Memorandum of Conversation, Prepared in the Embassy in the United Kingdom1
[Subject: Economic Questions Concerning Africa]
|Sir Hilton Poynton, Deputy Under-Secretary of State, Colonial Office
|Sir Gerard Clauson, Assistant Under-Secretary of State, Colonial Office
|Mr. Andrew Cohen, Assistant Under-Secretary of State, Colonial Office
|Mr. W. A. Mathieson, Economic Relations Department, Colonial Office
|Mr. A. Emanuel, Economic General Department, Colonial Office
|Mr. Marshall, Foreign Office
|Mr. Kelvin Stark, Exchange Control Board
|Mr. Leyden, East African Department, Colonial Office
|Mr. Bourne, West African Department, Colonial Office
|Mr. George McGhee, Assistant Secretary of State, NEA
|Mr. Charles Baldwin, Embassy2
|Mr. Elmer Bourgerie, Office of African Affairs
|Mr. Ben Moore, Embassy3
|Miss Margaret Joy Tibbetts, Embassy
Mr. McGhee and Mr. Bourgerie began by summarizing the views of investment groups in the United States on the requirements desired by United States investors. Although there is not to date any considerable amount of US investment in Africa, US investors are [Page 1555] interested in the area and American investments there may be larger in the future. The four main points of interest to US investors are (1) general most-favored-nation treatment, (2) assurances, as much as possible, against expropriation, (3) repatriation of earnings and capital, and (4) equal treatment for American capital with respect to entry into and similar treatment within the colony. All these points are subject to the over-all balance of payments position.
The British (Poynton and Emanual) outlined the British views as follows. Their general attitude in the broadest sense is that American capital investment is welcomed. The main qualification is the balance of payments situation and if a worth while economic benefit will result dollar expenditure is not automatically ruled out. It is the British view that the problem of finding out in which fiields there is scope for investment is one for the investors who should go to see for themselves.
With reference to specific points. On Point 1 (mfn treatment) there is no formal discrimination against the US investor.
On Point 2 (Expropriation) it is difficult to forecast the terms which any colonial or ex-colonial government might offer in the event of nationalization. To judge from British experience and traditions, there has never been expropriation without compensation but it is impossible to say that there would or could be any standard practice or guarantees. The British believe that traditional practices form a good basis for judgment.
Mr. Baldwin and Mr. Bourgerie then raised the question of a standard clause on this subject to be inserted in a Treaty of Friendship, Commerce or [and] Navigation. Although the United States recognized the impossibility of an iron-clad guarantee, it was the US belief that the inclusion of this provision in a Treaty of Friendship, Commerce and Navigation would facilitate investment and reassure American investors. The Colonial Office apparently were not aware of the fact that such a Treaty between the US and the UK was tentatively being considered but expressed the view that it would appear possible from their standpoint to include such a clause in the Treaty. Presumably this Treaty would be subject to the usual provisos concerning colonial accession but they thought it likely that the Colonial Governments would, if so advised by the British, accede to the treaties. Although they could not anticipate what the Colonial Governments might do on gaining full self-government, Mr. Cohen believed that they would realize the advantages to themselves of retaining such a treaty since they would need investment from outside.
On the question of repatriation of capital Mr. Kelvin Stark summarized the present provisions of the Exchange Control Board on [Page 1556] this matter, i.e. that for investments made after January 1, 1950 the full amount of the initial investment can be expatriated together with dividends etc. but an amount in excess of the initial capital investment can not be repatriated.
With reference to the screening of capital investments, the British said that investments were, of course, screened both on the balance of payments criterion and the suitability of the investment for the individual colony’s overall economic plan. There was a certain amount of industrial licensing in order to afford protection to newly established industries but this was not appiled on a discriminatory basis against Americans. In some instances local participation in the enterprise was sought as a quid pro quo for concessions but here too there was no discrimination on a national basis. The immediate and important type of screening of capital investment was exchange control.
Mr. McGhee pointed out that it was the US view that the territorial governments might do more to detail and publicize the opportunities available for investment and the British said that some governments were trying to do more along these lines. An Economic Survey of the Colonies is contemplated within the next year which would include a good part of this information. The British expressed a desire to be informed of any particular cases of discrimination which might come to the attention of the US officials.
On the question of Trade Discriminations Mr. Bourgerie said that here too it appeared to be not so much a question of the regulations as the manner in which these regulations were interpreted by local officials. The State Department was under considerable pressure from both Congress and American business on this matter and it was the American belief that US trade should receive at least as favorable treatment as the trade of any other nation, including the metropolitan country, subject to the balance of payments position. The US had Treaty Rights in the area, based among others on the Treaty of St. Germain-en-Laye, the Trusteeship Agreement and GATT. Although the balance of payments difficulties were fully and sympathetically recognized by the US there had been no surrender of our basic rights and there was no disposition to let these rights be nibbled away through administrative practice.
After drawing the attention of the British to the so-called Connally and Hickenlooper Amendments to the ERP Appropriations Act,4 Mr. Bourgerie said that it was the American impression that [Page 1557] in East Africa and the Rhodesias discrimination had at times been carried beyond the need to conserve dollar exchange. The US had received complaints to this effect although he would not delay the meeting by presenting details of such complaints at this time.
The British replied that they were in basic agreement with the US position that there should be no discrimination and expressed a keen desire to be informed of specific cases. They admitted that on occasion local officials would conceivably administer the regulations in what might appear to be a discriminatory manner although often on examination there was a reason for such action. In any case, they urged the State Department to bring these cases to their attention in order that, if the local officials should be in error, the situation could be corrected.
Mr. Bourgerie stated that it would be of assistance to US exporters to have some indication of the dollar allocations to the various areas. The British hastily replied that there were no set allocations: rather, each government is given a ceiling of dollars based strictly on estimates of essentiality. These ceilings were maxima which could not be exceeded, not, in any sense, targets. The local governments were obliged to cut down on dollar expenditures as much as possible.
Mr. Bourgerie pointed out that an improvement in the dollar reserves of the UK would undoubtedly make it increasingly difficult to explain discrimination on the basis of the balance of payments position. The Colonial Office stated that if, as a result of a rise in the dollar reserves of the sterling area, there should be an easing of the position vis-á-vis American imports, the Colonial Office would make a vigorous effort to see that the Colonies got their share of any general let-up. They again assured the Americans that they were anxious to diminish restrictions progressively and asked to be informed of specific cases of seeming discrimination.
Mr. McGhee then briefly summarized the proposed procedures for utilizing the sums available under Point IV. It was the American belief that through trainees, demonstration type equipment, teachers for extension work etc. much valuable work could be done. The Colonial Office agreed and Sir Gerard Clauson said that the possibility had been discussed of asking for Pt IV assistance to pay the expenses of African students already in the United States. Although these students were not in every case committed to a specific project, they were a hand-picked group whose expenses were paid by the British Government in the expectation that they would return to the Colonies and work in such fields as medicine etc.
Although recognizing that the amounts involved were not large, the Colonial Office indicated interest and stated that it should be [Page 1558] possible to take advantage of the program. Mr. Mathieson expressed the hope that the “fair share” of expenses for an American expert which are to be paid by the local government would not include such generous emoluments for travel, housing etc. as to impose a strain on the local budget or on the relations of the American expert with his British colleagues. Mr. Mathieson also expressed some doubts as to the necessity or advisability for each Pt IV request to be routed through OSR in Paris. Mr. McGhee stated that OTC clearance would be necessary only for those projects which might need coordinating with the work of other governments participating in the area and that there was no intention of making OSR clearance a regular part of the channel. Mr. Bourgerie then expressed the view that it was better to overprogram and then to assign priorities than to attempt to match projects exactly with funds now tentatively allotted for British Africa. It was agreed that the Colonial Office would keep in touch with the Embassy on this question.
The authorship of this memorandum is not indicated on the source text, but it probably was prepared by Margaret Joy Tibbetts, Attaché in the Embassy in the United Kingdom and an expert in African affairs. The source text is one of a set of memoranda covering the various agenda items discussed by Assistant Secretary of State McGhee during his visit to London, September 19–23; regarding that visit, see the editorial note, p. 1550.
At another meeting on September 20, Assistant Secretary of State McGhee, Mr. Bourgerie, and Miss Tibbetts received an informal review of British colonial policies in Africa, particularly the Gold Coast, Nigeria, and the Rhodesias, from Assistant Secretary of State Andrew Cohen of the British Colonial Office. The four-page memorandum of that meeting is included in the materials cited above.↩
- Counselor of the Embassy in the United Kingdom.↩
- First Secretary of the Embassy in the United Kingdom.↩
- The amendments under reference provided that no funds would be made available to any nation, if in the opinion of the President a dependent area of that nation failed to comply with a treaty to which the United States and the dependent area were parties.↩