Foreign Relations of the United States: Diplomatic Papers, 1944, General: Economic and Social Matters, Volume II

840.50/8–1144: Telegram

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

London, August 11, 1944—11 p.m.
[Received August 12—7 a.m.]

6473. For those concerned with Article VII discussions—No. 13 of series.

In an informal talk on economic reconstruction matters, Ronald expressed great satisfaction with the outcome of the Bretton Woods Conference. In regard to the commercial policy talks he asked whether the State Department would prefer a date before or after the election. The general impression he gave was that the exact date “in the autumn” might be arranged largely to suit our convenience. In view of the importance of the subject and the possibility that the war might be over before November, he personally hoped that it would be possible to arrange the time without regard to the election.

2. Ronald said that Ministers would go with the officials and would be the operating group. The officials who took part in the previous discussions will, in all probability, be in the delegation. He thought it probable that the Ministers would be the Chancellor of the Exchequer, the President of the Board of Trade and the Minister of State and it was possible that there might be another, but he did not know at this stage. He thought the objective would be to reach an agreed statement of principles perhaps analogous to that put before the Bretton Woods Conference at the outset or that adopted by the oil conference. This would subsequently be put before a United Nations conference with a view to a multilateral agreement.

3. The following estimate of the present position here is based in part on further personal talks with leading officials concerned with commercial policy, who have expressed themselves frankly in strict confidence. The general position here since very early in the year has been that officials had given their advice, which was in favor of a prompt resumption of conversations on the basis of a progressive commercial policy. This advice was not acted on because of the ministerial position described in previous messages. The officials concerned were greatly irritated by ministerial attitudes and expressed themselves strongly in private to Ministers. One of them said he had been so annoyed that for some time he have [gave?] up working on the subject and turned full time to other work within his responsibilities. Recent moves regarding the resumption of the talks were the result of external representations made to Ministers and of the efforts of certain Ministers and were made without discussions with civil servants. Now that Ministers have decided to resume talks they have to consider the general lines of policy for the U.K. representatives. Officials view with scepticism the idea of Ministers dealing unassisted with the intricacies of commercial policy and expect that the civil servants concerned with commercial policy will shortly be consulted.

4. These further talks confirm the view expressed in paragraph 1 of Embassy’s 5604 of July 15, that the two major differences on commercial policy which have been responsible for the delay have to do with agriculture and preferences. They disclose that one of the chief difficulties has to do with import quotas. Civil servants remain firmly opposed to quotas except as possible emergency measures to meet temporary balance of payments difficulties. But to some Ministers and their political supporters import quotas appeal strongly because of their simplicity. They were such an important protective device in the thirties that vested interests grew up around them. Extreme agricultural protectionists are afraid that tariffs may be surmounted by cost reductions and prefer the certainty of quantitative restrictions. Not only agriculturists but also some political “planners” here give lip-service to “expansion” at the same time as they advocate quotas. Such views are expressed by certain members of the House of Commons and by the Times under the influence of E. H. Carr.⁸² The agitation for quotas must be recognized as a political force of some importance even though it is opposed by all economists in Government, and by most of them outside—the only exceptions being a few economists of Continental European origin now in Oxford.

5. We have privately discussed with leading officials the best means of meeting the danger of the agitation for quotas. At present the danger centers largely on certain agricultural products and we believe that the most effective means of offsetting arguments for restrictive policies in the field is to press nutrition policy vigorously. This can be given a political and public appeal more effective than the conventional arguments of economists. It seems reasonably demonstrable that quotas on imports of dairy products into U.K. in the thirties kept down consumption of foods of particular nutritional importance. We have noted a significant change recently in the attitude of some leading permanent civil servants to nutrition questions. Eighteen months ago they regarded the subject with indifference or amused tolerance. Now, however, they look increasingly to nutrition policy as a useful instrument in support of economic policies with which they are concerned. This applies both to commercial policy and to colonial policy. We think, therefore, that certain aspects of nutrition questions might be worked into the discussions on commercial policy in a positive and constructive approach under cover of which a very strong stand could be made against quotas. After further conversations here we will try to make more detailed suggestions.

6. It would undoubtedly assist the Board of Trade officials, who are strenuously opposing quotas and high tariffs, if the demand for a fixed ceiling on subsidies were not pressed and if the taxpayer were relied on for the present to prevent excessive subsidies. We do not wish to minimize in any way the strong case for a ceiling on subsidies, but would suggest that the matter be weighed carefully in relation to the menace of quotas and high direct protectionism. There is a danger that any gains which might be made by putting pressure on U.K. to agree to a ceiling on subsidies would lead to more than offsetting losses in other fields of commercial policy.

7. As regards preferences we would suggest on the basis of our recent talks here that the most promising approach would be to refrain as far as possible from turning the spotlight on them in isolation from other issues and to treat them as one item linked up with a number of other items in a comprehensive approach. We think that the strategy and form of approach in this matter is quite as important as the concrete proposals that may be put forward. There is a widespread feeling even among the most progressive U.K. officials whose personal views on commercial policy are close to ours, that Americans do not appreciate or fully understand the relationships between U.K. and the Dominions. They feel that these relationships are in some respects a model which those concerned with the organization of a peaceful world might study to advantage. They consider that the extension of preferences in the early thirties was primarily a response to the Smoot-Hawley tariff,⁸³ and they wonder whether Congress will be prepared to make the very substantial cut in tariffs which the U.K. public, in view of the anticipated postwar balance of payments difficulties, would consider as a necessary offset to giving up all or a substantial part of preferences. Therefore, they do not respond favorable to a frontal attack from Americans on preferences per se, particularly if there seems to them to be an implication that the adoption of preferences was a more heinous offense than the erection of a very high wall around a market of continental dimensions. Given due appreciation of these psychological and other factors, however, there should be good prospects for advances in this field of commercial policy.

8. As regards cartels, it came out confidentially in our recent talks that the Board of Trade has now carried out investigations into the operations of some U.K. combinations. The conclusions they appear to have reached are that some of these combinations have engaged in questionable practices, but that there are a considerable number of which this cannot be said. We intend to have further personal talks on this since the reactions of different officials are not quite identical on the question how far it will be practicable to get Ministers, Parliament and public to go in regulatory or prohibitive measures. All seem agreed, however, that it will not be possible to get acceptance of what one official called “list of what are sins and what are not sins”. All are also agreed that a start can be made at least on international consultation.

9. We shall continue to keep in close touch with the leading officials concerned with commercial policy.

Winant

82. Assistant Editor of the London Times, 1941–46.
83. 46 Stat. 590.