841.00 Colonial/12–2452

No. 371
Memorandum of Conversation, by the Director of the Office of British Commonwealth and Northern European Affairs (Raynor)

secret

Subject:

  • Background on the Commonwealth Economic Conference1

Participants:

  • Commonwealth Representatives
  • Mr. H. Raynor, Director, BNA

. . . . . . .

[Page 878]

Import Restrictions

This matter was approached by several delegations from the point of view of self-interest. As to the U.K. the self-interest angle was based on a conclusion that in the overall restrictions were harming the U.K. more than helping. The Australian restrictions brought this into focus but in reaching this conclusion the overall situation, including the Continent, was taken into account.

Australia’s and New Zealand’s self-interest was from the point of view of the need for capital. Both countries realize that in the future they will not be able to obtain their full capital requirements in London. They realize further that the need cannot be fully met in the U.S. unless they are part of a convertible system.

There was a general feeling shared by all delegations of being fed up with being called to London every year or so to meet a crisis situation and a determination that whatever the cost may be to put an end to this kind of situation.

Internal Measures

Much more than lip service was paid to the principle that each country must put its own house in order. The opinion has been expressed that the necessity of each country accounting for its own policies, to its sovereign equals in the family was having a most salutary effect and analogy drawn to the same type of salutary effect in a different field resulting from the accountability features of GATT. The observation was made to me that the Indian Finance Minister had been impressive in the conference and was one of the ablest participants.

Convertibility

This was one subject on which Commonwealth representatives indicated they were not free to speak at all. I have been told, however, that “agreement was reached on a more or less precise plan for approaching convertibility”. It has been pointed out to me that the use of the word “plan” in the communiqué in paragraphs 18 and 21 is therefore of significance. It was firmly agreed that the U.K. would speak for the sterling area on this when the U.S. was approached. In this connection, as to the approach to the U.S., the timing and method has all been left to the discretion of the U.K.

Economic Development

I have been told the U.K. wanted to reach an agreement based on conviction to the effect that economic development would be pursued only if the specific projects would contribute to an improvement [Page 879] in the balance of payments position of the sterling area. The U.K. realized, however, that to press this too hard would risk jeopardizing the position of the City or perhaps even lead to withdrawals from the sterling area. Hence, they went along with certain offsets to this principle.

1)
Agreed to the release of the sterling portion (18%) of sterling area contributions to the International Monetary Fund.
2)
To the creation of the consortium body for private investment in the City under the chairmanship of Sir Edward Peacock. On the latter point this was a watered-down version of a not-too-well defined proposal put forward by New Zealand for some kind of a Commonwealth development corporation. A point was made that the City consortium project referred to was one involving private capital. In this connection the observation was made to me that Prime Minister Holland had not been impressive at the conference.

Tariff Questions

Considerable time was devoted to discussions of what adjustments would be necessary in the field of tariffs and preferences should restrictions be modified or convertibility started.

The UK in general favored the goal of no quantitative restrictions others than those permitted under Article 18 of GATT. The Indians, however, in particular, and some of the others, stressed that this was not enough. They wanted to be in a position to keep out luxury goods in general; for instance Cadillacs even though they were not planning to build automobile factories. This was the reason behind paragraph 19 of the communiqué according to my information.

On the questions of tariff rates the U.K. originally launched a move to modify Article I of GATT. On this they received support only from Australia and the concept of the Commonwealth looking inwardly for prosperity was decisively defeated. The U.K. accepted this with grace but did stress that they would have some problems in this field. They did not know precisely what these would be as the tariff had not been used by them as an instrument of protection since before the war. They felt, however, it would be very likely necessary for them to raise MFN rates on certain categories of goods. Immediately, they have this problem with respect to fruits and vegetables in order to be protected in this field from the Continent. The U.K. pointed out that it will be impossible to get Parliament to approve legislation which would impose a duty on a specific commodity for the first time against a Commonwealth country. This was the reason, according to my informants, for paragraph 16.2

  1. The Commonwealth Prime Ministers Conference finished its work at London on Dec. 11.
  2. For the text of the communiqué, see Documents (R.I.I.A.) for 1952, pp. 62–67, or Department of State Bulletin, Mar. 16, 1953, pp. 397–399.