840.00R/5–1550: Telegram

The United States Special Representative in Europe (Harriman) to the Administrator of the Economic Cooperation Administration (Hoffman)1


Toeca 587. Personal for Hoffman, Foster, Bissell from Harriman. Ref Toeca 581 to Washington repeated Torep Paris 496. Following is final text of British paper on sterling participation in EPU to be submitted to OEEC Payments Committee:

(Verbatim Text)

  • (1) We are prepared to come in as full ordinary members of the scheme.
  • (2) All cumulative bilateral surpluses shall be submitted for offsetting.
  • (3) The United Kingdom shall be entitled to make agreements with other participants governing the extent to which surpluses emerging from the offsetting should be held in sterling, and the extent to which deficits so emerging should be met from sterling resources. The general plan of agreement which we have in mind, subject to such variations as may be agreed, is as follows:
    • (a) Net creditors will hold in sterling such part of their cumulative overall surplus, within the credit limits referred to in (5) below, as corresponds to their cumulative surplus in sterling.
    • (b) Net debtors will draw on their sterling balances, accrued before 1st July, 1950, so far as they need to do so in order to cover their overall cumulative deficit.
    • (c) Net debtors who have no sterling balances will draw on their credit margins with the UK, if any, to meet such part of their overall cumulative deficit as corresponds to their cumulative deficit in sterling.
  • (4)
    • (a) The question whether or not gold payments are to be made to a creditor country shall depend on the size of the net cumulative surplus accrued since the scheme began, irrespective of whether this surplus is held in the form of a credit with the Union or of sterling.
    • (b) Similarly, gold payments will be made by debtor countries in accordance with their net cumulative deficit irrespective of whether that deficit has been met by credit from the Union or by bilateral credits.
    • (c) If, however, a deficit is covered by sterling which had accrued before 1st July, 1950, this shall not be counted, for the purpose of calculating any gold payments to be made to the Union, against the debtor which used this accrued sterling; moreover, the sterling so used should be subtracted from any net overall deficit of the United Kingdom for the purpose of calculating gold payments by the United Kingdom to the Union.
    • (d) Corresponding rules shall be worked out as regards the rights and obligations of the member’s when the scheme is liquidated.
  • (5) In order to make possible full participation in EPU, existing monetary and credit arrangements will be amended as far as is necessary to fit in with requirements of EPU. In particular, we are prepared to negotiate an agreed limit to the holdings of sterling by any member, and to revise limits for which provision is made in existing agreements, to take effect as from the inception of EPU.

  1. Repeated to Paris for OSR, Torep 500.