Historical Documents - Office of the Historian

1.

The dislocations caused by the recent war and the emergence of the intensive struggle against Soviet expansion have immeasurably intensified the urgency and pace of our efforts to achieve our basic and [Page 870] traditional foreign policy objectives. Our major antagonist presses us relentlessly in all fields, military, political, economic, cultural, etc., and forces us to the realization that alone we do not have the power or resources necessary to achieve our objectives. We must mobilize our allies and friends, expanding their number and assuring their collaboration and help.

2.

No other country has the same qualifications for being our principal ally and partner as the UK. It has internal political strength and important capabilities in the political, economic and military fields throughout the world. Most important, the British share our fundamental objectives and standards of conduct. Linked to the UK, and a source of much of its strength, is the Commonwealth. Much of that grouping, in particular the other dominions, share the same objectives and standards. The area of the Commonwealth is of greater importance, economically, strategically and politically than any other existing grouping. The US can find its most important collaborators and allies in the UK and the Commonwealth, just as the UK and the Commonwealth are, in turn, dependent upon us.

3.

For a great many years (at least since the statement of the Monroe Doctrine) and in spite of periods of strain and stress, a working relationship of sorts between the US and the UK has been a basic, if usually unspoken, premise of US foreign policy. Two world wars have converted this relationship into a partnership and it remains as one of the foundations of our foreign relations. In the post-war years, and in particular in recent months, there appear to have developed, due in large measure to the intimacy and extent of our relations, a number of stresses and strains. As the pressure of the cold war increases and the tempo of the world crisis rises, some of these stresses threaten to develop into major cracks in the structure of US–UK relations. A serious impairment of those relations would require a whole reorientation of US foreign policy, since the achievement of many of our objectives, including that of the closer association of Western Europe, depends on the British agreeing with those objectives and taking the necessary action to accomplish them. Accordingly, an examination of the relationship is necessary, not to see whether it can be retained but to see how it can be strengthened. We do not believe that these strains mean that the US–UK relationship is breaking. Such an event would be a major disaster involving the decline and eclipse of the whole Eastern Hemisphere and a policy of isolation for the Western Hemisphere or even perhaps for North America alone. The problem is to examine the causes of strains and divergencies between the two countries and to attempt to agree upon policies which will minimize and where possible eliminate those divergencies.

1.

We expect and depend upon the British to play a variety of roles on the world scene, including the following: (a) a leader (with France) in the movement toward closer European unity, (b) the cement which holds the Commonwealth together, (c) our principal partner in strategic planning, (d) a major force in ensuring political and economic stability in the Near and Middle East, (e) a collaborator in the resistance to Communist expansion in the Far East, (f) a willing collaborator in promoting the development of an expanding multilateral world trade, (g) a leader in furthering the development and emergence of dependent areas, and (h) a principal supporter of the UN. Even if there were not internal inconsistencies between these roles, they would tax the capacities of any country. While these roles may correspond to the capabilities of the British Empire of 50 years ago, when that Empire was the major world power, the British do not now have the capacity to fulfill all these various functions without the closest support and collaboration of the US.

1.

A number of factors seem to limit the capabilities of the British. Some arise from the indisputable facts of the British position today, some arise from British policy decisions. Whatever the cause, they result in differences between us and frictions which generate varying degrees of heat. The immediately following paragraphs summarize some of these factors.

2.

Financial Limitations. Financial limitations, which arise both from the intrinsic British economic position and from British policy decisions, are most frequently given by the British as the reason for their inability to take various actions which we favor. There are very few problems which we have with the British which do not seem to involve financial hesitations on their part. These matters can for convenience be divided into three types, although there is an overlap between the categories.

(a): Those arising out of the fact of their precarious dollar position. British dollar reserves, although considerably higher than six months ago, are lower than they were in 1948 when EBP started and, taking into account price changes, represent perhaps one-fifth of prewar. The increase and even the maintenance of these reserves are threatened by the inability of the British to control rigidly the dollar expenditures of the rest of the sterling area, the necessity of making large dollar expenditures for food, agricultural products and other essentials only obtainable in dollar markets, and the vulnerability of the British economy to a decline in US economic activity. Sterling area dollar earnings are heavily dependent upon American purchases of raw materials. Any decrease in such purchases seriously affects the [Page 872] British reserve position (and thus the reserve position of the sterling area) without any compensating decline in the needs of the sterling area for dollars.
(b): There are also those limitations which arise out of the facts of the British sterling budgetary position. With internal pressure for a reduction of the high internal tax rate, British budgetary receipts are not apt to increase. Therefore, any increased overseas sterling expenditures tend to be at the expense of domestic expenditures. In view of the precarious parliamentary position of the Labor Party, the Government is reluctant to make any reductions in domestic expenditures which might prejudice Labor’s tenure of office. Under the procedures which obtained until last fall, and which may be renewed in somewhat changed form, 95% of the local currency counterpart of ECA grants to the UK was in fact available as budgetary receipts. Since ECA aid is decreasing and will terminate in 1952, this significant source of revenue will disappear. This contributes to their reluctance to incur expenditures which may be recurrent. The releases which the British must make from the sterling balances held by dominions and other countries exert an inflationary effect. Increased sterling expenditures whether at home or abroad, add to this inflationary effect and, therefore, threaten improvement in the UK balance of payments position. For all these reasons the British are anxious to reduce their governmental sterling expenditures at home or abroad.
(c): There are also financial limitations arising as a result of policy decisions. The British Government is committed to the practice of dedicating a large part of the budgetary income to domestic welfare and social services. The pursuit of this policy necessarily results in reluctance to make either dollar or sterling expenditures which reduce the amounts available for the domestic welfare program. The British desire strongly to be free of dependence upon US aid by mid-1952, an objective which we have urged innumerable times upon all ERP countries. Linked to this policy objective is the correlative objective of reestablishing sterling as a strong international currency in which other countries will conduct their trade and wish to keep their reserves. The reestablishing of sterling would assure the invisible earnings which come from being the banker of a sterling system. Furthermore, achievement of these two objectives would be major factors in the British retaining and increasing their political prestige and power. As a result the British appear to give an overriding priority to these objectives.
: We cannot do otherwise than recognize the precarious dollar position of the British and the sterling area based on the facts outlined under (a) above. Nor can we explain away or ignore the facts of the British sterling position described in (b) above, including the domestic political facts which affect the Labor Party. It is rather in the field of the policy decisions described in (c) above that there is room for flexibility in the British position and in these fields it is probably more a question of emphasis and priority than a disagreement with the substance of the decisions. Any modern democratic state must dedicate [Page 873] a considerable portion of its budget to welfare and social services. It is our position that the scope of such action by the British must be limited by the necessity of devoting adequate amounts to external responsibilities arising from the world situation, particularly since that type of domestic expenditure, once undertaken, becomes politically very difficult to reduce. Hence in any time of decreased budgetary receipts, the pressure to decrease non-domestic expenses is increased. A failure to keep domestic welfare expenditures in a reasonable relation to total commitments might very well defeat the very objectives which the British seek domestically. They cannot transfer external responsibilities to us without limitation. We cannot quarrel with the objective of becoming independent of US aid nor with the objective of reestablishing sterling as a strong currency. Obviously, we cannot continue dollar support to the British indefinitely and, due to the wide traditional use of sterling in international transactions as well as the widespread holdings of sterling, the reestablishing of sterling could only have a beneficial influence on progress toward expanding multilateral world trade. It is doubtful whether we are willing to face the consequences which would result from a widespread loss of confidence in the future of sterling. Here again it is a question of priority and emphasis. We believe that the urgency of taking the actions necessary to prevent deterioration in the situation of the Western world is greater than the urgency of terminating dependence upon US aid and the reestablishment of sterling. This belief forces us to face the fact that we may well have to do some or all of the following: (a) continue US aid in some form after 1952, (b) take a variety of domestically unattractive actions which will in themselves decrease the necessity for US aid, and (c) contribute to a solution of the sterling balance problem.

3.

Geographical Diversity of British Commitments. A major source of difficulty for the British, and for us in our relations with them, is the apparent or real conflict between their roles as a leading European power, as principal member of the Commonwealth, and as an intimate partner of the US. Although certain extremists in the UK appear to believe that one or another of these roles should be put into first place with the others subordinated or even abandoned, this line of thought has no significant strength. But the dilemma of working out a satisfactory balance between these three positions has by no means been resolved. It is only fair to say that we have not resolved in our own minds what balance we believe desirable.

(a): The physical location of Britain, as well as a multitude of historical, political and economic factors, tie them closely to the Continent, particularly in the field of security. A concern with the security situation on the Continent has always existed historically. It is particularly [Page 874] evident today and accounts for the fact that through the Brussels Treaty the British have gone further in establishing an association with Continental countries in the military field than in any other field. The British have had in the past, and continue to have, a strong desire to maintain their political power and prestige with Continental countries. They are vigorously opposed, however, to political union. This opposition springs from a belief that political merger with Continental countries would be fatal to their position as a world power. In addition, the British do not have much respect for the political maturity, resoluteness or discipline of the Continental countries. The British feel that they have developed a stable political system and a type of society which would only suffer by being associated more closely with the Continent. Economically, the British attach great importance to their extra-European economic ties. This springs in part from the fact that the UK is so dependent upon raw material imports from overseas, and hence must carry on a large compensating trade with non-European countries. In addition, they believe that a major part of their position as a world power depends upon their overseas connections, particularly with the whole sterling system which is essentially managed from London. The ability to retain independence of action and maneuverability is of great importance to them, particularly at a time when their internal economy is kept going at its present level only through detailed manipulation of price and wage controls, subsidies and other forms of government direction of the economy. Any proposal which would transfer to a European grouping the power to make executive decisions with regard to the British economy would appear to them to be placing their destinies in the hands of foreign countries whose abilities they doubt and in many cases whose economic philosophies they disagree with.
: We must recognize that there is validity in all these points. Significantly there has been less difficulty between us and the British in the field of European defense than in the political or economic fields. Our principal difficulty has related to the reluctance of the British to indicate, in making defense plans, what forces they would be prepared to commit on the Continent. It is probably an academic matter to discuss whether we do or do not favor real political union between the UK and Europe (except perhaps in a context which would include both the US and the Commonwealth). There is no reason to believe that a strictly Western European political union is within the realm of practical politics in the foreseeable future. It is also far from clear that, if we faced up to all the implications, we would favor political merger to such a degree as to mean the end of the Commonwealth system and of the special relationship which exists between the British and us. This does not mean, of course, that we do not believe it necessary to urge the creation of closer political ties between the UK and the Continent, particularly as a counterbalance to the growing revival of Germany. Such a development seems essential, and requires us to analyze what steps may be necessary on our part to make it possible. While we must necessarily recognize the great importance to the British of their non-European economic relationships, it is equally clear that the revival of economic health on the Continent cannot be achieved without British participation. We must [Page 875] strongly urge such participation and again face tile action which we must ourselves take to make it possible.
(b): While there is a tendency for the British to say that their Commonwealth responsibilities make it impossible for them to associate themselves too closely with the Continent, this is probably often an excuse rather than a position taken as a result of objective analysis. While it is certainly true that Empire and Commonwealth defense relationships must continue to play an important role in British defense thinking as well as in U.S. planning, and while it is also true that a real political merger with the Continent would undoubtedly lead to the dissolution of the Commonwealth relationship, the welfare of the Commonwealth is in the long run dependent upon a strong Western Europe with which the UK is closely associated and close relationships between the US and the UK. The form and very nature of the Commonwealth relationship has undergone great changes in recent years, and we cannot foresee its future. It still seems to retain, however, a considerable degree of cohesion and does represent an institutional arrangement which can be of great value to us so long as it remains strong. It should be an objective of our policy to strengthen the Commonwealth, always bearing in mind that its validity as an organization depends upon the maintenance of the security and prosperity of the whole Western world and particularly upon a continuing close relationship between the US and the UK.
(c): The British attach great importance to the continuance of an especially close relationship with the US. This coincides with our own policy. The British, however, are inclined to wish to make this relationship more overt than we feel desirable. This manfests itself in various efforts to reestablish openly the relationship which existed during the last war when, in substance, the British and ourselves managed the resources of all the Western powers. The British react strongly against being treated as “just another European power.”
: It should be our line with the British to assure them that we recognize the special relationship between our two countries and that we recognize their special position with regard to the Commonwealth. We should insist, however, that these relationships are not incompatible with close association in a European framework. In fact, the close U.S.–U.K. relation and the Commonwealth today find their significance in their ability to contribute to the attaining of other ends, including the strengthening of Western Europe and resistance to Soviet expansion everywhere. We should insist, moreover, that the British recognize that it is necessary for us, when we are dealing with a generalized European problem, not to make overt distinctions between them and other European countries. Any such overt distinctions could only have the effect of seriously upsetting the Continental countries, particularly France, adding to the everpresent fear that both we and the British will abandon them in case of an emergency.

4.

Doubt as to Consistency of U.S. Policy. Full British cooperation with us is inhibited by their doubts that U.S. policy is consistent or persistent. They cannot but be aware of the conflicts between executive agencies which are so often waged in public. They are, from [Page 876] experience, impressed by the fact that any U.S. action which requires financial support must be reargued in Congress every year and they are likewise aware of the domestic political pressures which influence Congressional action. Also when the Executive Branch preaches the doctrine of the removal of barriers to trade, specific Congressional actions seem often to be in the reverse direction (shipping, agricultural subsidies and petroleum). Not only does this lack of confidence have a corrosive effect on the working out of joint courses of action but also the British feel that they must not abandon wholly those policies which would give the greatest promise of self support if American aid and cooperation were withdrawn. We cannot deny that domestic political factors have a major influence upon the foreign policy which the Executive Branch of the U.S. Government carries out. This problem is inherent in the democratic process both here and in Britain, although it may well be that it seems particularly present here due to the extremes of publicity to which we go. Our position must be, however, that in recent years, particularly since the war, when the issues of world responsibilities and the necessities of foreign policy have been laid before American people, their response has been intelligent and effective. Furthermore, there is no alternative possible to British reliance upon American action. The U.K. could not survive if it played a role of total independence from and antagonism to the U.S.

5.

Differences of Economic Philosophy. The divergencies of economic and social philosophy between the U.S. and U.K. lead to differences between us, particularly in the economic and financial fields. Aside from giving a general policy priority to domestic welfare expenditures over external responsibilities, the dominant socialist creed of the Labor Party undoubtedly encourages the maintenance of economic controls in line with the theory that a planned managed economy is desirable. While it is claimed by the British Government that there is no inconsistency between the maintenance of a socialist state and progress towards non-discriminatory multilateral expanding world trade, it is undoubtedly true that there is no theoretical aversion on their part to managed bilateralism. Further, the belief that state economic management is necessary to achieve social and economic welfare leads to the practice of trying to protect the economy against adverse economic developments in the outside world. This practice, in fact, leads to attempts to insulate the economy from outside competitive economic forces, thus limiting the ability of the British economy to adapt itself to changing world conditions.

It is also undoubtedly true that the more doctrinaire of the British socialists are personally affected by a reaction against what they [Page 877] believe to be the antagonistic philosophy of competitive capitalism. In extreme cases that leads to a personal distrust of American motives and in many cases it leads to an insistence on insulating British economic planning from any chance of intervention by Americans (e.g., British resistance to the idea of U.S. point IV activities in their colonies).

While we cannot deny the right of the British, or of any country, to follow whatever social or economic doctrine they choose democratically, we do have a right and duty to see that the large amount of assistance we are giving is used in a way to promote the objectives for which it is given. We have the right and duty to protest if we really believe that the pursuit of dogma is prejudicing the creation of those conditions which are necessary to recovery and peace.

6.

Temperamental Differences. A last point which should be mentioned is both traditional and temperamental. We are apt to be impatient, urging fast action, specific commitments and definite plans. The British are much more cautious and favor the gradual approach of expediency and step-by-step pragmatic action, an approach which has traditionally been known as “muddling through”. While it is certainly true that we may be too impatient, and dogmatic, the pressure of events and the tempo of the cold war are not such as to permit leisure.

1.

The forces and attitudes which have been described above are realities which cannot be ignored. There is no alternative to facing up: to them and trying to work out an accommodation which will permit the full development of the essential U.S–U.K. partnership and the application of that partnership to the necessities of the world today. There will have to be flexibility and compromise on both sides. The interplay of these factors and forces is such that it is deceptive to believe that clear-cut policy decisions can emerge in any conversation or set of conversations with British representatives. The best that can be achieved is agreement upon ultimate objectives, the allaying of suspicions and doubts, and agreement on the necessity of working out solutions. The last may include the establishment of special procedures for continuing consultations comparable to the continuing talks after the September 1949 meetings.3 One thing is sure, that there can be no accommodations unless there is established a framework within which both countries feel free to discuss and make recommendations with regard to policies and actions which may seem to be of purely [Page 878] domestic concern. Furthermore, it must be realized on both sides that governmental leaders can at best only agree on what policies they will seek to have their government follow. On neither side can binding long-range commitments be made.

2.

The salient points to bear in mind in determining our relations with the British are the following:

(a): To achieve our foreign policy objectives we must have the cooperation of allies and friends. The British and with them the rest of the Commonwealth, particularly the older dominions, are our most reliable and useful allies, with whom a special relationship should exist. This relationship is not an end in itself but must be used as an instrument of achieving common objectives.
(b): We cannot afford to permit a deterioration in our relationship with the British. We must strive to get agreement on the identity of our objectives and reaffirm the fundamental identity of our interests.
(c): British capabilities are limited by the British financial position. We are affected as well by limits on our financial and other capabilities. The British appear to be giving an overriding priority to these steps which will terminate their need for outside aid and reestablish sterling as a strong international currency by mid-1952. Concentration on this financial goal may be seriously prejudicing other more important world objectives. If we urge the British to change their emphasis, we must ourselves face the probable necessity of some form of continued U.S. aid after 1952, the necessity for each to take difficult internal actions, and the necessity of doing something to lessen the pressure of the sterling balances.
(d): We should reassure the British that we do not advocate their political merger with the Continent, but that we are convinced that closer economic and political, as well as military, ties between them and the Continent are essential. In this connection we would be glad to support British leadership (in conjunction with the French), and we must face the implication for us, i.e. what action must be taken to enable closer U.K.–Continent association to develop?
(e): While we recognize and support the British in their role as leader of the Commonwealth and their attempts to strengthen it, we do not believe that, except in very special cases, this role is incompatible with close association with the U.S. or with Europe.
(f): We recognize the special close relation between us and it is one of the premises of our foreign policy. It is not, however, a substitute for but a foundation under closer British (and perhaps U.S.) relations with the Continent. In dealing with other Europeans, however, we cannot overtly treat the British differently and they should recognize that the special US–UK relation underlies US–Europe relations, and that we do not consider close UK–European relations as prejudicial to the US–UK relation.
(g): There is no future for the British apart from close collaboration with the US. They will have to rely on our record, which is good, and we each have to continue to recognize that public debates and domestic political antics are an essential and fundamentally useful part of the democratic process.
(h): Both the UK and ourselves must strive to temper our domestic programs to the realities of the cold war. Since we have greater economic latitude, this will be harder on the British. Their economy needs to be made more adaptable to the economic facts of life. There is no future in economic isolationism, for the UK or the Commonwealth or the sterling area.
(i): The traditional British preference for the gradual step-by-step approach is too leisurely for the pace of cold war.

1.

The first objective of the talks with Mr. Bevin is to establish the harmony of basic objectives between the U.S. and the U.K., our inter-dependence and the necessity for a close working relationship involving a continuing frank exchange of views. It should be pointed out to Mr. Bevin that without such a foundation, little lasting progress can be made in dealing with specific issues. The Secretary should recognize that there have been signs of unusual stresses and strains between us. Difficulties are inevitable when the relation is so close. It should be a major objective of our diplomacy to lessen and when possible eliminate the strains.

2.

The Secretary should continue with the following line with Mr. Bevin. We recognize that there is and must be a very close relationship of collaboration, cooperation and common action between our two countries, and that this relation is essential to the security, prosperity and expansion of the free world. The collaborative efforts of the U.S. and U.K. and the Commonwealth must be used to accomplish our common objectives in the world. As of today the U.S.–U.K. relation will find its main significance in the support it can give to our joint and several roles in accomplishing the strengthening of Western Europe and the repulse of Soviet expansion throughout the world. We recognize that such a relationship carries with it certain consequences on our side including the following:

(a): An attempt to avoid any actions in the foreign field which will significantly injure essential British interests.
(b): Recognition of the importance of the British position as leader of the Commonwealth and willingness to support the Commonwealth relation without prejudicing, of course, the normal conduct of our relations directly with the dominions.
(c): Recognition of the necessity of affirming U.S. support of the organization of Western Europe (including the U.K.) into a strong healthy community.
(d): Willingness to continue to support these steps which will further the attainment within a reasonable time of a balance in the international accounts of the U.K. and the sterling area at a reasonable level, and the reestablishment of sterling as a strong international currency.
(e): Continuance of our efforts to take such domestic action as seems necessary to further the above objectives and willingness to have constructive suggestions made as to what steps we should take, without considering such suggestions as impertinent interference in internal affairs. We recognize that circumstances may require, in addition to domestic action on our part, that the U.S. consider the necessity of some form of continued aid after 1952.
(f): A continuance and expansion of the practice of intimate discussion, consultation and collaboration which exists, as exemplified by the joint military planning and the continuing consultations resulting from the September 1949 ABC talks.4

3.

The Secretary should point out that on the British side there are comparable consequences, and that recognition of the special U.S.–U.K. relation should enable the British to follow certain courses of action which might seem risky from the British point of view in the absence of that special relation. The correlative British consequences include the following:

(a): An attempt to avoid any actions in the foreign field which will significantly injure essential U.S. interests.
(b): Recognition that a strong and effective Commonwealth relation can only exist in the context of a strong free world based on a healthy and vigorous Western European community and on U.S.–U.K. collaboration. This implies recognition that in any case in which they claim that collaborative action with Western Europe or the U.S. is prejudicial to the Commonwealth relation, the burden of proof will be on the U.K. and on the dominions to show that such is the case, and joint or simultaneous consultation with the Commonwealth countries will be called for.
(c): A considerably greater degree of participation and leadership in the organization of Western Europe into a strong reliable association politically, economically and militarily, particularly supporting the strengthening of France. In addition, the British will have to recognize that in the European context, we must deal with them as a European country and they must not try to demonstrate overtly a special relation to us.
(d): Recognition and acceptance of the principle that the security and prosperity of the free world cannot be reached through an insulated sterling or soft currency system, permanently protected from the impact of the competition of outside economic forces through trade and financial controls and restrictive practices, public or private. This will require facing the fact that the overriding priority which the British seem to be giving to achieving a balance in their accounts is in some cases prejudicing the achieving of world conditions essential to the continuing security and stability of the free world. Consequently, they may have to accept the postponement of self-support until after 1952.
(e): Willingness to face and act on the necessity of accomodating domestic actions and objectives to the actions necessary to achieve [Page 881] world aims. In this connection, the necessity of our being in a position to comment on and make suggestions as to their internal problems and actions will have to be accepted. This last is particularly necessary in the light of the responsibility which the U.S. Government has for ensuring that the large financial support which we are giving the U.K. and through the U.K. to overseas territories and the sterling area, is in fact being used to attain the objectives for which it is given.
(f): Wholehearted acceptance of the practice of continuing and intimate consultation and mutual discussion of problems of common interest, as outlined above.

4.

As an example of the type of consultation he believes necessary, the Secretary might refer to the continuing ABC machinery, by which, on a strictly confidential basis, we receive British ideas of what actions on the part of the U.S. would be most helpful in resolving the “dollar gap”, and we are able to make the British, on the same basis, comparable suggestions as to British domestic actions.

5.

The Secretary will have to point out, of course, that he cannot make hard and fast commitments. On the other hand, the complexities of international relations are such that clear-cut issues seldom arise. The important step is to agree on common objectives, dispel the accumulation of doubts which minor disagreements generate and provide a mechanism for close consultation.

Foreign Relations of the United States, 1950, Western Europe, Volume III

Paper Prepared in the Department of State1