394.31/4–351: Telegram
The Ambassador in the United Kingdom (Gifford) to the Secretary of State
priority
5209. On Mar 26 first person note text of which contained in Torquay’s 604 Mar 26 and Deptel 4372 Mar 26 was delivered to FonOff. Full text FonOff reply just received follows:
“Your Excellency,
“I have the honor to acknowledge receipt of Your Excellency’s note No. 973 of the 26 March regarding the tariff negots which have been taking place Torquay between the UK and the US. His Majesty’s Govt heartily acknowledge the contribution, referred to by your Excellency, which the US Govt is making to the improvement of the basic economic position of Western Europe and the correction of the difficulties which prevent the re-establishment of a system of multilateral trade and payments. They must necessarily however be concerned primarily in the tariff negots with the problems facing the UK herself and in this context greatly welcome the assurance that the Govt of the US is keenly aware of the problems raised by the unbalance of trade between the two countries. His Majesty’s Govt did not fail to study with interest and attention the memo of 11 August 1950 referred to in the fifth para of Your Excellency’s note. I would, however, remind you that in the formal acknowledgment of the above communication it was pointed out that His Majesty’s Govt could not accept the fundamental economic arguments set out therein. It seems to them to ignore some of the basic facts with which the UK and indeed the US also were faced today have been faced since 1939. The essential causes of this situation are well known to the US Govt: they are a matter of history and represent the core of the problem to which His Majesty’s Govt hoped that the US Govt would be able to give particular attention.
“His Majesty’s Govt cannot agree that reciprocity by itself represents the underlying spirit of the General Agreement on Tariffs and Trade. Negots conducted under that agreement look to arrangements on a basis not only reciprocal but also mutually advantageous. While they note the opinion of the US Govt in regard to the economic policy of the UK which is referred to in the last sentence of the fifth para of Your Excellency’s note, His Majesty’s Govt have to be the judge of what is or is not advantageous so far as the UK is concerned.
“Moreover, while naturally recognizing that this applies to both countries engaged in bilateral negots, they would point to the specific provision, in the rules under which such negots are conducted, that countries must be regarded as free not to grant concessions on particular products whether in respect of tariffs or preferences. It may well be that the concessions most likely to help redress the unbalance of trade between our two countries would raise a great deal of opposition from affected interests in the US. I must, however, remind Your Excellency that in the very difficult position which the industry of this country has had to face since the war it is not surprising the interest in the UK should consider as fully justified the continuance [Page 1316] of a reasonable measure of protection in their own home markets. Equally there is naturally grave concern at the loss of such preferred positions as may be enjoyed in the markets of our partners in the Commonwealth. His Majesty’s Govt have to look at the interests of the country as a whole and are quite unable to accept the view taken by the US Govt, on the advice of its delegation at Torquay, of the value of the offers made on behalf of the UK. His Majesty’s Govt do not feel that full account has been taken by the US Govt in the negots of the loss of preferences with which the UK will or may be faced or that sufficient account has been taken of the probability of such losses which, unlike reductions to be secured in the tariff of the US and other foreign countries must be regarded as permanent losses.
“His Majesty’s Govt understand, however, that for the concessions offered by them at Torquay, the US Govt are unable to contemplate the grant of any concessions on their part which would increase the chances of dollar-earning by the industry of the UK. They understand that only by greatly increased offers, and by the consent of other Commonwealth countries to forego important sections of the preferences which they enjoy in this country, can the US offers be obtained. They understand that the US are insistent on practically the same price being paid for the whole of their offers, or for those of their offers which afford some prospect of further dollar earnings and which were made in response to specific requests on the part of the UK.
“His Majesty’s Govt have made every effort in discussion between the leaders of the two delegations to the last practicable moment to find the basis of an agreement, but they cannot accept the foregoing conditions nor are they willing to put pressure, as was suggested by the US delegation, on their partners in the Commonwealth in order to secure their acquiescence in the losses of preferences enjoyed in the UK.”
Sent Department 5209 repeated info Torquay 151.