Foreign Relations of the United States, 1952–1954, Western Europe and Canada, Volume VI, Part 1

741.5 MSP/3–1152

No. 366
Foreign Secretary Eden to the Secretary of State¹

secret

[London,] March 10, 1952.

You will have seen the Prime Minister’s message to The President² explaining the economic circumstances in which we find ourselves and making the suggestion that the United States should take over some of our United Kingdom contracts for the production of the most valuable N.A.T.O. weapons (Venoms, Canberras and the like).

I mentioned to you in Lisbon how seriously concerned I was over our economic problems.³ The measures which we are now forced to undertake in connexion with the Budget show our firm determination to put our affairs in order. I know you understand how essential it is for us if we are to play our full part in Western defence to have a sound economy and I am sending you this message to enlist your sympathetic support for the proposal which the Prime Minister is now making.

I realize that it will raise a good many difficulties especially for Bob Lovett and Averell. But I am convinced that something on these lines is necessary and to our mutual interest. I am sure we can rely on you and your colleagues to do your utmost to help.

[Attachment]

Paper Prepared by Foreign Secretary Eden

secret

[London,] undated.

Following is background to Prime Minister’s Message.

1. The Prime Minister and I explained in January our very serious external situation and told the President that our main hope lay in an expansion of our engineering exports involving cutting sharply into home civil demand for engineering products and some reluctant slowing down of the defence programme.

2. Since then our external difficulties have become even more acute and the Chancellor of the Exchequer will announce a further series of measures to deal with it in his Budget speech. These imply grave shortages of the things which our people need most and hardship for many people. The reductions imposed on the home investment demand for engineering products represent the maximum drafts on the future.

3. The action we have now set in train together with the direct dollar assistance which we are relying on receiving from the United States during 1952/53 will we trust suffice. But there is no margin. If things get worse or if there are delays in the flow of dollar assistance we shall be compelled to take further measures to pay our way. It would be impossible to go on cutting home consumption and imports essential to the life and continued strength of the community while still retaining public support for the defence programme at its present level. We should therefore have to rely on expanding our exports further. But this could not be done without a sharp and immediate cut in the defence programme which we are sure the United States Administration are as anxious as we are to avoid particularly having regard to our very large contribution to total European arms production.

4. The essential thing for us is to know what we can count on and when we can count on receiving it. Our liabilities are only too clear. The United States Government know that they can count on us to use any aid we receive from them to our best mutual advantage. If they could assure us of an amount of economic aid sufficient to cover our dollar deficit we could maintain our defence programme and in particular those elements in it which are vital to NATO. But we realise the difficulty in assuring us of economic aid and the importance which Congress has attached to linking aid to specific defence items. We believe the most hopeful solution would be to get the United States Government to supplement their economic support by using specific items in our munitions capacity for NATO purposes.

5. We can for example offer for sale under the offshore procurement procedure military equipment of the latest types such as Canberra and Venom aircraft for which we have placed orders under our present programme. If the United States could take over those items it would be possible for the United Kingdom to earn immediate dollars against deliveries in 1952/53 and progress payments for aircraft due to be delivered later and General Eisenhower would be assured of these vital supplies which the competent NATO authorities could allocate to whichever NATO force could use them most effectively. The outlay of dollars would be directly linked with the delivery of weapons of the highest priority and the United States taxpayer would be getting good value for his money as our costs are lower.

6. These aircraft are it is true at present within the United Kingdom defence programme but we fear there is a grave risk that our defence effort cannot be sustained at its present level unless something of this kind which brings us quick and certain relief is acceptable.

7. This proposal would be developed with Mr. Batt in London and with Mr. Harriman in Washington through you.⁴

1. This message was delivered to Secretary Acheson by Ambassador Franks on Mar. 11 and was attached to a memorandum by Battle to the White House, along with Churchill’s message to Truman (supra), which asked that they be cabled to the President who was then in Florida.
2. Supra.
3. For a record of Eden’s discussion with Acheson on British economic problems during the Ninth Session of the North Atlantic Council at Lisbon, Feb. 20–25, see vol. v, Part 1, p. 131.

4. On Mar. 14 Secretary Acheson discussed the British proposal with Ambassador Franks and asked, among other things, if there was scope for further offshore purchases. On Mar. 21 the British replied that they would submit further proposals for the offshore purchase of military equipment. (Aide-mémoire, Mar. 21; 741.5 MSP/3–2152) This aide-mémoire contains the only record of the discussion on Mar. 14 which has been found in Department of State files.

   Subsequently on Apr. 18 Gifford cabled from London that “Batt had discussed this general situation with Alexander, and it is agreed that the matter had as well be considered closed as of the present.” Gifford continued that no formal reply was expected to the British proposals, but that the British would “continue to press strongly for largest possible dollar support from US.” (Telegram 4706; 741.5 MSP/4–1852)