Memorandum of Conversation, by the Ambassador in the United Kingdom (Douglas)1

top secret

Participants: Prime Minister Attlee
Ambassador Douglas

Supplemental to Embassy cable of this date.2

After I had said to Attlee that I thought there was a fundamental contradiction between the Labor Party pamphlet on the one hand and the OEEC Convention and the bilateral agreement with the United States on the other hand, Attlee examined all three documents. His observation was that people attempted to read into all three documents meanings that were not intended. For example, he said that the sentence in the pamphlet to the effect that any further liberalization of trade would not be in the interests of resolving the dollar gap had to be interpreted against the background of the larger European problem; which was that any reference to reduction of trade barriers and liberalization of trade in the OEEC Convention and the bilateral agreement should, and must be, interpreted in the light of the dollar problem. Surely, said he, no one contemplates that tariff barriers should be reduced in Europe, thus creating a high cost European area and diverting products from dollar markets. Moreover, said he, we did not contemplate in the OEEC Convention that Europe would be a free trade area and that our internal plans would thereby be upset. The OEEC Convention calls for the reduction of tariffs with a view to establishing a multi-lateral trading system. That, said he, we accept. I replied that I was not convinced on this point. If they were prepared to accept a multi-lateral trading system throughout the world they exposed themselves to all of the impacts and influences of such a system and I could not see why they were reluctant to expose themselves to influences within a smaller area. If the larger were good, the smaller also was good. Moreover, I did not interpret the OEEC Convention to mean that steps would not be taken to establish a multilateral trading area among the participating countries. Quite the contrary, the express language and the sense of the Convention contemplated the establishment as rapidly as possible of a relatively free trade area.

[Page 1654]

Attlee then said that they, of course, were very anxious to cooperate with European countries but that the establishment of a free trade area contemplated the integration of the internal plans of HMG with the plans of other governments but no one contemplated that there would be any return to a free trade laissez-faire system.

Attlee explained the language of the Labor Party pamphlet in these terms and tried to rationalize the contradiction between the fundamental obligations and commitments undertaken under the OEEC Convention and the bilateral agreement with the United States. At no time during the conversation did he indicate that there was anything in the Labor Party pamphlet with which he disagreed. On the contrary, he defended it quite vigorously (possibly he could do nothing else although he surely knew me well enough to be able to indicate at least lukewarm support).

In response to the suggestion that there might be a statement reaffirming the OEEC and the bilateral agreement with the United States as a true reflection of British policy, Attlee said that he might say that there was no contradiction between these two instruments and the Labor Party pamphlet. I suggested that he make no reference to the Labor Party pamphlet at all but merely reaffirm the OEEC and U.S. agreement as mirroring correctly government policy, but he added HMG intended to abide by those obligations.

My own interpretation of the pamphlet and my conversation with Attlee is that at last there has been brought out into the open the real inconsistency between socialism as a part of an international order, except as it may be wholely and completely socialist, and the socialist state as an instrument for internal planning of the economic life of a nation.

L[ewis] W. D[ouglas]
  1. Transmitted as an enclosure to a letter from Douglas to Secretary Acheson, dated June 20, not printed, in which the Ambassador stated that he did not include this material in the telegraphic report since he did not know what distribution the telegram would receive (741.00/6–2050).
  2. Telegram 3391, supra.