841.10/9–751
Memorandum of Conversation, by the Assistant Secretary of State for Economic Affairs (Thorp)
| Participants: | Mr. Hugh Gaitskell, Chancellor of the Exchequer |
| Sir Leslie Rowan | |
| Mr. Denis Rickett | |
| Mr. Webb | |
| Mr. Cabot | |
| Mr. Thorp |
Mr. Gaitskell reviewed for Mr. Webb his analysis of the British balance-of-payments situation and gave him a detailed memorandum on the subject.1 He then summarized his meetings with Messrs. Wilson and Bissell.2 Mr. Thorp inquired whether the statements in the morning newspapers concerning the talk with Mr. Wilson were correct, particularly with reference to steel and coal, since he had been present and had not heard that any such conclusions were reached. Mr. Gaitskell said that the news reports were not correct, that he was very much disturbed about it, and that apparently it had been given out by someone in Mr. Wilson’s office. They are taking the matter up to see what could be done to correct it.
Mr. Gaitskell then said that he had three points of particular interest to the State Department to make:
(1) to explain their action whereby they propose to end the existing arrangement involving the virtually automatic convertibility of Iranian sterling into dollars. In view of the great strain which the Iranian action is putting on their dollar position, he does not feel that the arrangement can be continued. It amounts to $50–100 million per year. The Iranians of course will be free to use their sterling as sterling. He said that he understood that this had already been discussed with the Department, and that the U.K. was taking most seriously the American suggestion that the matter be presented in a way which will eliminate as far as possible the charge that it is an economic sanction.
[Page 971](2) He then referred to East-West trade saying that the Foreign Secretary will probably bring this up with Secretary Acheson.3 He stressed particularly the fact that even under present arrangements the Russians will probably accumulate a surplus of sterling and they don’t quite know what will be the result of this. The difficult points are tin and rubber. It is the British feeling that they are now at the point where further restrictions will hurt them more than they will hurt the Russians.
(3) Finally, he mentioned two German problems. First, with respect to the financial and economic implications of prospective developments, the U.K. will not be able to meet its occupation costs which have heretofore been met by the Germans; secondly, with respect to the debt problem, they feel that the post-war debt should have priority over the pre-war debt. He justified this position on the basis that much of the pre-war debt involved an assumption of risk and did not deserve to be rescued, and, secondly, that the general interest (government) should be put before that of various individuals. He stated very strongly that the debt problem cannot be gotten out of the way in advance of a determination on the first point. In fact, that all the elements in the German financial and economic situation should be resolved together.