Foreign Relations of the United States, 1948, General; the United Nations, Volume I, Part 2

560.AL/3–1248

Memorandum of Conversation, by Mr. Leonard Weiss of the Division of Commercial Policy

secret

[Washington,] March 12, 1948.

Participants:	Mr. Anthony E. Percival, Counselor, British Embassy
	Mr. W. G. Brown, ITP
	Mr. L. Weiss, CP

Mr. Percival came in to discuss Article 23 of the Charter dealing with discrimination for balance of payments reasons and in this connection presented a letter from the British Ambassador¹ addressed to the Secretary of State.²

The letter was concerned with two points: (1) the presumed dual control by both the Fund and the ITO over discrimination under the Geneva rules to be incorporated into the new Article 23 in contrast to only single control by the Fund under the Habana draft of these provisions, and (2) a request for postponement for several days of any decision by the Habana Conference on these provisions so as to afford the British Cabinet time to consider the problem. On the latter point Mr. Brown, on the basis of information received from Mr. Wilcox at Habana, assured Mr. Percival that a decision could be postponed until next Tuesday, thus meeting the British request. Mr. Percival expressed his appreciation for the postponement. Mr. Brown emphasized the urgency of settling the problem as soon as possible and coming to a decision on next Tuesday.

With respect to the question of dual control, it was pointed out to Mr. Percival that in the case of both the Geneva and Habana rules incorporated in the new Article 23 the International Monetary Fund would be responsible for determining the end of the transition period and thus both sets of rules were on an equal level in this respect. During the transition period the Fund would be responsible for determining the permissible degree of discrimination under the Habana rules, whereas the ITO would be responsible for determining the latitude of discrimination under the Geneva rules. Under both sets of rules only one body would be responsible for determining the degree of discrimination and hence they were on an equal level in this respect also. Mr. Percival was inclined to agree with our interpretation of the Habana and Geneva texts on discrimination for balance of payments reasons and indicated that he would pass this interpretation on to his Government.

Mr. Percival suggested, however, that the British considered dual control to exist under the Geneva rules in the sense that both the Fund and the Organization were given powers which affected a Member’s ability to discriminate, the Fund by being able to terminate the transition period and the Organization by determining the degree of discrimination within the transition period. This contrasted with the Habana rules under which only one body, the Fund, had any responsibility regarding the determination of both the scope and the duration of discrimination. It was pointed out in reply, however, that our Delegation at Habana considered only single control to exist even under the Geneva rules in the sense that only one body, the Fund, determined the duration of the transition period and only one body, the Organization, determined the permissible degree of discrimination within the transition period.

It was strongly emphasized to Mr. Percival that the negotiations regarding these provisions should be conducted in Habana and not in either Washington or London. It was pointed out that the respective delegations of the United Kingdom and the United States and the various experts on these provisions were available in Habana, that the U.S. Delegation has full authority and the complete support of the Department, and that to shift the negotiations away from Habana would cause only confusion and delay. Mr. Percival agreed that the proper place for the conduct of these negotiations was Habana and not Washington or London.

Mr. Brown stressed the fact that the U.S. had already gone a long ways to meet the British by our willingness to agree to the elimination of the prior approval requirement from the Geneva Draft of Article 23 and the insertion of an interpretative note on new preferences in accord with British desires. Mr. Percival indicated he was personally convinced our position was correct.³

Later that evening Mr. Percival called Mr. Weiss regarding further questions which had arisen in his mind on the problem of dual control under the Geneva Draft of Article 23. Mr. Percival stated that although he agreed with our interpretation to the effect that there was no dual control of the degree of discrimination in the transition period, he nevertheless felt, after reading the record of the negotiations at Habana and other information available to him, that confusion on this point still existed both in London and in Habana. He quoted a statement made by Mr. Bronz at the Habana Conference which suggested that there was dual control over the degree of discrimination under the Geneva provisions. He pointed out that it would be of great assistance in reaching agreement if he could point out definitively to his government that there was no dual control. He therefore urged most strongly that the Department either cable or telephone Mr. Wilcox to determine conclusively whether such dual control existed or not. Mr. Percival indicated that he would then transmit this information to his Government.

Mr. Weiss replied that (1) Mr. Wilcox had already been telephoned on this point earlier in the day and very clearly indicated that there was no dual control over the scope of discrimination under the Geneva provisions; (2) if any confusion still remains as to whether dual control exists or not, the proper place to clear the matter up is between our respective delegations at Habana. To attempt to obtain interpretations of these provisions from Habana and then to transmit such interpretation to Mr. Percival who would then presumably pass them on to London would be an extremely awkward procedure and might serve only to compound the existing confusion. In view of the foregoing, Mr. Weiss indicated that he believed it undesirable for Washington to intervene further in the negotiations at Habana and suggested that the problem be taken up directly by our respective delegations at Habana.

Mr. Percival continued to press further that the Department contact Mr. Wilcox in order to obtain an answer as to the question of dual control and urged that Mr. Weiss consult with other persons in the Department as to the advisability of doing this. Mr. Weiss agreed to talk with other people in the Department and to call Mr. Percival back.

Mr. Weiss thereupon telephoned Mr. Brown and presented the problem to him. Mr. Brown stated most strongly his belief that further discussion on this provision should be conducted at Habana and not in Washington and that to attempt to do otherwise would only confuse the situation further. Mr. Weiss telephoned Mr. Percival and informed him of Mr. Brown’s views.⁴

1. Lord Inverchapel.
2. Not printed.
3. In telegram 338 to Habana, March 12, not printed, the Department informed the Delegation about this conversation with Mr. Percival, quoted portions of the British memorandum, and noted that: “Inverchapel phoned Douglas in absence Marshall and Lovett requesting his support British position.” (560.AL/3–1248)
4. On March 15, Ambassador Douglas, then in Washington, and at the request of Secretary Marshall acknowledged the Inverchapel letter that had been presented by Mr. Percival, and said: “I should like also to confirm what I said to you over the telephone, and what Mr. Brown said to your Mr. Percival—namely that the matter of reaching agreement on the text of the article is one which must be handled by our Delegations in Habana. The United States Delegation has full authority to reach this decision and the full support of the Department of State in the position which it is taking.” (560.AL/3–1248)