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THIS
DOCUMENT
IS
THE
PROPERTY
Printed
OF
HIS
BRITANNIC
for the Cabinet.
August
MAJESTY'S
GOVERNMENT
1947
SECRET
Copy N o .
C M . (47)
73rd Conclusions
C A B I N E T 73 (47)
CONCLUSIONS
of a Meeting of the Cabinet held at 10 Downing
S.W. 1, on Wednesday, 20th August, 1947, at 12-15 p.m.
Street,
Present
T h e R i g h t H o n . H E R B E R T M O R R I S O N , M . P . , L o r d P r e s i d e n t of t h e Council (in the Chair) The
Right Hon.
H U G H DALTON,
M.P.,
Chancellor of t h e Exchequer.
The R i g h t H o n . A . V. ALEXANDER,
M . P . , M i n i s t e r of Defence.
rne
itignt
T h e R i g h t H o n . S i r STAFFORD C R I P P S ,
K . C . , M . P , . P r e s i d e n t of t h e B o a r d of
Trade.
T h e R i g h t H o n . E . SMINWELL,
M.P.,
M i n i s t e r of Fuel a n d P o w e r .
non. j . .
" T A "fl *" Q
M . P . , M i n i s t e r of A g r i c u l t u r e a n d
Fisheries.
Also p r e s e n t :
S i r E D W A R D B R I D G E S , P e r m a n e n t Secretary, T r e a s u r y .
Secretariat:
Sir
N O R M A N BROOK. Mr.
S. E. V .
LUKE. CONTENTS
Subject
B a l a n c e of P a y m e n t s
....
....
....
Page
234
,4 13
B a l a n c e of
Payments.
(Previous
Eeferenee:
CM.(47)72nd
Conclusions,
Minute
l.)
T h e Cabinet h a d before them t e l e g r a m s from Sir W i l f r i d E a d y
( W a s h i n g t o n t e l e g r a m s Nos. 4566-4569 of 2 0 t h A u g u s t ) r e p o r t i n g
the outcome of h i s f u r t h e r discussions on 19th A u g u s t w i t h repres e n t a t i v e s of the U n i t e d S t a t e s G o v e r n m e n t r e g a r d i n g the decision
of H i s M a j e s t y ' s Government to t a k e i m m e d i a t e steps to limit
t h e convertibility of s t e r l i n g . T h e y also h a d before t h e m teleg r a m No. 4570 of 2 0 t h A u g u s t from H i s M a j e s t y ' s A m b a s s a d o r
i n W a s h i n g t o n commenting on the latest developments.
S i r W i l f r i d E a d y h a d r e p o r t e d t h a t , a f t e r f u r t h e r discussion,
d r a f t s h a d been p r e p a r e d for an e x c h a n g e of letters (telegrams
Nos. 4568 a n d 4569) on lines which were considered to be acceptable
by t h e B r i t i s h Mission. T h e Mission h a d been informed, however
t h a t t h e exchange of l e t t e r s m u s t be accompanied by a secret u n d e r ­
s t a n d i n g t h a t H i s M a j e s t y ' s G o v e r n m e n t would not d r a w on t h e
U n i t e d S t a t e s C r e d i t for some unspecified period beyond the
d r a w i n g s a l r e a d y notified, the i n t e n t i o n being t h a t H i s M a j e s t y ' s
G o v e r n m e n t m i g h t at a l a t e r stage, which m i g h t be c o m p a r a t i v e l y
soon, ask the U n i t e d S t a t e s Government for permission to resume
d r a w i n g s w h e r e u p o n t h e U n i t e d S t a t e s Government ' ' would have
to m a k e u p its m i n d . " The B r i t i s h Mission h a d p r o t e s t e d strongly
a g a i n s t t h i s proposed condition, b u t it h a d subsequently been con­
firmed by the N a t i o n a l A d v i s o r y Council, who h a d s t i p u l a t e d t h a t
t h e r e m u s t either be a secret u n d e r s t a n d i n g to t h i s effect or a n open
a s s u r a n c e in t h e proposed exchange of letters t h a t H i s M a j e s t y ' s
G o v e r n m e n t would r e f r a i n from d r a w i n g s for a n unspecified period.
I n s p i t e of f u r t h e r p r o t e s t s by the Mission, the N a t i o n a l A d v i s o r y
Council h a d a d h e r e d to t h e i r a t t i t u d e t h a t , in view of their
fiduciary responsibility to Congress for t h e m a n a g e m e n t of the Loan,
they m u s t ask for such an agreement for t h e suspension of d r a w i n g s .
I n these circumstances S i r W i l f r i d E a d y h a d suggested t h a t there
w e r e four possible courses of action :--—­
(i) The U n i t e d S t a t e s proposal for an agreement on the
suspension of d r a w i n g s m i g h t be accepted in one of the
a l t e r n a t i v e forms suggested.
(ii) H i s M a j e s t y ' s G o v e r n m e n t m i g h t u n d e r t a k e , i n the
e x c h a n g e of letters, to r e f r a i n from d r a w i n g on the
C r e d i t for a p e r i o d of t w o months, if the U n i t e d States
G o v e r n m e n t would include in t h e i r reply a n u n d e r t a k i n g
t h a t a t t h e end of t h a t p e r i o d H i s M a j e s t y ' s Govern­
ment could resume d r a w i n g s on the C r e d i t a t a n y time
unless the U n i t e d S t a t e s Government gave notice t h a t
they h a d g r o u n d for c o m p l a i n t t h a t B r i t i s h procedure
a n d policy h a d not been in accordance w i t h the
assurances given in t h e i r letter a n d were in breach of
their obligations u n d e r t h e A g r e e m e n t .
(iii) M i n i s t e r s m i g h t proceed t o W a s h i n g t o n for discussions.
(iv) H i s M a j e s t y ' s G o v e r n m e n t m i g h t t a k e t h e i r proposed
action u n i l a t e r a l l y : t h i s would no doubt involve the
i m m e d i a t e suspension of d r a w i n g s on the Credit
i n c l u d i n g those a l r e a d y notified b u t n o t yet d r a w n .
The Chancellor of the Exchequer
said t h a t he h a d no objection
to t h e proposed texts of the exchange of letters contained in W a s h ­
i n g t o n telegrams Nos. 4568 a n d 4569. A s r e g a r d s the possible
courses of action suggested by Sir W i l f r i d E a d y , he could not recom­
m e n d acceptance of t h e second. T h i s w o u l d m e a n t h a t our actions
w o u l d be u n d e r the constant surveillance of the U n i t e d States
A d m i n i s t r a t i o n d u r i n g t h e next t w o m o n t h s ; a n d it seemed
inevitable t h a t d u r i n g t h a t time w e should be forced to act in a
m a n n e r which t h e U n i t e d S t a t e s G o v e r n m e n t m i g h t claim as giving
t h e m justification for complaint.
H e also t h o u g h t t h a t for the
reasons given by S i r W i l f r i d E a d y the U n i t e d States proposal for
a. secret a g r e e m e n t r e g a r d i n g the suspension of d r a w i n g s was wholly
unacceptable. H e recommended t h a t t h e C a b i n e t should hold to
t h e i r previous decision to t a k e a c t i o n a t 9 p.m. on 2 0 t h A u g u s t to
l i m i t t h e convertibility of sterling, b u t t h a t a p a r a g r a p h should be
a d d e d t o the proposed exchange of l e t t e r s saying t h a t H i s M a j e s t y ' s
Government were r e a d y to m a k e n o f u r t h e r d r a w i n g s on t h e Credit,
beyond those a l r e a d y notified, p e n d i n g f u r t h e r consultations. A s
he h a d informed t h e C a b i n e t on 19th A u g u s t , $150 million h a d been
d r a w n on 11th A u g u s t a n d notification h a d been given for f u r t h e r
d r a w i n g s of $ 1 5 0 million on 21st A u g u s t a n d $150 million on
2 5 t h A u g u s t . I n a d d i t i o n , t h e T r e a s u r y r e p r e s e n t a t i v e in W a s h ­
i n g t o n h a d been i n f o r m e d on t h e previous d a y t h a t t h e Government
wished to d r a w a f u r t h e r $150 million on 1st September, b u t i n view
of t h e delicacy of t h e p r e s e n t position i t h a d been left to h i s discr£­
tion w h e t h e r such notification should be m a d e a t the p r e s e n t stage.
I f d r a w i n g s were m a d e , as proposed, u p to 2 5 t h A u g u s t , t h e balance
of t h e C r e d i t r e m a i n i n g would be $550 million.
The President of the Board of Trade t h o u g h t t h a t t h e time h a d
come for discussions a t a M i n i s t e r i a l level. Provision w a s m a d e i n
A r t i c l e 8 (ii) (b) of t h e F i n a n c i a l A g r e e m e n t for consultation p r i o r
to agreement to c o n t i n u e to invoke t h e provisions of A r t i c l e X I V ,
Section 2, of t h e A r t i c l e s of A g r e e m e n t of the I n t e r n a t i o n a l
M o n e t a r y F u n d . H e suggested t h a t t h e Government should s t a t e
t h a t they would n o t propose to notify a n y f u r t h e r w i t h d r a w a l s u n t i l
such consultation h a d taken place. There should be no suggestion
a t t h i s stage of a formal a p p r o a c h on t h e lines contemplated in
A r t i c l e 12 of t h e A g r e e m e n t , since t h i s implied t h a t a n y modifica­
tions agreed u p o n would have t o be presented to t h e legislatures of
the t w o countries.
The Lord President
said t h a t a n y s t a t e m e n t r e g a r d i n g suspen­
sion of d r a w i n g s on t h e Credit should be so worded as to i n d i c a t e
t h a t H i s M a j e s t y ' s Government h a d h a d no a l t e r n a t i v e b u t t o a d o p t
the course proposed i n view of t h e a t t i t u d e of t h e U n i t e d States
Government. P u b l i c opinion in t h i s c o u n t r y should not be left w i t h
the impression t h a t t h e Government h a d taken t h e i n i t i a t i v e in
suggesting suspension of d r a w i n g s .
The Minister
of Fuel and Power s u p p o r t e d the view t h a t
f u r t h e r discussions w i t h the U n i t e d S t a t e s Government ought now
to be conducted by Ministers. I t was i m p o r t a n t to remember t h a t for
some t i m e to come we should be greatly dependent on U n i t e d S t a t e s
help, a n d our objective should therefore be to reach a satisfactory
long-term settlement w i t h them. F o r t h a t reason it w a s i m p o r t a n t
t h a t we should avoid a n y action a t this stage which would heed­
lessly antagonise t h e U n i t e d States A d m i n i s t r a t i o n .
The Cabinet.—­
(1) I n v i t e d t h e Chancellor of t h e Exchequer to a u t h o r i s e the
B r i t i s h Mission to W a s h i n g t o n to agree t h a t letters
should be exchanged in the t e r m s of t h e d r a f t s set out
in W a s h i n g t o n telegrams Nos. 4568 a n d 4569, subject
to t h e a d d i t i o n , in t h e letter from H i s M a j e s t y ' s Govern­
ment, of a p a r a g r a p h i n t h e following terms : " A s we
a p p r e c i a t e that, in such circumstances as have arisen,
provision is m a d e i n t h e F i n a n c i a l Agreement for con­
s u l t a t i o n p r i o r to agreement to continue to invoke the
provisions of" A r t i c l e X I V , Section 2, of t h e Articles
of A g r e e m e n t of t h e I n t e r n a t i o n a l M o n e t a r y F u n d , we
would not propose to notify a n y f u r t h e r w i t h d r a w a l s ,
beyond those already notified, from t h e line of credit,
u n t i l such consultation h a s t a k e n place ' ' ;
(2) Asked^the Chancellor of t h e E x c h e q u e r to verify* t h a t t h e
U n i t e d S t a t e s Government accepted the' proposed
exchange of letters, w i t h the modification set out in Con­
elusion (1) above, before a n n o u n c i n g t h a t evening the
C a b i n e t ' s decision to l i m i t t h e convertibilitv of sterling
by t h e means approved a t their meeting on 17th A u g u s t
Cabinet Office, S. W. 1, 20th August, 1947. * Later
in t h e d a y a m e s s a g e w a s r e c e i v e d n o t i f y i n g t h e c o n c u r r e n c e of t h e U n i t e d
Government m t h e course proposed in t h e above conclusions.
States