840.48/4527⅙: Telegram

The Director General, British Ministry of Economic Warfare (Leith-Ross),89 to the Assistant Secretary of State (Grady)90

Personal. I have recently been asked by my Government here to take charge of the surplus problem and to formulate proposals for remedial action. I hope to rope in Cairns91 as my chief assistant. It is a big subject and I have not yet been able to give much time to it. But I should like to outline to you the position as I see it and invite your interest in the whole problem and your views on practical steps that can be taken.

2.
I assume that you have seen the memorandum about the question submitted to the State Department by Lord Lothian on September 18th, but I am not sure that the implications of this memorandum were made sufficiently clear. Superficially, both your country and ours are faced with various ad hoc surplus problems in our own territories and other countries throughout the world which demand some [Page 139] immediate measures of relief. While some of these problems are due wholly to war conditions, others are largely repetitions of chronic maladjustments of supply and demand accentuated by the war. In either case, neither the United States nor the British Empire, acting alone, can hope to do more than supply expensive short lived palliatives, whereas in cooperation real solutions may be initiated which, combined with temporary war-time measures, should not only tide the world over the present emergencies but also lay foundations for a definite improvement in the economic organization of the post-war world. Thus it seems to me that the surpluses problem should be viewed as a great whole and as a collection of the problems of individual surpluses in particular countries. It is an opportunity to set on foot an international cooperative effort of great post-war as well as war-time significance.
3.
Viewed from this angle the solution seems to lie in an international programme for storage of surplus supplies accompanied by appropriate regulation of production and marketing. A programme for storage of surplus supplies and regulation of production and marketing links up of course with the immense needs of Europe after the war. With the dangers of a sudden reversal in the supply situation unless stocks can accumulate beforehand, there may be a serious delay in food relief and in a restoration of economic activity in Europe, while outside Europe there will be great economic instability as result of a repetition of post-war credit and slumps of a future 1919–1920. The interests of the United States as well as those of the British Empire require that every possible effort should be made to avoid these dangers and restore normal conditions of international trade throughout the world as quickly and smoothly as is humanly possible.
4.
As to methods, my personal and provisional views are as follows:
(a)
I take it that neither your Government nor ours will be anxious to purchase surpluses not needed for consumption, and producing countries must not look to us as Fairy Godmothers who will take the existing surpluses off their hands and leave them free to start producing another next year. The producing countries should therefore be encouraged to formulate measures for carrying on their own surpluses and storing as much as possible of them on the basis of internal financing. Many of them will however need some financial support and this might be found on condition that schemes are reasonably economic and that there is adequate cooperation both as regards regulation of production or export and coordinated marketing.
(b)
My idea is that the international committee should be revived and asked to get on to this as regards wheat as soon as possible. Similar international committees should conjointly be internationally created to deal thereafter with coffee92 and cotton. Copper might be [Page 140] dealt with through a cartel. Maize, linseed, wool and jute could be dealt with on similar lines by the producing countries concerned.
(c)
There would still remain a number of colonial products especially vegetable oils, which are more difficult to store, and these would have to be dealt with by creating some storage corporation, which could buy up surpluses at appropriate prices and turn them over so as to have a supply available when the need arises. Finance would have to be provided for this corporation; but the problem would be greatly reduced in dimensions if more storable commodities could be dealt with on the basis of international schemes.
5.
It seems to me that the United States and the British Empire should take the lead in formulating this programme and in securing the cooperation of the principal producing countries. Immediate ad hoc measures for dealing with particular problems or particular countries ought to be fitted into the framework of a programme on these lines. I should like to see a joint Anglo-American committee set up to agree to the general lines of policy and to initiate action and such a committee could later on be extended to include representatives of other countries and act as a coordinating body to which various committees on wheat and other commodities could refer.
6.
If and when it seemed desirable, I would arrange to come to Washington for consultation. It will not be easy for me to get away from here but a good deal of prospecting work could usefully be done here before that stage comes, provided that the United States Administration would favour action on the above lines in principle. It would be the greatest help to me if you could let me know whether you think something can be developed on the above lines. I am not fully aware of what transpired at the Havana Conference and it may be that your experiences there were such as to make you hesitate to initiate any further efforts at international cooperation. The difficulties in the way of such action are of course considerable but the alternative of unregulated competition by overseas producers is so serious that I believe there is a better chance today of securing agreements than in the past.
F. Leith-Ross
  1. Chief Economic Adviser to the British Government since 1932.
  2. Transmitted by the British Ambassador under covering letter of December 3.
  3. Andrew Cairns, Canadian, Secretary of the International Wheat Advisory Committee.
  4. For correspondence regarding the Inter-American Coffee Agreement signed November 28, 1940, see vol. v .