor to their fear that the very large sterling balances would be spent rapidly and would become claims on the U.K. for gold. In addition, the Foreign Minister felt that the British had a certain amount of reluctance, felt very strongly by Bolton2 of the Bank of England, to giving up their position as the center of the sterling area and as the banker for a large part of world trade, and that they felt the establishment of the Clearing Union would substantially diminish the importance of this position.

Ambassador Harriman emphasized the role which the Bank of England had played in changing, almost at the last minute, the British position on the European Payments Union and interpreted it [Page 636] as a reluctance to giving up their position of control through bilateral agreements of the international financial policies of a great many countries of the world, a control which enabled them to exercise a substantial influence on world trade. Mr. Hoffman also emphasized this point, adding that the British feared that any giving up of that bilateral control of their trade relations in favor of a multilateral scheme might open their closely controlled and planned economy to pressures it was not prepared to take. Considerable emphasis was laid by Mr. Hoffman on the fact that the British had been for so many years top dog in world financial matters that they were most reluctant to accept the idea of a European payments scheme with a managing board which might be in a position to tell them what policies they should adopt in the financial field.

In response to a question from me as to how long they thought it would take to work out a Payments Union scheme, none of the gentlemen were willing to commit themselves, though Mr. Harriman felt that it would be before 2:00 a. m. on July 1 as had been the case last year, Mr.: Harriman said that he would not be surprised if we saw again this spring a drive on the part of the British to bring the European countries into the sterling area in some fashion, converting the European Payments Union into some form of Sterling Union. The Foreign Minister responded that no continental country would accept an arrangement of that kind. They did not want to be in a position of having to hold sterling or having to look to the Bank of England for permission to use their resources.

Ambassador Harriman opened up a discussion of the problem of dual pricing with a strong statement about the importance of pressing ahead with its elimination. He called attention to the excellent report by the OEEC condemning the practice, and to the fact that it had been accepted by all countries except the U.K.

Mr. Hoffman emphasized vigorously the fact that the U.K., in November, had committed itself to the elimination of dual pricing and that we were therefore not imposing our will on them but merely asking them to live up to a firm commitment made by them.

The Foreign Minister indicated that he felt that Sir Stafford Cripps would be very difficult in the problem of dual pricing and that he wanted to concentrate his efforts for the present on the Payments Union as the more important problem. Mr. Hoffman said that he had no objection to whatever timing the Foreign Minister and Ambassador Harriman felt was desirable but could not emphasize too strongly the necessity of the U.K. taking positive action in this field. Mr. Hoffman referred to the very strong criticisms which he had been receiving from the Congress with respect to the U.K. position on various parts [Page 637] of the ERP program and indicated that he felt it would be much simpler to get the ECA legislation through if there were several concrete actions taken which gave evidence of the desire of the U.K. to cooperate fully.

Commenting on my observation that I had understood Sir Stafford to say that he could not take action prior to the election and that was now past, the Foreign Minister observed that the British felt that the results of the election still left them with difficulties. However, the Foreign Minister was not sure that he agreed that this was the case and by and large Churchill3 had been a strong advocate of European integration. He felt that there would be no difficulty in reaching agreement with the opposition on firm steps leading in this direction.

I observed that it seemed to me of the greatest importance to get the ECA legislation out of the way and not have a repetition of last year’s performance in which the time of so many top level persons was taken up for months. There were too many other more serious and critical problems which required attention. In these circumstances it seemed to me important that the British take action with respect to Payments Union and dual pricing—actions which sooner or later they would have to take any way. I expressed the opinion that I had gone pretty easy on the British for five or six weeks in view of the election and Bevin’s poor health and that it seemed to me it was now time to have a talk with Sir Oliver Franks. I observed that I thought the situation was a highly critical one and that we needed to be in a position to direct our attention to such problems as Austria, Germany, the Far East and the defense of Europe.

The Foreign Minister observed that the defense problem was indeed a very critical one. As it now stands, defense plans are being governed by Finance Ministers. The military men draw up extravagant plans which the Finance Ministers of the individual countries cut down, without any effective coordination on a North Atlantic Treaty basis. In the light of the real needs for defense, it was essential that action be taken in this financial field if effective defenses were to be created.

I observed that it was indeed desirable to improve the defense situation and that I thought we needed to turn our attention to a more effective use of the North Atlantic Treaty in coordinating the political policies of the member governments.

In connection with my statement to the Foreign Minister on the importance of getting ECA legislation out of the way, Hoffman raised [Page 638] a matter in connection with Point IV on which I sent a separate memorandum to Mr. McFall.4

  1. See footnote 7, p. 620.
  2. Sir George L. F. Bolton, Executive Director of the Bank of England and of the International Monetary Fund.
  3. Winston Churchill, former British Prime Minister, leader of the Conservative Party.
  4. Memorandum to Jack K. McFall, Assistant Secretary of State for Congressional Relations, not printed.