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

No. 458

741.5–MSP/12–2851: Telegram

The Secretary of State to the Embassy in the United Kingdom ¹

secret   niact

Washington, December 28, 1951—9:24 p.m.

3098. For Ambassador and Batt. Continuous and urgent Cabinet level attn being given to question circumstances and timing US econ aid to UK. (Ref Toeca 1238 Dec 21 and related msgs²) At mtg Dec 27 attended by Acheson, Snyder, Harriman, Foster and Bissell, entire problem was considered in its multiple context of effect on UK defense effort, TCC report, EDF and attitudes of Continental NATO Members, Churchill visit, psychological aspects of run on sterling, and finally vital importance of reaching decision and then so timing and presenting it as to secure maximum support of US public opinion and Cong for MSP FY 1953 request which presumably will include provision for econ aid for UK.

While accepting importance of arguments for announcing aid to UK in specific amt not later than date UK announcement of year end reserve position and preferably in advance of Churchill’s arrival, we are aware that amt available for balance current fiscal year is inadequate of and by itself to reverse current run on sterling but that it would have greatest effectiveness if announced as part of concerted attack on problem including plans for action by UK itself and by other Commonwealth countries as well as exploration by US–UK (mentioned in Toeca 1238) of possible means to enlarge dol earnings by UK.

In light of foregoing all here agree (a) that immed effort must be made seek Brit agreement to issuance by them of public statement which wld set forth clearly their intent to take a variety of measures to cope fundamentally with their econ situation and substantially to carry through their rearmament program; (b) that in addition to what can be said publicly, the Brit shld give us in confidence (but susceptible to later use with Cong) as clear indication as possible of their intentions re future measures concerning (1) continuance of defense effort, (2) policy re assistance from and coop of sterling area, (3) import policy, (4) coal production and coal export policy, and (5) consumption and investment; and (c) that announcement of aid decision in context such public statement need not be made prior Churchill’s arrival and might appropriately coincide with Chancellor’s statement of year end reserve position.

Public statement we have in mind wld be along fol lines:

“1. Substantial decline in UK reserves during third and fourth quarters has created situation of utmost seriousness.³ First steps toward remedying position were taken promptly after new govt took office. These have been followed by intensive review with US reps of UK econ position.

2. UK measures already taken include substantial cuts in imports and vigorous efforts in the internal financial field notably affecting credit in order to reduce trade and payments deficits.

3. A mtg of Commonwealth FinMins has been arranged for Jan to determine on urgent basis what further remedial measures can be taken on an international basis in addition domestic measures.

4. UK Govt plans at early date to lay before House further measures designed to meet this grave problem. (We have in mind importance of UK Govt not waiting until Apr budget presentation for disclosure program.)

5. In light importance maintaining econ strength of UK essential for its defense effort and in light of measures already taken and being planned by UK Govt to meet situation, US Govt has informed UK Govt that it will allocate immed to UK 350 million econ aid for first six months 1952. The US and UK Govt are also exploring together means by which it may be possible to expand the earning of dols by the UK.

6. The Govt of the UK is determined to institute measures designed to restore fundamental and enduring econ strength to the UK. It is equally determined that in so far as it is concerned its contribution to the collective requirements of NATO and its rearmament efforts for the defense of the free world shall not be impaired.”

Foregoing suggests gen lines of a UK public statement which wld meet necessities as we see them. It shld be put up to Brit as indicative and of course not verbatim text. It wld also be of importance to secure supplementary private assurances covering gen topics listed earlier. Specifically, among them, you shld make every effort to obtain indication of nature proposals they plan to put to Commonwealth FinMins at Jan mtg. You shld also make every effort to obtain assurance as to Brit adherence to long-term objectives of Anglo-American financial agreement concerning convertibility and non-discriminatory policy as requested in Snyder–Butler conversation in Rome.⁴

Separate ECA telegram will fol covering in detail points listed below but you shld inform Brit it is our thought (a) that $50 million of $350 million cited above wld represent limit on payments by US during FY 1952 on Katz-Gaitskell Agreement,⁵ any further liability which might accrue to be met from any funds which may be appropriated and available for FY 1953, (2) that ten percent of $300 million wld be in form loan in accordance terms Mutual Security Act, and (3) that there may be included within $300 million certain military items which UK wld otherwise be purchasing for dols.⁶

If Brit agree to issuance public statement satisfactorily incorporating points enumerated above and supplement it with statisfactory private assurances re intentions as described above, it is our plan to recommend to Pres approval of $350 million allocation and concert with Brit simultaneous release their statement and separate US announcement on same day Brit publish reserve position as of year end. Pls confirm to us date set by Brit for latter announcement.

This timing we believe wld achieve maximum psychological effect; It would also afford opportunity to impress on Churchill here (without going into detail) importance we attach to early public disclosure by Brit of gen comprehensive plan for dealing with situation and necessity of attack by them on problems no less vigorous than our own efforts to assist them. Moreover, it wld afford us time necessary here for advance explanation to Congressional Comite Chairmen most directly cocerned.

This is a joint State–Def–Treas–ECA–DMS msg.⁷

Acheson

1. Drafted by Livingston T. Merchant, the Special Assistant for Mutual Security Affairs, and cleared by Foster, Snyder, Bissell, Harriman, Martin, Acheson, and Jack C. Corbett, Deputy Director of the Office of Financial and Development Policy.
2. Telegram Toeca 1238 is not printed; other messages dealing with aid to the United Kingdom include telegram Repto 6117, December 7, and telegrams 2741, 2746, and 2865 from London, December 14, 15, and 24, none printed. Copies of these telegrams are in file 741.5–MSP/12–751 through 12–2451.
3. At this point in the source text the following phrase had been deleted before transmission: “and one which if uncorrected wld be detrimental to UK rearmament effort.”
4. No record of this conversation has been found in Department of State files.
5. The agreement under reference here has not been identified further.

6. At this point in the source text the following paragraph had been deleted before transmission:

   “FYI only thought is currently being given to desirability inviting Butler here after Churchill visit for continued exploration gen UK econ problem.”

7. In telegram 3099 to London, December 28, Batt and Gifford were told that the draft communication transmitted in telegram 3098 should be transmitted to a high level in the British Government. (741.5–MSP/12–2851)