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

611.41/3–753

No. 387
United States Delegation Minutes of a Meeting of the Secretary of the Treasury (Humphrey) and the Chancellor of the Exchequer of the United Kingdom (Butler) at the Department of the Treasury, March 6, 1953, 10 a.m.¹

top secret
WET MIN–3

March 6, 1953, 10 a.m.

Participants:

• U.S.

  • Secretary Humphrey
  • Mr. Douglas
  • Mr. Burgess
  • Mr. Bissell
  • Mr. Overby
  • Mr. Southard
  • Mr. Linder
  • Mr. Gordon
  • Mr. Corbett
  • Mr. Harley
  • Mr. Leddy
  • Mr. Locker

• U.K.

  • Rt. Hon. R. A. Butler
  • Sir Leslie Rowan
  • Sir Edwin Plowden
  • Sir Frank Lee
  • Sir Edmund Hall-Patch
  • Mr. D. H. F. Rickett
  • Mr. C. Empson
  • Mr. R. W. B. Clarke
  • Mr. M. Stevenson
  • Mr. D. Allen
  • Mr. G. Parker
  • Mr. M. Parsons
  • Mr. W. Armstrong

The Chancellor of the Exchequer Butler: The Chancellor, after responding to greetings by Secretary Humphrey and Mr. Burgess, remarked on the difficulties which the U.S. apparently saw in the British plan. He said he was not speaking for the U.K. alone in this matter. He was putting forward ideas reached after six to nine months of extremely hard work in the Commonwealth. It was not just a U.K. matter but a world matter. The problems seem to him to be much broader than those that had been discussed the day before. The objective remained of uniting the free world. At this point he could but say that it was going to be most difficult for him to go to Canada, to hold further discussions with the Commonwealth and to initiate discussions with Western Europe.

The Chancellor said that while we should use some of the remaining time to draw up a communiqué, we must still discuss the question of how to open a new chapter in world economic relations; how to keep the momentum going. He would hope that the discussions could be wound up in a constructive fashion; if that could be done with honor and without kidding ourselves, it would be useful.

The Chancellor returned to the problem of U.S. surplus. He again referred to U.S. generosity but asked how the U.S. planned to cover their payments surplus in the future. Aid was clearly not going to be easy and there seemed to be a question about the liberalization of trade. If the U.S. economy is to remain protective and there is to be less aid, then the Chancellor was left with the idea that we have not made much progress. He thought that the world might be forced back into blocs but that would not be the wish of the U.K. This situation must be remembered when requests are made at NATO for greater defense effort and when additional foreign policy obligations are being urged. The Chancellor does not wish to depart until both sides have an understanding. Such an understanding should be sincere and aimed at a policy of unity.

Mr. Burgess: Mr. Burgess hoped very much that a final statement of these meetings could strike an affirmative note.

Mr. Douglas: Mr. Douglas referred to the goals of earlier economic programs. Some of these have been reached—production, for example, has been greatly increased. There, however, remains the intractable program of freer currencies along with freer trade. This is the problem the U.K. has posed. A step at the right time and under the right auspices would be of immense importance, ranking with the defense effort. Mr. Douglas would not wish in any way to underestimate the importance of the objectives of the British proposals but the question remains one of how to come to grips with the problem.

The Chancellor of the Exchequer Butler: The Chancellor said he had extracted some encouragement from the President’s State of the Union message.² He did not now feel he was entitled to this encouragement. The Chancellor said he must know how things are going to proceed; the U.K. just could not look ahead to debts, defense burdens and overseas obligations. He would not want to undertake the next chapter in world economic development under a “sham facade”.

Mr. Burgess: Mr. Burgess said the matter also involved a question of timing. The U.S. was not sure at this stage what could be delivered. Perhaps a year from now the situation will look much better. Certainly, the U.K. representatives could assume that the President’s statement of policy in the State of the Union meesage is firmly held. Mr. Burgess did not know at this time how far he could go in interpreting that statement. Mr. Burgress said that reference could be made to the President’s words in response to a question by the Chancellor.

The Chancellor of the Exchequer Butler: The Chancellor asked if legislation was involved.

Mr. Burgess: Mr. Burgess said yes but that we were also looking to what can be done administratively. He said that the U.S. must make its study of the problem a continuing one. He referred to the suggestion by Secretary Humphrey and Ambassador Aldrich concerning the identification of items of trade that might be expanded. He hoped that the British would be able to do something on this matter in order that we might better visualize what was in their minds.

Sir Frank Lee: Sir Frank was not sure if the request was one which could be handled in such a specific manner. The matter had to be looked at as a world problem, not a problem of the U.S. and the U.K. or the U.S. and the sterling area. It would be the task of the U.K. to earn dollars by being competitive in third markets and it was difficult for the U.K. to make estimates of what the U.S. might buy from these third markets. He would be willing to explore:

1. The height of tariffs in the U.S.

2. Classification schedules.

3. Shipping discriminations.

4. Buy American.

5. Tied loans.

6. Private and public investment.

The important thing was to increase the flow of dollars. This would take resolute action on a broad front. He thought that it would present a new challenge to all exporters in the non-dollar world. The deterrents to trade with the U.S. were both absolute and qualitative. He developed this point by reference to the general level of tariffs and to specific types of tariffs. He mentioned also the competitive ability of the U.K. in the automotive field where tariffs did not encumber trade.

Mr. Burgess: Mr. Burgess said that the Bell and CED Reports to which reference had been made did not do exactly what Secretary Humphrey and Ambassador Aldrich had in mind. These were still too much in general terms and did not allow us to see clearly the impact on our economy of the increased imports to which the British were referring. Perhaps the way to approach the matter was the way it had been approached in the reciprocal trade program—country by country and commodity by commodity.

The Chancellor of the Exchequer Butler: The Chancellor felt that he must return to four important questions:

1. Could we agree to continue to work together towards a world multilateral trade and financial system?

2. How is the U.S. surplus to be covered?

3. What are the attitudes of the U.S. Government toward institution of good creditor policies?

4. What could be said to Europe?

Mr. Burgess: Mr. Burgess thought that we were quite clear on question one. With respect to question two, we will study the matter and in the meantime reference could be made to the statements of the President.

Mr. Bissell: Mr. Bissell said that in the immediate future the world payments situation will be influenced heavily by U.S. military outlays and offshore procurement and a somewhat easier dollar position will result. There was no danger of this flow ceasing abruptly. Therefore, he thought that U.S. surplus could be covered in a substantial fashion from this source. There was not the prospect of an immediate crisis ahead and, therefore, in describing the problem it was not necessary to resort to the use of crisis terms.

The Chancellor of the Exchequer Butler: The Chancellor said that he found these remarks very interesting and he would have to explore the matter with Mr. Stassen. Until this had been done he was not sure precisely what could be said in the communiqué concerning the impact of offshore procurement.

Mr. Douglas: Mr. Douglas wondered what could be said to the public. He felt that the message should not be a depressing one although we must speak with complete honesty. He has three questions in mind. Can we say that the problems are those of relaxing trade barriers and moving toward freer currencies? That we share these objectives with the U.K. and that we will give them our closest study? Would it be satisfactory to say that the problems will be genuinely studied? This raises the further questions of when and how this is to be done?

The Chancellor of the Exchequer Butler: The Chancellor thought this was a satisfactory approach provided we really meant to go ahead.

(There ensued a brief discussion on the timing of British action and the relationship of this to U.S. measures on tariffs.)

Mr. Douglas: Mr. Douglas asked his second question; would a reference to the President’s State of the Union message be useful?

The Chancellor of the Exchequer Butler: The Chancellor said that this would be helpful if something were going to happen. As he understood it, it was not only a question of what the Congress would do in the matter of trade but what the Executive Branch of the U.S. Government would put to Congress.

Mr. Burgess: Mr. Burgess referred to the Customs Simplification Act, Offshore Procurement and to the Reciprocal Trade Act as being measures which could be envisaged.

Sir Frank Lee: Sir Frank thought these would be helpful but not quite what the U.K. had in mind.

Mr. Burgess: Mr. Burgess, at this time, did not see that we could make statements of policy beyond those contained in the President’s message. He stated that we are in deadly earnest to study these matters and it was not a question of simply lip service.

Mr. Douglas: Mr. Douglas referred to restrictions on trade and currencies which existed elsewhere. He mentioned the President’s reference to broader markets and more dependable currencies and the importance which attached to initiative taken in these fields by countries.

The Chancellor of the Exchequer Butler: The Chancellor said that the U.K. would have to review the position of Western Europe if steps could not be taken along the lines the U.K. had proposed. He thought the EPU a “nice little working mechanism” but it was not a world-wide approach to the problems.

Sir Leslie Rowan: Sir Leslie recalled the commodity arbitrage scheme which some had interpreted as showing the weakness of European currencies in terms of the dollar. He thought he should mention the fact large amounts of sterling were available to the European countries through the EPU which would not be the case in the current proposals. He spoke of the task of the U.K. to recover its gold from the EPU repay the debt to the EPU. The U.K. would not wish to go back into deficit with the EPU. This was in partial response to Mr. Douglas’ third question about the possibility of making an advance in trade liberalization on the European front.

Mr. Douglas: Mr. Douglas inquired concerning the usefulness of references to the President’s message.

The Chancellor of the Exchequer Butler: The Chancellor responded that it would depend on the interpretation which could be placed on this message.

Mr. Douglas: Mr. Douglas did not think that this group, at this time, could engage in any interpretive remarks.

Mr. Burgess: Mr. Burgess referred to American investment abroad. It was the desire of the Administration to encourage such investments; it was, however, a two-way problem. Other countries would have to create the proper climate and certainly the sterling area could do much in this respect. Mr. Burgess said he admired the Chancellor’s statement about being the “noblest way” of meeting the problem. He referred to the growing experience of the IBRD and the hope this held for the the future. Mr. Burgess then asked the Chancellor what he had in mind concerning international organizations.

The Chancellor of the Exchequer Butler: The Chancellor thought that the relationship of the EPU to the IMF should be carefully explored. It might show a way of bringing the IMF more into the world picture. He then referred to some of the problems which a smaller group might deal with:

1. A quick run-down of the sterling balance.

2. Certain institutional matters.

(a) Relationship of IMF to EPU

(b) Loosening up of the IMF

3. Spreading a flexible rate for sterling without the institution of convertibility. (A point which Mr. Bissell had raised earlier.)

(A working group was named and the time of its meeting was set to follow the close of the full meeting. Mr. Leddy and Sir Frank Lee were to discuss further the matter of Empire preferences and the relationship of this to the provisions of the GATT. It was also suggested that the working group might discuss investment and development matters if this proved to be possible.³)

Mr. Douglas: Mr. Douglas inquired of the Chancellor if he thought it possible to draft a communiqué which would not speak of specific subjects but emphasize the necessity of further study.

The Chancellor of the Exchequer Butler: The Chancellor thought that references made to Mr. Bissell’s proposals concerning offshore procurement would need a little more time. He did not want to feel rushed on this matter even though he recognized the Secretary of State had a schedule which called for his departure on Saturday. If this occurred, he thought it still would be possible to carry on the work here. He thought it would be a great mistake to issue a communiqué which contained just a few small morsels. The fact was that preliminary contact had been made with the U.S. and that while references to study might be considered very sensible by the public, the question would have to be answered: What actually happened? He felt that he had terrific responsibilities. He did not wish to go back to the Commonwealth with so little as to create a danger of poor relations between the Commonwealth and the U.S. He thought that a feeling of disappointment on the part of the Commonwealth might arise from such a development.

Mr. Burgess: Mr. Burgess said that the end of these meetings should in no sense be interpreted as a termination of our interest in these subjects. Actually what we should make clear was that decisions were being deferred pending further study.

The Chancellor of the Exchequer Butler: The Chancellor said he was delighted with this statement and would accept it.

1. Drafted on Mar. 7.
2. For the text of President Eisenhower’s State of the Union message, delivered Feb. 2, see Public Papers of the Presidents of the United States: Dwight D. Eisenhower, 1953, pp. 12–34.
3. The U.S.–U.K. Working Group met twice on Mar. 6 and once on Mar. 7 to discuss sterling balances and investment. The minutes of these three meetings, which were largely exploratory, are in CFM files, lot M 88, box 164. No record of the discussions on Empire preferences and their relationship to GATT has been found in Department of State files.