840.50 Recovery/6–748: Telegram
The Secretary of State to the Embassy in the United Kingdom
2116. From State and Treasury.
- 1.
- ECA, State and Treasury have discussed approach to be made to problem of dollar requirements of independent sterling area countries not participating in ERP. Basis of discussion has been Treasury paper entitled “The Dollar Problem of Self-Governing Sterling Area Countries”1 of which Hebbard and Bartlett2 have copies.
- 2.
- Tentative agreement has been reached on principle that US can not acquiesce to UK Govt diverting current dollar earnings to meet dollar requirements of independent sterling area countries during first year of ERP. (British proposal made in submitting ERP 1.) Positive approach to be made to problem for subsequent years of ERP still in exploratory stage.
- 3.
- Specific comments in inter-agency discussion on Section III
conclusions of reference paper:
Para 1 Agreement as indicated above.
Para 2 a(1) Assistance from Fund 3 considered practical and substantial.
Para 2 a(2) No appreciable assistance appears likely at present from International Bank and ExIm–Bank.
Para 2 a(3) Rephrase to read … in such amount as to minimize so far as practicable the use of reserves to meet any portion of Western Hemisphere requirements …”
Para 2 a(4) Offshore procurement must be used with extreme caution and only in such cases as would clearly further objectives of ERP. Probably cannot be expected to make substantial contribution toward solving problem.
Para 2(b) Still under consideration. Serious questions raised regarding desirability of US direct participation in negotiations with [Page 1089] these countries re dollar requirements so long as they are not directly within program.
Para 3 Complete agreement.
Para 4 Questions unrequited exports, capital outflow and settlement of sterling balances still under discussion. No agreement reached on desirability of relating these questions to sterling area dollar discussions.
- 4.
- We propose to have informal exploratory discussion with the British here to obtain their present thinking and to indicate our tentative views on the immediate problem.
- 5.
- Your views and comments requested soonest.
- 6.
- Preliminary background study of dollar requirements of sterling area countries prepared by Treasury despatched to Hebbard by pouch. [State and Treasury.]