Foreign Relations of the United States: Diplomatic Papers, 1945, The British Commonwealth, The Far East, Volume VI

560.AL/6–2845: Telegram

The Ambassador in the United Kingdom (Winant) to the Secretary of State

London, June 28, 1945—midnight.
[Received June 28—10:42 p.m.]

6547. 1. Liesching, Eady, Robbins, Enfield and Shackle yesterday placed before Hawkins, Fowler and Penrose a “specimen draft of a possible statement of principles” which gives their present view of a suitable type of statement to accompany a future invitation to an international conference on trade and employment. They emphasized that the statement represents merely their views as individuals and carries no authority or commitment of any kind.

2. Text of statement is contained in the immediately following telegram.¹⁷ A preliminary discussion took place on the draft and in view of the important light which it throws on present UK thought on commercial policy we report it fully below in the sequence in which it took place. What follows should be read in conjunction with the text of the draft statement.

3. International trade organization. UK officials said they continued to favor strongly a single international trade organization with subsections for commercial policy, commodity policy and policy regarding restrictive practices. All these subjects should be regarded as part of general trade questions.

4. Employment policy. UK officials doubt whether any separate employment section should be set up in ITO. They wish to study S F¹⁸ proposals concerning economic and social council and their relationship to para 3 of draft.¹⁹ Possibly in statement of principles it would be enough to state obligation to avoid national action that would be detrimental to employment policy in other countries.

5. Commercial policy. Hawkins commented on para 4a of draft.²⁰ He said that question arises as to method for making tariff reductions and that the US Govt now has extensive legislative authority for doing this by bilateral agreements. He pointed out that since 1934 there had been considerable sentiment in US in favor of what amounted to a multilateral bilateral approach to tariff reduction. Secretary Hull had frequently urged that other govts should adopt trade agreements programs similar to ours and had pointed out that if the major countries of the world had done so much more rapid progress would have been made. Hawkins stated that sentiment in favor of this approach might have been strengthened by overwhelming Congressional approval for greater powers in respect of trade agreements. He added that this approach is a proved and practical method of reducing trade barriers and that if all govts of United Nations pledged themselves to negotiate as rapidly as possible with their more important suppliers and to generalize benefits, resulting agreements would bring down tariffs all around, get rid of most if not all quantitative restrictions, reduce or completely eliminate preferences and in general reach same objects as in case of uniform percentage tariff reductions.

6. Robbins said there were 3 very great objections from UK point of view to multilateral bilateral approach. First there was the length of time required to implement it. To negotiate such a multiplicity of bilateral agreements in a reasonable time was “a nightmare conception”; there were not enough qualified people to do the job. Second this approach requires negotiators to enter into a sea of general commercial policy obligations without knowing where they will, in fact, land. Third, he said, it has nothing like the psychological advantages of a uniform percentage reduction. It will seriously endanger the whole plan to reduce trade barriers if the situation is allowed to remain fluid for several years, as it would be during a period of numerous bilateral negotiations when govts will change and the currents against tariff reduction may grow. Psychologically it is essential to make a comprehensive reduction where all parties will make sacrifices at once.

7. In reply to Robbins we pointed out that in relatively short period, when conditions were extremely unfavorable due to depression and impending war, the US negotiated a large number of agreements; and that during that period the US alone was carrying on a comprehensive program of trade agreement negotiations; whereas under the multilateral bilateral approach, now all countries would be obligated to pursue such programs and would be doing so under conditions much more favorable to commercial policy reform than existed prior to the war. Consequently it can hardly be claimed that this approach would not get important results.

8. Eady said that abandonment of the multilateral approach with its general tariff cut “would be the end of all we hope to achieve”. The whole impact of a new approach would be lost. With all its difficulties a new approach must be tried. What is needed is a simple, bold and challenging approach to the whole attitude on trade that has been built up in the last 20 or 30 years. To start out with the mulilateral bilateral approach would be “the end of everything worth having”. He added, “the UK would go into it with no heart and no expectation of anything worthwhile coming out of it. You could never tell where you stood or where you would come out. I am certain of the effects on my govt of such a proposal”.

9. Liesching said he thoroughly endorsed Eady’s views on every point and wished to add that the chances of dealing successfully with preferences would be much greater if a substantial uniform all round cut were made than if an attempt at gradual whittling down by a multitude of reciprocal pacts were made. Robbins expressed agreement on this point which he said was a key point in the UK domestic political position. It was much easier, he said, to swallow effective measures for dealing with preferences in a multilateral context, and it was extraordinarily difficult to believe that such measures would be swallowed at all under the bilateral method.

10. Hawkins asked UK officials whether they still thought that the technical problems in applying a formula for a general tariff cut could be solved.

Liesching, Shackle, Eady and Robbins replied that they were confident that this could be done so long as reasonable flexibility were allowed and perfect precision were not sought.

11. Eady said that there was no function for an ITO if a mere bilateral approach were adopted. What was the use, he asked, of an international organization that could at most tell a country it was not negotiating bilateral treaties fast enough?

12. Liesching said that after the confusion of war a new start must be made. Some of the European Allies were still pressing UK for a statement of its views on postwar commercial policy. If, he said, the UK were to reply by merely advising the negotiation of a host of bilateral treaties some of the Allies would be likely to launch out in an entirely different direction with little regard to what we want. The negotiation of bilateral agreements was a permissive and gradual process.

13. Eady said the significant reality is what is the US going to do. Robbins added that the world at large is not likely to take the view that bilateral treaties are adequate evidence that the US will come through. He added that the only effective position would be to say “let’s all agree to a common code and all make substantial reductions at once”.

14. Eady then said he feels certain that there is no chance of success in getting UK ministers to adopt any plan unless they can see clearly what they give up and put it in the balance against what they get. He added with emphasis, “I beg you to represent strongly to the State Dept what we say”.

15. Robbins added that, in his judgment, to rely on nothing more than bilateral agreements would endanger not only commercial arrangements, but also the Monetary Fund arrangements. Critics of the latter in UK are constantly saying that UK should not take on the obligations under the Monetary Fund without knowing the trade position.

16. Liesching said that UK has only enough trained personnel to negotiate one commercial treaty at a time.

The US–UK agreement of 1938 took 10 months to negotiate.²¹

17. Hawkins asked whether they were reasonably confident that the uniform percentage reduction would be successfully negotiated, particularly with Dominions and India. He had in mind the possibility of getting a nucleus of important trading nations together in an opened agreement to which other countries might be more or less obliged to adhere. He stated as his personal view and they agreed that the very minimum for such a nucleus would be the US and Brit Commonwealth countries. He asked whether UK officials had considered the position they would take if a uniform tariff cut were attempted and it proved absolutely impossible to get sufficiently wide agreement. They replied that only in such a case would they agree to fall back on the other approach. An indication of this is contained in the last paragraph of the draft.

18. Quantitative regulation. We pointed out that the draft did not appear to undertake any further commitment on exchange control than was contained in the International Monetary Fund Agreement, even though it seems reasonable to go somewhat further if improved trade conditions are attained. Eady and Robbins replied that it was implicit in the Fund Agreement that exchange controls when permitted should be as little discriminatory as possible; but added that they would study the wording of the agreement further.

19. Agricultural proposals. We asked whether they had anything to add on the subject of their proposals concerning food. UK officials replied that these proposals were result of much consultation and they still believed them to be the most feasible approach to the problem. Eady and Robbins said that the magnitudes of X and Y would have to be agreed upon in preliminary US–UK discussions. Liesching added UK had in mind levels not too unattractive for primary producing countries including Dominions. The question is are the principles acceptable provided X and Y are given reasonable values. He said these UK proposals were of critical importance from viewpoint of getting whole scheme of commercial policy adopted in UK.

20. Preferences. Hawkins said the statement on preferences would be unacceptable and referred to distinction between tariffs and preferences in article VII. Liesching replied that much would depend on the precise formula for tariff reduction which is left open, that we should consider the para on preferences as [not?] completed since they are not yet able to state their position with precision and that the para is comparable to the blank we had left in our statement of June 8.²²

21. Restrictive practices. We pointed out that the draft was based on a different approach from that favored in Washington. They reiterated their view that the case by case approach, leading to development of generally accepted rules of conduct governing private enterprise, was preferable to a statutory approach.

Winant

17. Telegram 6548, June 28, midnight, from London, not printed.
18. Reference is to the United Nations Conference on International Organization, held at San Francisco, April 25–June 26, 1945; for documentation on the Economic and Social Council, see vol. i , entries in Index under: Economic and Social Council (ECOSOC).
19. This paragraph in the British draft urged that governments undertake policies designed to maintain a high level of employment.
20. This section urged substantial overall reduction of tariffs.
21. For documentation relating to the reciprocal trade agreement between the United States and the United Kingdom, signed November 17, 1938, see Foreign Relations, 1938, vol. ii, pp. 1 ff. For text of the agreement and exchange of notes, see Department of State Executive Agreement Series No. 164, or 54 Stat. (pt. 2) 1897.
22. Reference is to a draft proposal to establish an international trade organization, presented to British officials in London; copy enclosed with despatch 23525, June 8, from London (560.AL/6–845).