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

560.AL/8–2647: Telegram

The Acting Secretary of State to the Consulate at Geneva

top secret
us urgent

Washington, August 26, 1947—1 p.m.

1079. For Clayton from Lovett.

1. Have discussed with President your 895, explaining the four courses action available if, as expected, British reject our list without making acceptable counterproposals. He agrees alternatives (1) and (4) impractical and should be rejected. He favors alternative (2) over alternative (3).¹ He is reluctant to send a message to Attlee at this time in view British political situation although he indicated he would reconsider if essential. We would be reluctant to urge sending message. Your proposed letter to Cripps was not discussed and we leave sending of this to your judgment, though if you decide to do so I would appreciate it if you would clear letter with Dept in order that we may check consistency with recent financial agreement discussions.

2. Hickerson, Hawkins, Nitze, Willoughby and I have independently considered matter and are also of opinion alternative (2) is lesser of two evils. Without attempting full evaluation here, following comments offered for your consideration.

(a) Consensus here is British will not modify to great extent position taken by Cripps regarding preferences. Financial talks indicate British feel desperate and political situation such that they are likely follow course they feel necessary in view current crisis even if clearly contrary their own long-run interests. During loan conversations British made it clear they are prepared to violate any international obligations which would prevent them from taking action they consider essential, witness unilateral violation 16 financial and trade agreements regarding convertibility. Must assume therefore alternative (3) would result no agreement.

(b) In other matters we are attempting to give UK every assistance in getting over this difficult period and in avoiding irretrievable damage to their long-run position.

(c) Believe course of action leading to rupture trade negotiations inconsistent with policy we are following regarding financial agreement. (President referred to inconsistency our position if we should take alternative (3).) Important from point of view of successful relaxation convertibility and nondiscrimination provisions that some progress, even though slight, be made in commitment to reduce trade barriers.

(d) Believe alternative (3) likely to lead to strong resentment British public and considerable confusion and criticism in US. Would make more difficult consideration by Congress further assistance UK and Europe generally. As you know, UK Govt now under intense pressure from left wing members Labor party to curtail sharply UK foreign commitments, reduce arm forces and to withdraw British forces from Greece and Italy. We are concerned over likelihood that USSR will exploit fully any such differences between US and UK just as they are now trying to capitalize on British weakness by increasing pressure throughout Eastern Europe and Near East.

(e) Consequently best course seems to be to get best agreement possible in present highly unfavorable circumstances and reserve part of our negotiating position for use at more propitious time by trimming our offers correspondingly.

(f) From standpoint of public and congressional opinion here thin agreement of this kind we believe better than none, especially if made clear that present agreement only an initial stage in dealing with this problem. Such a position would probably be understood in view of fact Britain is a key country in these negotiations and present crisis creates very unfavorable conditions for finding complete solutions.

(g) In line with above could concentrate now on eliminating preferences in UK of little or no concern to latter but of importance to dominions, using such of our offers as may be necessary for this purpose but withholding a substantial part of our offers on products of interest to UK for later use in getting releases for elimination of preferences enjoyed by UK in the dominions.

(h) Might seek commitment from UK to resume negotiations in hope of finding more satisfactory solution when Britain has gotten through the immediate crisis; also commitment from dominions that effect would be given by them to any agreement later reached with UK for elimination of preferential margins in dominion tariffs.

Lovett

1. In a memorandum prepared for President Truman, August 25, not printed, covering both Geneva’s 895, and the Department’s thinking, Lovett said: “I feel that the final choice in this connection should be left to Mr. Clayton although I believe we should point out to him that opinion here is that alternative (2) is the lesser of the two evils.” (560.AL/8–2547)