645.116/9–1045

The Commissioner in India ( Merrell ) to the Secretary of State

No. 230

Sir: I have the honor to refer to previous correspondence extending back well over a year, and particularly to the Department’s restricted memorandum instruction No. 340 of August 7, 1945, (Department’s File No. 645.116/2–545) regarding the difficulties of the F. E. Myers & Brother Company of Ashland, Ohio, in obtaining entry for its pumps and sprayers into the Indian market, and to enclose a copy of a communication (D.O. No. 10(42)–ITC/44) dated [Page 279] September 6, 1945,74 from the Secretary to the Government of India in the Commerce Department, Mr. N. E. Pillai, relating to the case in question.

It will be noted that the Government of India has been making inquiries as to how far Myers pumps satisfy “the test of essentiality” with the conclusion that the import of manual operated pumps is not regarded as essential but certain types of deep well pumps manufactured by the American firm are considered essential and at present their import is being licensed. Pillai’s letter sounds the death knell of his earlier proposal of quotas for American machinery exporting firms, the reason being made clear in the last sentence of his letter, which reads as follows:

“You will, I am sure, appreciate that the present dollar position of the sterling area precludes all imports of non-essentials which would involve dollar expenditure.”

It appears probable to me that this marks a reversion to the previous policy of the Government of India of refusing permission to import from the United States goods which may be available in the sterling area. If this is the case the move is obviously connected with the cessation of Lend Lease and the near panic with respect to the dollar position in the United Kingdom. If my interpretation is correct, it is evident that the Bank of England must have instructed the Government of India to limit its demands for dollars from the Sterling Area Dollar Pool as rigidly as possible.

It will be noted that the current communication from Mr. Pillai does not specifically withdraw the statement of policy in his letter of August 23, 1945,75 which informed me of a change from the previous rigid refusal to license imports payable in dollars if such goods were available in the sterling area. I believe it would be inexpedient to press now for a clarification of this point since, until I am specifically advised of a change, the Mission can assume that the August 23rd statement still stands, at least in theory. I fully anticipate, however, that great difficulty will continue to be encountered in obtaining the issuance of licenses to import from the United States, at least for the present. An ultimate relaxation of this policy must depend, in my opinion, on (1) the outcome of the negotiations being opened in Washington today between the British and ourselves with respect to Lend Lease termination and related problems,76 and on (2) any separate negotiations with India which may be initiated at a later date as a logical outgrowth of the current talks with the British.

Respectfully yours,

George E. Merrell
  1. Neither printed.
  2. See the Commissioner’s despatch 212, August 28, supra
  3. For documentation regarding this subject, see pp. 1 ff.