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

Lot 65A987, Box 101

Memorandum by the Minister-Counselor for Economic Affairs at London (Hawkins), and by Mr. Winthrop G. Brown¹

top secret

London, September 24, 1947.

If, as we anticipate, the British refuse any further substantial action on preferences we have two alternatives:

(1) To break off negotiations.

(2) To take the best agreement we can get.

If we make an agreement with the U.K.—

1) We will have the first multilateral tariff reduction in history, covering 75% of world trade.

2) We will get indirect concessions greater than we could ever get by a series of bilateral agreements.

3) We would get substantial tariff concessions from the U.K. and statistically the U.K.–U.S. pattern, taken alone, would look very satisfactory, aside from the issue of preferences.

4) In the overall picture of success, the comparative failure on preference negotiations will not loom too large.

5) The Geneva Conference will end in an atmosphere of success and good will, with the U.S. recognized as having been constructive, generous and understanding.

6) The ITO project will get off to a good start, giving an objective towards which the Marshall Plan can work.

7) Under our present offers we still have substantial bargaining power left for the future.

If we break off with the U.K.—

1) Even though we are right, we appear to the world as Uncle Shylock.

2) We would be portrayed to British public opinion as exacting our pound of flesh. The British would be advertised to our public opinion as breakers of their contracts. British and U.S. opinion would be inflamed against each other.

3) A breach with the U.K. means a breach with all the Dominions.

4) The first effort at multilateral tariff reduction will fail. This type of effort will be set back for years.

5) Havana and the ITO will be jeopardized.

6) We will lose substantial tariff benefits and Commonwealth discrimination against us will be intensified.

7) An open breach with the U.K. will hurt the Marshall plan more than their failure, under present circumstances, to give substantial elimination of preferences.

8) We will provide the Russians with just the propaganda material they need.

9) We will end a joint effort with our best friends in bitterness and disillusionment.

We therefore recommend that we do not break off, but seek the best agreement, in substance and in form, that we can get.

Our objective in this case would be:

a) To retain the satisfactory offers on tariff rates made by the U.K.

b) To get the most we can on preference eliminations throughout the Commonwealth compensating for lack of coverage by importance of items.

To achieve these objectives we should tell the Commonwealth representatives that:

a) If we cannot get the broad action on preference eliminations requested of the U.K. we must have:

1) Elimination at least of certain key preferences beyond present offers, viz., dried and canned fruits in the U.K. and Canada, and automobiles in India.

2) A few further reductions in preference margin in cases where we are still dissatisfied with offers in the most-favored-nation rate, for example, automobiles in Australia and tin-plate in Canada.

b) Australia will immediately insist that she cannot waive her preference on fruits without an improvement in our offers on beef and butter. We should say that if she will waive these preferences we will recommend the full 50% concessions on beef and an improvement in our offer on butter, for example, double the quota and make it apply to the Australian season only.

Agriculture might possibly agree with the improved offer on beef but would certainly dissent on butter. This would mean that the matter would have to be decided by the President.

c) In cases where the Dominions have agreed to elimination or reduction of the margin of preference they enjoy in the U.K., we would request the U.K. to reduce their rates accordingly.

d) If we are to maintain our offers to the Colonies, we would need some action on preferences in the Colonies. We are prepared to consider any formula which they wish to suggest.

e) To avoid an appearance of unbalance in depth of concessions we propose to reduce the extent of our offer on whisky and perhaps a few other offers of 50% concessions (whisky alone would reduce the trade coverage of our 50% offers from 29% to 7%).

f) If our agreements with the Commonwealth countries are otherwise satisfactory we would probably accept agreement on this basis. If we do reach agreement with the Commonwealth, Geneva will be considered a success. If not, it will probably be considered a failure.

Success at Geneva is within our grasp. The General Provisions of the Trade Agreement have been unanimously agreed. A procedure for putting it into effect has been developed. On tariff rates, we are certain of good concessions from Benelux, Cuba and Norway and satisfactory concessions from China, Brazil, Chile and Lebanon. We are reasonably sure of good concessions from India and satisfactory concessions from France and Czechoslovakia. Over 70 other bilateral negotiations of varying importance have been concluded and are ready to be fitted into the unilateral frame. We will benefit extensively from these other negotiations. An agreement with the Commonwealth countries on the basis above suggested would therefore in our opinion make the over-all multilateral agreement generally satisfactory. Such an agreement would be a landmark in economic history and to have negotiated it under present conditions would be a very considerable achievement.

1. Mr. Brown, third-ranking member of the U.S. Delegation at Geneva, was temporarily in London. The memorandum was addressed to Under Secretary Clayton and Ambassador Douglas.