Foreign Relations of the United States, 1958–1960, Foreign Economic Policy, Volume IV

189. Telegram From the Embassy in the United Kingdom to the Department of State⁰

London, December 9, 1959, 7 p.m.

3010. From Dillon. Discussion economic aid commenced toward close of Chancellor’s luncheon December 8. Amory opened with following points. Both countries agree on importance economic development. During meetings with Commonwealth HMG had stressed importance of (1) maintaining strength of own economy as essential element in economic health of Commonwealth, (2) importance underdevelopeds maintain favorable climate private investment, and (3) where a choice exists trade preferable to aid.

UK now committed “to the hilt.” Current surplus in past year fully devoted to aid and overseas investment and projected surplus in coming year more than committed these purposes. Amory volunteered, however, that much private investment going to countries other than underdevelopeds. While further strain on UK balance-of-payments not justified, he said UK should be able afford additional aid in form of unrequited exports. In this connection Indians had asked UK whether they prepared sacrifice their own standard of living in order to increase economic development. British had replied their ability this direction limited by public opinion.

Finally, UK welcomes IDA though still not happy about soft currency loans, but assumes some satisfactory solution to latter problem can be found.

Dillon replied that UK position largely in agreement with ours. We agree to trade versus aid and importance private investment, but these have limits and private investors not enthusiastic about underdeveloped countries. US is doing its best to encourage investment that direction, for example, by investment guarantee agreement with India and recent US-India tax treaty.¹ IDA useful but not adequate for total job. Concerning soft currency loans, this a desirable way of maintaining control over what otherwise would have to be grant aid.

Dillon called attention to need for greater coordination among leaders. Germany, for example, could do more. Possibility using OEEC as forum for bringing pressure on other lending countries. Believed this would induce greater German help and perhaps also help from Italy. Italian budgetary position difficult but balance of payments would permit greater aid. British asked whether use of OEEC mechanism would not exclude Japan. Dillon answered not necessarily as it advisable include Japan in discussions of aid patterns.

[Here follows a brief comment on an unrelated matter.] Concerning US aid to underdevelopeds, we have reached decision not to cut absolute level our aid but hope our proportionate share will be reduced by increased help from others.²

[Here follows a brief discussion on an unrelated matter.]

At this point luncheon adjourned to meeting of Sixes and Sevens chaired by Foreign Secretary.

Whitney

0. Source: Washington National Records Center, RG 59, Conference Files: FRC 83–0068, CF 1548. Confidential. Drafted by John W. Evans, First Secretary of the Embassy in London, and cleared in draft with Dillon.
1. For text of the agreement supplementing the September 19, 1957, agreement on guaranty of private investments, signed at Washington and entered into force on December 7, 1959, see 10 UST 1997. For text of the agreement of September 19, 1957, see 8 UST 1442. The tax treaty has not been further identified.
2. Dillon repeated the comments in the two preceding paragraphs during a December 11 conversation with Adenauer. (Memorandum of conversation; Washington National Records Center, RG 59, Conference Files: FRC 83–0068, CF 1548)