611.41/1–2450
Memorandum by the Assistant Secretary of State for
European Affairs (Perkins) to the Secretary of State
1
secret
[Washington,] January 24,
1950.
I understand that you are seeing Sir Oliver Franks this week prior to
his return to London and that you intend to discuss with him the
present difficulties in Anglo-American relations and the potential
sources of difficulties in the immediate future. We have worked up a
comprehensive list of such items but it is clear that a great many
of the individual cases are either relatively unimportant and are
being handled in the normal course of business at the working level,
or are not expected to raise acute problems in the near future.
For your use at the present time, I am attaching lists covering two
types of problems: Tab A—those which are important and which require
urgent solution, and Tab B—those which are important but which do
not require urgent action although they may flare up at any time.
The problems are stated in very summary fashion but can, of course,
be expanded if you wish. Even though it might be desirable to
postpone the resolution of difficult issues until after the British
elections on February 23, the matters in the first category cannot
wait. I recommend, therefore, that you describe these to Sir Oliver
and point out the reasons (given in Tab A) why we will have to
continue to press on these points. You may wish also to run over the
second category problems briefly and to indicate that while we are
trying to keep these matters quiescent in the next few weeks, they
may flare up and our hand may be forced. On our part, we can try to
minimize frictions between us in the immediate future.
There are some difficulties on the British side which they can and
should attempt to handle. It is clear that they are obsessed by the
feeling that they must cut their overseas and defense expenses,
sterling as well as dollar expenses, so as to save every possible
penny. This causes them, in our opinion, to put undue weight on the
financial aspects of their foreign problems. They should try to
accept the assurances which you gave Sir Oliver some weeks ago that
we are conscious of their fiscal problem, that we are evidencing our
concern through the very large financial assistance which we are
giving them and that we will not ask them to extend themselves
beyond what seems reasonable.
There have been a number of instances recently in which the British
have taken very firm and, to us, unreasonable positions with the
statement
[Page 1611]
that such
positions represent Cabinet decisions which cannot be changed. Such
an approach toward the mutual working out of problems leads to
difficulty. We have been told by the British as well as our own
people that there is currently in the United Kingdom a feeling that
we are trying to push them around and there is reaction against us
for that reason. These waves come periodically and this one will be
intensified by the election campaign and the self-hypnosis which
election speeches glorifying the Labor Government will cause. It
seems to me fair that we should ask that responsible Government
officials try to take a longer range view point and to discount as
much as possible the election fever.
I should also suggest that you mention to Sir Oliver that it might be
desirable, after the election, to have a fairly full review of all
outstanding issues, first at the working level and then, to the
extent necessary, at higher levels so that the points of friction,
actual and potential, may be eliminated as far as possible.
[Tab A]
Important Problems Which Require Urgent
Solution
[Washington, January 24,
1950.]
Circumstances require that the following problems be handled as a
matter of urgency. In some cases the importance is intrinsic, in
other cases the urgency arises out of a Congressional or other
dead line which makes prompt action essential.
- 1.
-
MDAP Bilateral.
While it appears that all major points relating to the text
of the bilateral are either resolved or are on the way to
solution, except a sticky point on the privileges and
immunities of military personnel, the British are making
difficulties about making available promptly the local
currency needed for administrative expenses. The amounts are
not large. In fact the administrative expenses for the
MDAP personnel dealing
with the British program are the least for any participating
country and will not be more than the equivalent of
$150,000. The British also balk at contributing a share of
the administrative expenses of the regional office and of
the aircraft distribution set-up at Burton wood. There will
be a very strong reaction here if the MDAP is held up by British
refusal to bear their share of the local currency expenses
of the program.
- 2.
-
Petroleum. This matter has aroused
wide comment and the current discussions must be pressed to
a satisfactory conclusion or at least progress made to that
end before the ECA
Congressional hearings which are scheduled to start February
21. A brief statement of the problem is as follows: Oil
operations constitute the largest single item
[Page 1612]
in the sterling
area dollar drain (currently about $700,000,000 per annum).
The British claim they can make large dollar savings by
utilizing to the full the production of British companies
and by displacing to that extent American companies from the
sterling area. Such action would prejudice United States
political and strategic interests in the Middle East if it
went far enough. The British are going ahead with this
displacement unilaterally although we have informed them of
our concern as well as of our belief that they have not made
an adequate effort to meet American companies’ suggestion of
arrangements by which the dollar drain on oil account could
be reduced substantially without displacing American
companies. ECA has told the
British they may well not only withhold ECA aid for new expansion of
petroleum facilities but also reduce ECA aid if the British use free dollars to
initiate further expansion of petroleum facilities over
ECA disapproval.
- 3.
-
Relief in Palestine and the Near
East. We are discussing with the British the amount of
their share of the relief and works programs of the UN in
the Near East proposed by the Clapp Economic Survey Mission
and are pressing them to contribute 25% of the total program
of $55,000,000 for 18 months. The Foreign Office is trying
to get the Treasury to agree to increase the Treasury’s
first proposal of a much lower contribution. We are about to
go to Congress with a request for our contribution (50%) and
must be able to show that the British are making an adequate
contribution.
- 4.
-
Deconcentration and Decartelization in
Germany. There is urgent need to agree on a law to
succeed to Military Government Law No. 75 dealing with the
deconcentration of the coal, iron and steel industries in
Germany. Furthermore, we are apparently at odds with the
British on the whole question of decartelization. The
British have no apparent desire to move in this field. We
are under strong pressure and face a Congressional
investigation into this matter.
- 5.
-
Broadcasting Frequencies in Germany.
The Copenhagen plan, in the drafting of which our observers
were not permitted to take part, assigns a wholly inadequate
number of frequencies for use in our zone in Germany. We
need the frequencies for servicing our troops, the Voice of
America and internal re-education. (The British and French
can reach their troops with their domestic services.)
Furthermore, the Copenhagen plan gives the Iron Curtain
countries a disproportionately favorable position. The
British and other Europeans are planning to implement this
plan on March 15. We must work out an alternative or we may
be forced into unauthorized use of frequencies and cause
radio chaos in Europe.
- 6.
-
European Integration. With the
renewal of ERP legislation
coming up in February, we must continue to press for action
among
[Page 1613]
the ERP countries for the reduction
of trade and financial barriers, et cetera. There is a
widespread feeling, shared by a number of Congressmen, that
the British are resisting action along this line for purely
selfish reasons and without adequate justification. We will
have to continue to press on this front.2
- 7.
-
Japanese and German Accession to the Wheat
Agreement. Settlement of this issue has been
postponed until about 20th of February. The United Kingdom
position has been that it will not consent to the admission
of these countries unless it is assured that they will not
have the right to purchase wheat from Australia under the
existing quota. We have been unable to work out a
satisfactory arrangement with the British to date. We will
have to keep at this problem so that it can be
satisfactorily settled.
- 8.
-
Additional Military Production. The
British have not been willing to furnish us with the
information which we feel is necessary with regard to their
program of additional military production. One important
reason is, undoubtedly, that they do not wish us to inject
ourselves into their economic planning. Solution of this
matter is necessary before we can furnish raw materials or
machine tools to the British under MDAP.
- 9.
-
Military Facilities. The British have
now withdrawn from their position that a firm agreement on
the cost to them of military facilities furnished at our
request is a condition precedent to signing the MDAP bilateral. On both sides,
however, we will want to get the matter of facilities which
they are to supply resolved as soon as possible. Some cases
have been hanging fire for over a year. An open British
unwillingness to furnish facilities could react against them
all along the line.
[Tab B]
Important Matters of a Lesser Degree of
Urgency Which May Flare Up
[Washington, January 24,
1950.]
The following matters which are important do not seem at the
moment to present critical issues which must be resolved. Any
one or more of them may, however, become active and critical at
any time.
- 1.
-
Disposition of ECA Counterpart. The ECA counterpart was used
initially to retire short-term British Government debt. This
practice has been suspended and the counterpart is piling up
and now amounts to some hundred million pounds. ECA is exploring the
possibility
[Page 1614]
of
using some of this counterpart in the British investment
program. The piling up of this money may become embarrassing
and an attempt by ECA to
become involved in the British investment program will
undoubtedly be strongly opposed by the British who want no
United States interference in their economic
planning.
- 2.
-
Relations in the China Area.
Difficult problems may arise in the course of our attempts
to have the British protect United States interests in
Communist China. Two specific matters which may come up are
those of UN membership and the disposition of the CAT
aircraft now in Hong Kong.
- 3.
-
Dual Pricing. While Mr. Hoffman is
proposing a formula under which a part of ECA aid will be distributed in
accordance with the performance of participating countries
along certain lines, the difficult problem raised by the
excess of British export coal prices over internal prices
may flare up again.
- 4.
-
Sterling Balances. Exploratory
discussions are going on with regard to the sterling balance
problem. We hope to be able to keep this problem in a
non-controversial status. There are a number of people
interested in this question in this country and there is a
danger that we may find ourselves involved in the whole
problem in a controversial way.
- 5.
-
Political Leadership for OEEC. If we stick to
the position that we are not formally promoting Mr. Spaak to
be leader of OEEC, this
matter may cause no outward difficulties although it is
clear that the British will probably try to kill the idea by
one means or another. Enough United States people have
become committed to the idea, however, to raise a danger
that this may become an openly controversial problem.
- 6.
-
Italian Colonies. There are not at
the present time issues between ourselves and the British
with regard to the Italian Colonies. There are, however, a
number of danger spots so far as the British are concerned
involving the Italians, Ethiopians and possibly the French.
It is by no means impossible that we may find ourselves
involved in any difficulties which may arise.
- 7.
-
High Frequency Broadcasting. A
conference is to be held on April 1 on this subject to
assign frequencies. It is expected to raise difficult issues
between us and the Europeans, including the British. We can
anticipate that we will not get adequate short wave
facilities for carrying the VOA.
- 8.
-
Japanese Participation in International
Relations. The British have opposed the authorizing
of Japanese attendance at international conferences and
participation in international agreements, claiming that
such action should await a peace treaty. We are urging the
prompt admission of Japan into such activities and it is
possible that this issue may arise openly in the near
future.
