Memorandum of Conversation, by the Director of the Office of British Commonwealth and Northern European Affairs (Labouisse)


Participants: The Secretary
Sir Oliver Franks, British Ambassador
Hume Wrong, Canadian Ambassador
Graham Towers, Governor of the Bank of Canada
Sir Leslie Rowan, Minister, British Embassy
Henry R. Labouisse, BNA

The Canadian Ambassador had asked the Secretary to meet informally with the British Ambassador and Graham Towers to discuss the problem of sterling balances. The meeting was held during the late afternoon at Mr. Wrong’s home.1

At Mr. Wrong’s suggestion, Sir Oliver Franks opened the discussion by referring to Great Britain’s position during the 19th century, emphasizing the close relationship between Britain’s position as a world banker and her position as a strong military and political force. He [Page 1599] stressed the importance which capital investment had played in Britain’s key position in the world. Recognizing that Britain could no longer function as world banker, he felt it important that the role be filled and indicated that this might take the form of some joint arrangement among the US, Britain and Canada. The general conclusion which Sir Oliver apparently sought to draw was that the main hope of maintaining a strong democratic force in South and Southeast Asia would be for the US not only to inject some dollars into that area but to maintain both a military and political interest as well. The Secretary asked whether or not Sir Oliver was suggesting that we should “use the Marines” in connection with overseas investments. The Ambassador replied in the negative.

Mr. Towers made a few observations concerning Canada’s interest in the sterling balance problem and indicated that he thought Canada would be prepared to assist in some small way.

The Secretary made no commitments whatsoever concerning the US position. He agreed that there was no reason why we should not explore all possible courses of action which might lead to a solution of the problem created by the outstanding sterling balances, but he expressed no view as to what eventual course might be practicable or desirable, except in so far as his observation, mentioned in the following paragraph, might be construed as a suggested possible course.

During a discussion as to the political problems involved, Sir Oliver mentioned the great delicacy of the situation because of the large sterling holdings of such countries as India and Egypt. The Secretary observed that the time might come when the British would have to tell the Indians that “the party is over”; the Indians might then probably ask the British what the next step was; the British might then probably say “We had better go across the street to see our rich friend”.

H[enry] L[abouisse]
  1. On January 3 Secretary Acheson had Informed Webb that he was meeting with Wrong, Franks, and Towers on January 6 to discuss sterling balances and to “see whether the Ambassadors, Mr. Towers and I can agree on how to go at the problem.” Acheson told Webb that he would appreciate guidance from either Labouisse or him and would be glad to have either of them or any other officer accompany him to the meeting. Memorandum for Webb, January 3, not printed. (841.10/1–350) Labouisse, on January 6, prepared a guidance memorandum on the sterling balances, not printed, in which he traced the history of the problem and concluded that it was “generally agreed that, if any solution, as distinguished from a palliative, is to be found, it will require an injection of dollars.” (841.131/1–650)