Foreign Relations of the United States, 1951, Europe: Political and Economic Developments, Volume IV, Part 1

No. 428

741.5/3–951: Telegram

The Ambassador in the United Kingdom ( Gifford) to the Secretary of State

secret

London, March 9, 1951—6 p.m.

4853. This is joint Embassy, ECA, MAAG message in reply to Deptel 4050 March 7.¹ Treasury representative also concurs.

Presumable judgment that British program requires no dollar assistance beyond end-items is based on expectation that sterling area dollar gap will not reappear in near future. We share that expectation. British program for next FY can be carried out without dollar assistance and its fulfillment was not predicated upon dollar assistance as necessary condition. However, absence of reference to dollar aid in presentation of program to Parliament was explicitly explained during debate as appropriate pending results of multilateral burdensharing exercise in NATO. Key issue here is whether our approach in multilateral exercise will be rigidly governed by dollar gap criterion. If there is possibility of flexibility in our approach, whether rigid dollar gap criterion modified by considerations of burden in terms of resources in general or in terms of all-currencies balance of payments, important that results of exercise not be prejudged by Congressional presentation which would tie our hands to dollar gap criterion. Preferable then to leave administrative flexibility in allocation of funds to considerable extent to cover cases where burden-sharing exercise indicates aid is desirable. British case must face expectation that strain will be evidenced by over-all balance of payments deterioration and accumulation of sterling balances even though sterling area dollar reserves may be up. If despite this expectation there is not to be flexibility in our approach, and dollar gap is to be necessary condition for aid whatever other conclusions of burden-sharing exercise, that fact should be communicated to British immediately since they have evidently assumed otherwise. If fact of no dollar assistance except end-items should become known to British public only through specific or inadvertent disclosure during Congressional presentation, we would expect seriously adverse public reaction here.

Judgment of adequacy of British program obviously will vary as assessment of urgency of situation and apportionment of military tasks vary. Military appraisal here of extent to which British program fulfills existing targets is in preparation and will be forwarded. Pending results this appraisal tentative reaction here is that British program adequate. Although prospective effort clearly not proportional to US effort, it appears to approach maximum long-run effort of which economy capable to much same degree as US program which has been revealed to date. If reassessment of situation leads to acceleration of MTDP and further increases in US program, then basis for pressure on the British for further upward revision of British program would be laid.

We do not believe that US should attempt at this time to “push British for increased effort”. Expanded British program has only recently been announced. It involves definite sacrifices, including reduced consumer consumption. Program generally accepted despite some grumbling within labor party. Government has not yet spelled out full implications program (this cannot be done until budget presentation in early April) except to give rather cheerless forecast that under this program shortages will not be as severe as existed during last war.

While admittedly standard of living could be reduced more drastically, government believes current proposals adequate in terms: (a) international situation, (b) contributions by other NATO countries, (c) impact on British economy.

In addition we consider it important that US not be placed in position of prodding British further at this time. There has recently been considerable amount of public criticism of American dominance (latest manifestation of which was the admiral affair²) and if the US unilaterally were to challenge the adequacy of the defense program before a general NATO decision and before the implication of current programs have even been fully weighed, we believe it would have a most unfortunate reaction.

We of course favor a reappraisal of the British effort if decision is reached to raise sights across the board. In addition we recognize the possibility, at some later stage, that the British and ourselves might wish to combine in an effort to demonstrate joint leadership to use an expanded British, American program as an example before NATO to persuade the continental powers to make a greater effort. Under such conditions the criteria applied to the British effort might be somewhat different from those applied to the programs of other European members. However, we do not believe that this is the time to attempt to use the British for such pacesetting.

As you know, British are deeply concerned whether they will be able to obtain sufficient supplies of raw materials, component parts and machine tools under their present defense program. These doubts have perhaps some added justification because of reported feeling in some quarters in Washington that such items in short supply should largely be retained for American production because of its productive capacity and ability to produce more quickly. Accordingly, before we embark upon an effort to obtain an expanded British program we should make sure that not only the current British needs for items in short supply but the expanded needs (which might be considerable) would have at least a reasonable prospect of being supplied.

Gifford

1. Telegram 4050 reported the Department of State position on the British defense effort as follows:

   “1. Present UK defense program probably requires no US assistance except end items.

   “2. Program adequate measured by presently accepted criteria although admittedly these criteria now under scrutiny.

   “3. US shld not push Brit for increased effort in absence or in advance of US policy decisions re MTDP acceleration and closing gap between commitments and MTDP requirements.”

   The Embassy in London was requested to comment on this position. (741.5/3–751)

2. For documentation on the nomination of Adm. William M. Fechteler to the Supreme Allied Command, Atlantic (SACLANT), see vol. iii, Part 1, pp. 464 ff.