441.62A31/3–250: Telegram
The Secretary of State to the Office of the United States High Commissioner for Germany, at Frankfort
1392. Brit Amb1 called on Secy this morning to deliver orally personal msg from Bevin re UK–Ger trade talks, objecting in strongest terms to US intervention both as to procedure and substance.
Re procedure, Brit had been informed that Amreps in Ger had objected to payment arrangements and had attempted to prevent UK–Ger discussions from proceeding. While US had refused to discuss issue in Washington, US reps in Ger said they had been instructed to fight UK proposal all the way and had hinted that matter would be allowed to get into press. In Brit view, proper procedure was to discuss matter in HICOM.
Re substance, Amb said Brit proposals were designed to liberalize trade. It was not true as had been alleged that UK proposed to bring Ger into sterling area or transferable accounts system. In Brit view these proposals were not inconsistent with EPU but were in fact consonant with US desires. Msg stated US interference appeared to be effort to dictate UK–Ger agreement and to force EPU into pattern desired by US. If US action became known in Brit it would be deeply resented.
[Page 607]Msg said UK would now find it impossible to withdraw from negots. They would take some days, perhaps ten, to complete and there would be ample opportunity to discuss matter when agreement came before HICOM. Bevin asked that Secy instruct USreps in Ger to refrain from further interference in conduct of negots.
Amb added he had learned in London UK is preparing new proposals re EPU which wld be ready in about ten days. They hope that these wld be acceptable to US. He said that objective shld obviously be maximum liberalization and maximum convertibility. Decisions involved are extremely fundamental to Brit. He implied that current dispute created extremely bad atmosphere for consideration these proposals.
Amb left memo stating Brit position on certain points in more moderate language than used in personal msg. Text of memo contained in immediately fol telegram.2
Secy said that as to procedure, matter was obviously not going in manner which two govts cld consider satisfactory. From our info, he was inclined to feel Brit had been at fault in not informing us more fully concerning their proposals, contrary to procedure followed by US in negotiating ECA Bilateral Agreement with Ger, in which Brit and Fr were consulted fully in advance. Unwillingness of Brit negotiators to hold up when disagreements arose had probably also created difficulty. He did not exclude possibility of some fault on Am side as well. It was pointed out to Brit that procedure which HICOG had been instructed to fol was designed to permit discussion between US and UK prior to time issue came formally before HICOM and thus to avoid open split between occupying powers in full view of Gers.
With regard to substance, Secy said that US quite understood Brit difficulties with respect to payment arrangements and was prepared to see provisions included in UK–Ger agreement which would minimize possibility of gold and dollar payments.
Re inconsistency with EPU, he said Brit were obviously looking at this from viewpoint of what they thought EPU should be while we were looking at it from viewpoint of what we thought it should be. However, it was not our intention to use agreement issue as means of forcing our views on EPU but want to obtain some solution which would not prejudice solution of EPU, either from our viewpoint or Brit viewpoint.
Secy said that OSR official, Mr. Tasca, was about to go to London to discuss EPU. He hoped these discussions would indicate that 2 govts were not too far apart on basic issues. In any event, since there seemed to be some confusion as to facts re Ger negots (our info indicating [Page 608] Brit had proposed inclusion of Ger in transferable accounts system) and different appraisal of effect on EPU. He thought this point might also be usefully discussed in London by Tasca. Meanwhile, Mr. McCloy is about to arrive in Washington, and the Secy would be glad to take the matter up with him.
Secy made clear that US objection was to discussion with Gers of specific payment proposals and not to conduct of negots.
Re EPU, Secy said on this point also we appreciated Brit difficulties and were most anxious to find some middle ground between various proposals which had been put forward on which general agreement could be reached.
Amb said he would report London on conversation.
Sent HICOG, Frankfort, rptd AmEmbassy, London as 964, Paris for Ambassador and OSR as 905.