Foreign Relations of the United States Diplomatic Papers, 1937, The British Commonwealth, Europe, Near East and Africa, Volume II

611.4131/338

The British Embassy to the Department of State

Record of Statement Made by Mr. Chalkley and Mr. Stirling at the State Department on the 8th of July, 1937

Mr. Chalkley said that the Ambassador in his talk with the Secretary of State on the previous day had referred to the letter of June 15th from Mr. Oliver Stanley, President of the Board of Trade, to Mr. Cordell Hull suggesting that “a full and frank explanation of our position is the most useful step that we can take in the immediate future.” The Ambassador had in fact explained to Mr. Hull in general terms the position resulting from the conversations which United Kingdom Ministers had held in London with the Ministers of other Empire Governments, adding that the United Kingdom Government had sent out Mr. Stirling, a permanent official of the Board of Trade who had been concerned with these conversations throughout, in order that further discussions with the United States authorities might be conducted in the light of first-hand knowledge of what had recently passed in London. In accordance with the understanding reached with Mr. Hull, Mr. Chalkley and Mr. Stirling would repeat and amplify the Ambassador’s statement, in the following form:—

1. The concessions required by the United States Government in their memorandum of March 2nd and May 18th affect the contractual rights of four Dominions as well as of India, Burma, and Southern Rhodesia. Further progress is therefore dependent, not on the decision of the United Kingdom Government alone, but of the several Dominion and other Governments concerned. These Governments are entirely autonomous in economic matters, they enjoy contractual rights in the matter of free entry and preferences for the products of their countries on importation into the United Kingdom. It was therefore necessary to ascertain how far they might be willing to agree to waive their rights in so far as those rights are affected by the requests which the United States put forward as “essential”. These enquiries have now been made, and while there still remain considerable difficulties, the United Kingdom Government are anxious to examine, in cooperation with the United States Government, all possible means of solving them.

2. In the course of the recent discussions in London the Dominion and Southern Rhodesian delegates (it had not been possible up to the time when Mr. Stirling left London to ascertain the views of the Governments of India and Burma) expressed general sympathy with the underlying objects of an Anglo-United States trade agreement. It is clear that the Governments concerned share the desire of the United States and United Kingdom Governments that everything possible should be done to promote the expansion of world trade and to make possible an agreement having that purpose, and that they would help so far as political exigencies in their own countries allow.

3. It appears, however, that the Dominion Governments would in varying degrees find it essential to obtain compensation for any advantages which they might forego in the United Kingdom market in order to be able to justify in their own countries the concessions which they might be called upon to make.

4. This raises the question of what compensation is available. The United Kingdom Government did not fail to call attention to the advantages which would accrue to the Dominions from:—

(a) participation in the general expansion of world trade hoped for from the conclusion of an agreement with the United States,

(b) the increased purchasing power of the United Kingdom for Empire products which might be expected to result from the conclusion of such an agreement,

(c) the assurance contained in paragraph 5 of the United States memorandum of the 18th of May that a satisfactory agreement with the United Kingdom would pave the way for similar agreements with the Dominions,

(d) reductions made in the United States tariff in an agreement with the United Kingdom on commodities of which the Dominions were also suppliers,

(e) such compensation as the United Kingdom Government could offer them.

5. As regards (e) compensation by the United Kingdom could take only two forms, namely (1) to give the Dominions alternative advantages in the United Kingdom market, and (2) to give sympathetic consideration to such reasonable requests as they might themselves desire to put forward for the modification of preferences now enjoyed by United Kingdom goods in their markets, in order to facilitate trade negotiations between themselves and foreign countries, including the United States.

6. As to (1), Dominion goods already enjoy free entry in the United Kingdom (with a few exceptions of a revenue character). One way out might have been to compensate the Dominions by increases of duties on foreign goods designed to give the Dominions further preferences. The United Kingdom Government however decided that they could not contemplate such a course because they regarded an agreement with the United States as a step towards a general reduction of trade barriers. Thus the only form of compensation which the United Kingdom is in fact able to offer the Dominions is that of being ready to agree to some abatement of its rights in their markets if those rights should stand in the way of trade negotiations which they might wish to conduct.

7. The United Kingdom Government made this offer to the representatives of each Dominion in turn. South Africa accepted it in principle and will formulate proposals to the United Kingdom on these lines. The representatives of the Union Government, however, asked the United Kingdom Government to emphasise the fact that they (the Union Government) were showing themselves ready to make considerable sacrifices and to request that this fact should be borne in mind when at a later stage they came to negotiate with the United States. The other Dominions felt that in order to justify concrete concessions they would require something more than hypothetical advantages to be gained by future trade negotiations. They are faced with political difficulties which can be overcome only if they are able to persuade their Parliaments that commercially they would be no worse off by agreeing to concessions in favour of the United States than they are at present. In other words they must have something more tangible to show in return for immediate concessions than an assurance that an Anglo-United States agreement would pave the way for negotiations with them or that the United Kingdom would help them in trade negotiations by yielding up some preferences. They regard both of these suggestions as deferred compensation, which is not enough to meet their immediate difficulties.

8. An Australian Minister recently in Washington has explained the position of his Government. A New Zealand Minister will no doubt be doing the same next week.⁶⁸ The position of the Canadian Government as explained by their Ministers recently in London is that if they are to justify the impairment of the advantages for which they gave consideration in the recent Anglo-Canadian Agreement, they must be able to point to satisfactory compensating advantages. It is believed that the Canadian Government would welcome discussions with the United States Government which would be simultaneous and linked with those between the United States and the United Kingdom.

9. The foregoing part of this statement has been concerned with the Dominion position. Many of the United States requirements also closely affect United Kingdom producers. It is true that in their case no contractual rights are involved and the position is therefore less rigid. It is nevertheless difficult enough and all the more difficult because the United Kingdom tariff is relatively low. The readiness of the United Kingdom to go as far as possible in meeting the United States requirements must be taken to mean, not that the requirements occasion no difficulties, but that the United Kingdom Government were prepared to face those difficulties, which are substantial.

10. Explanations of the position in regard to particular commodities, so far as it can at present be defined, will be offered to the United States authorities at an early date.

Washington , July 10, 1937.

68. See memorandum by the Assistant Chief of the Division of Trade Agreements of conversations with New Zealand Government officials, July 12, 13, and 14, 1937, p. 203.