Foreign Relations of the United States, 1947, General; The United Nations, Volume I

560.AL/9–2647

The Department of State to the British Embassy

secret

Aide-Mémoire¹

Reference is made to the communication from the British Embassy on the subject of the reduction or elimination of Empire preferences on the trade which the United Kingdom enjoys with members of the Commonwealth and with the Colonies, which was delivered by the British Ambassador in Washington to the Secretary of State on the 27th of September.² It deals with three questions.

First: The adverse effects which might follow the breakdown of negotiations between the Governments of the United Kingdom and the United States.

This Government would, of course, deplore such an eventuality for it might produce far-reaching and incalculably grave complications for both countries. This Government, therefore, hopes that the British Government will join in continued attempts to find a way out of the present situation. It is glad to note that negotiations are continuing at Geneva and it is gratified that apparently progress is being made toward more satisfactory arrangements.

Second: Whether there has been a substantial observance of the principles to which the two Governments heretofore have agreed.

A careful review of the history of the negotiations culminating in the financial agreement, an examination of the terms of the financial agreement itself and of the collateral documents, combined with a precise interpretation of the language of the Prime Minister’s statement made before the House of Commons on December 6, 1946 [1945], confirm our view that the agreement between our two Governments contemplated that elimination or reduction of imperial preferences was to depend on general tariff reductions und not on those offered solely by the United States.

The Prime Minister, in the statement referred to, used the following language:

“The statement makes it clear that, in pursuit of the objectives of Article VII of the Mutual Aid Agreement, we for our part are ready to agree that the existing system of preferences within the British Commonwealth and the Empire will be contracted, provided there is adequate compensation in the form of improvement in trading conditions between Commonwealth and Empire countries and the rest of the world”

Again on the same occasion he said:

“The statement makes it clear there is no commitment on any country in advance of negotiations to reduce or eliminate any particular margin of preference. The position is that each country remains free to judge in the light of the offers made by all the others, the extent of the contribution it can make towards the realisation of the agreed objectives.”

He also used the following language:

“It is recognised that reduction or elimination of preferences can only be considered in relation to and in return for reductions of tariffs and other barriers to World Trade in general which would make for mutually advantageous arrangements for the expansion of trade.”

Finally, he said:

“The elimination of all preferences would be such a step as would require a most substantial and widespread reduction of tariffs and other trade barriers by a large number of countries”

The Prime Minister thus lucidly and categorically construed, we believe correctly, the understanding between our two Governments to mean that elimination or reduction of Empire preferences was to be undertaken in consideration for reductions of tariffs in general by many countries and that the measure of the elimination or reduction of such preferences was not to be calculated and effected on the basin of reductions of the tariff structure of the United States alone. Although this interpretation has been accepted by the British Government, the statistical comparison of reductions or eliminations of Empire preferences in relation to the tariff reductions of the United States alone is a contradiction of the basic principle to which both Governments in 1945 agreed. We therefore believe that the implicit departure from this principle recently taken by the British Government is contrary to the understanding between our two Governments.

At Geneva important progress has been made toward general relaxations of interferences with World Trade. To this progress the United States and many other countries have made substantial contributions. One hundred and eight agreements either have been or are in progress of being completed. Thus the conditions to which the Prime Minister referred as consideration for the elimination or reduction of Empire preferences have been satisfied.

Third: The British Government asks that before any termination or breakdown of negotiations takes place Mr. Bevin and his colleagues be given an opportunity to express their views on the subject to Mr. Marshall.

This Government will be glad to accord Mr. Bevin this opportunity should it be necessary. At the moment, however, it appears possible that results of the negotiations presently proceeding in Geneva may permit us to avoid a breakdown. On this question we therefore withhold further comment until we have had an opportunity to assess the results of the Geneva discussions.

The American Ambassador at London, Mr. Douglas, will arrive in England in about 10 days. He has had an opportunity to go into this matter thoroughly, and will be glad to discuss it in London on his arrival.³

Washington, October 15, 1947.

1. The aide-mémoire was handed to Ambassador Inverchapel by Under Secretary Lovett on October 15.
2. The text of the letter is incorporated in telegram 5218 from London, September 27, p. 998.
3. Ambassador Douglas discussed the aide-mémoire with Foreign Secretary Bevin on November 1, and reported: “I told Mr. Bevin that in view of the outcome of the negotiations at Geneva, there was nothing further to be said at the moment about Empire preferences, and that the matter of principle had been set forth for guidance whenever preferences might come up again for negotiation.” (FW 560.AL/11–347)