Foreign Relations of the United States, 1947, General; The United Nations, Volume I

Lot 65A987, Box 101

Memorandum by the Vice Chairman of the United States Delegation (Wilcox) to the Chairman of the United States Delegation (Clayton)

secret

[Geneva,] August 6, 1947.

(1) It now appears probable that we shall come out of the Geneva negotiations with a Charter that will be more acceptable in the United States than the earlier drafts. The prospective results of the tariff negotiations, however, are extremely discouraging. If the negotiations, as a whole, were to fail, we could probably salvage satisfactory agreements with Norway, Benelux and Lebanon-Syria, and a fair agreement with Canada and China. The present prospect for adequate agreements with Brazil, Cuba, Chile and Czechoslovakia are not promising. We shall have to wait for some time for an answer on the agreement with India. The real test of success or failure depends upon the outcome of our negotiations with France and with the British Commonwealth, and it is here that we have encountered our greatest difficulties. Unless we can obtain satisfactory agreements in these cases, the tariff negotiations will be a failure, and we shall be accused, in the United States, of accepting slim tariff concessions simply to get agreement to the provisions of the Charter. This would imperil the ratification of the Charter and the renewal of the Trade Agreements Act.

(2) It has been apparent, throughout the negotiations, that the United Kingdom has had no intention of making concessions that involve any real progress toward the elimination of preferences. The offers originally made by the United Kingdom were pitifully inadequate. Helmore and Cripps have nevertheless insisted that they represent a fair balance. Cripps, moreover, has made the amazing suggestion that a better balance might be achieved by the withdrawal or reduction of our offers. Helmore has sought an early termination of tariff negotiations and has indicated that we should be satisfied with modest results. In respect to preferences, the Commonwealth has placed us at a disadvantage in negotiations by taking the position that we must purchase every reduction or elimination of a preference twice—once from the country that receives it, and once from the country that grants it. On the basis of performance to date, it would appear that the United Kingdom will attempt to extract every concession that we will make toward easing their short-run situation without making any appreciable concessions with respect to long-run trade policy. The vested interests that have been built up under the preferential system are strong, and the United Kingdom has shown no willingness to take the political risks involved in reducing or removing the protection afforded them by the preferences which they enjoy. It appears that no concessions are made without the permission of the industry concerned. The real obstacle to effective action on preference exists, not in the Dominions, but in the United Kingdom.

(3) The approach to the immediate situation which was suggested to Helmore on Sunday evening, August 3, involved a thorough-going relaxation of restraints upon discrimination in the short run and, in addition, an easing of our requests with respect to preferences by (a) reducing the number of items covered within the scope of these requests, (b) accepting gradual, rather than immediate, elimination of preferences in a majority of the remaining cases, and (c) insisting upon the immediate and complete elimination of preferences only in a minority of crucial cases. The implication was clear that it would not be politically possible for us to grant the sort of relaxation on discrimination which they desire to have in the short run, unless we could honestly demonstrate that the negotiations as a whole had resulted in really substantial progress toward the elimination of preferences in the long run. The United Kingdom has responded in no way to this approach.

(4) American opinion regards the Hawley-Smoot tariff and the Ottawa system as related parts of inter-war trade restrictions. We are undertaking the liquidation of the Hawley-Smoot rates. We cannot support this action at home unless we obtain, in the process, the liquidation of the Ottawa system. We now have in our hands bargaining weapons that we may never possess again: (a) Our excellent offers on tariff reduction; (b) a cut on wool; (c) the possibility of easing the British financial crisis through relaxation on discrimination in the short run; and (d) the prospect of aid under the Marshall Plan. If we cannot now obtain the liquidation of the Ottawa system, we shall never do so. What we must have is a front-page headline that says “Empire Preference System Broken at Geneva.” With this, the success of this whole series of negotiations is assured. Without it, there is grave danger that the whole trade program will end in defeat.

(5) In this situation, most serious consideration should be given to these critical questions: If the United Kingdom should persist in its refusal to live up to its commitment with respect to the elimination of preferences, should we enter into any trade agreement with them? Would the chances of getting the Charter accepted in the United States be promising enough to justify us in submitting it to Congress at all? If the case is indeed hopeless, would it not be better for the Administration to abandon the program here and now than to run the risk of repudiation at home next year?

(6) If this analysis of the situation is correct, it is suggested that Sir Stafford should be told (a) that genuine and far-reaching performance on preferences is imperative here and now; (b) that the United States cannot enter into a trade agreement with the United Kingdom that does not involve such performance; (c) that the United States may be unable to attend the Havana Conference or present the Charter to Congress if it does not get such performance; (d) that the United Kingdom will have to take the responsibility for the failure of the program; (e) that, in this context, it will be virtually impossible for us generously to approach the problem of permitting short-term discrimination; and (f) that the prospects of Congressional approval for additional aid, under the Marshall Plan or otherwise, will be seriously impaired.

(7) One serious aspect of this situation should be stressed. There has been growing irritation between our two peoples over the past year. This is attributable, in the main, [to] the British resentment against the requirements accepted by their Government in the Anglo-American Financial Agreement. If the United States were to take generous action to relieve the British financial situation in the present crisis, a large part of this resentment might be removed and our relations accordingly improved. Failure by the United Kingdom to fulfill its commitments as to long-term commercial policy, unrelated to its short-term difficulties on the other hand, would give rise to resentment in the United States. If, as a consequence, our country failed to come to Britain’s aid in the present emergency, the bitterness against us would be continued and increased. In the circumstances, action by both Governments is required to reestablish the mutual respect and confidence that are essential to our cooperation in the reconstruction of the western world.

(8) What needs to be done, in this situation, can be done without real cost to either side. In the short run, the demand for American exports will be so great that greater latitude for discrimination can be permitted without serious harm to our interests. In the long run, the United Kingdom will be better off in a world of multilateralism and non-discrimination than in a world permanently condemned to bilateralism and preferential trade. The real obstacle to mutually advantageous agreement lies in the political resistance to multilateralism within the United Kingdom. Unless that obstacle can be removed, our program will have failed.