(c) crown copyright
Catalogue Reference:CAB/128/10
Image Reference:0023
THIS
DOCUMENT
IS
T H E PROPERTY
Printed
OF
HIS
for the Cabinet.
BRITANNIC
August
MAJESTY'S
GOVERNMENT
1947
SECRET
Copy-Mo.
C M . (47)
72nd Conclusions
C A B I N E T 72 (47)
CONCLUSIONS
of a Meeting of the Cabinet held at 10, Downing
on Tuesday, 19th August, 1947, at 12 noon
Street,
S.W. 1,
Present:
The R i g h t H o n . C . R . A T T L E E , M . P . , P r i m e M i n i s t e r (in the
Chair).
The 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
The R i g h t Hon. ERNEST BEVIN, M.P.,
Secretary of S t a t e f o r F o r e i g n
Affairs.
The R i g h t H o n . H U G H DALTON, M . P . ,
The R i g h t H o n . A . V . ALEXANDER,
M . P . , M i n i s t e r of Defence.
Chancellor of t h e Exchequer.
The R i g h t H o n . V I S C O U N T
Lord Chancellor.
The R i g h t H o n . ANEURIN BEVAN, M . P . ,
M i n i s t e r of H e a l t h .
JOWITT,
T h e R i g h t H o n . T. W I L L I A M S , M . P . ,
Minister
Fisheries.
of
Agriculture
and
The following w e r e also present.:
Mr. HAROLD W I L S O N , M.P.,
Secretary
Sir
for Overseas T r a d e .
EDWARD
Secretary.
BRIDGES,
Permanent
Treasury.
Secretariat:
S I R N O R M A N BROOK.
Mr. S . E . V . LUKE.
CONTENTS
Minute No.
Subject
1
B a l a n c e of P a y m e n t s ....
2
Food
Australian
3
....
....
....
....
230
231
Wheat.
Food and R a w Materials
Government Bulk
4
....
Page
231
Purchase.
Trade Negotiations a t Geneva
34236-2
....
....
....
----
232­
46
Balance
of
Payments.
(Previous
Eef erenee:
C M . (47) 71st
Conclusions,
Minute
1.)
1. T h e Cabinet considered a telegram from Sir W i l f r i d Eady
( W a s h i n g t o n telegram No. 4542 of 19th A u g u s t ) r e p o r t i n g the
course of h i s discussions on 18th A u g u s t w i t h representatives of the
U n i t e d S t a t e s Government r e g a r d i n g the decision of H i s Majesty's
Government to t a k e immediate steps to limit t h e convertibility of
sterling.
A f t e r a p r e l i m i n a r y m e e t i n g w i t h Sir W i l f r i d E a d y , the United
States S e c r e t a r y of the T r e a s u r y h a d instructed h i s officials to draft
an official s t a t e m e n t according friendly recognition of the inevita­
bility of H i s M a j e s t y ' s G o v e r n m e n t ^ action; a n d he h a d asked that
an a t t e m p t should be made to find an i n t e r p r e t a t i o n of the AngloA m e r i c a n F i n a n c i a l A g r e e m e n t w h i c h would j u s t i f y his Govern­
m e n t ' s a t t i t u d e w i t h o u t r a i s i n g t h e question of formal approval by
Congress. On the latter p o i n t it m i g h t be a r g u e d t h a t our action
was i n accordance w i t h A r t i c l e 8 (ii) (b) of the A g r e e m e n t ; alter­
natively, the U n i t e d States Government m i g h t recognise that, while
it w a s not w i t h i n the text of t h e Agreement, i t w a s essential to
ensure t h a t the dollars r e m a i n i n g were used, for the purposes
envisaged in A r t i c l e 3 of t h e A g r e e m e n t a n d in the Articles 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 . A t a later meeting, however, the
U n i t e d S t a t e s representatives h a d proposed an exchange of letters,
in w h i c h the B r i t i s h Delegation would notify t h e decision of His
M a j e s t y ' s Government and u r g e t h a t the measures t o be taken were
w i t h i n the p u r p o s e and i n t e n t i o n of the A g r e e m e n t ; a n d the reply
would s t a t e t h a t t h e U n i t e d States Government h a d t a k e n sympathe­
tic note of t h e d r a i n on t h e dollar resources of t h e U n i t e d Kingdom
a n d t h a t t h e y would consult a t once w i t h the B r i t i s h Delegation,
on t h e u n d e r s t a n d i n g t h a t m e a n w h i l e no f u r t h e r d r a w i n g s on the
C r e d i t would be sought beyond those a l r e a d y notified. S i r Wilfrid
E a d y h a d p r o t e s t e d strongly a g a i n s t this proposal. The United
S t a t e s representatives h a d , however, replied t h a t n o more helpful
a t t i t u d e could be expected from them a t such short notice. The
B r i t i s h Delegation strongly u r g e d t h a t , in view of the g r e a t impor­
tance of securing at least the acquiescence of the U n i t e d States
Government, the announcement of the measures proposed for limiting
the convertibility of sterling should be deferred for twen " four
hours.
1
1
The Chancellor of the Exchequer t h o u g h t i t would be advisable
in t h e circumstances to postpone action for t w e n t y - f o u r hours, on
the u n d e r s t a n d i n g t h a t t h e r e could be no question of any further
postponement a n d t h a t S i r W i l f r i d E a d y should m a k e every effort
in t h e m e a n t i m e to secure the most favourable declaration he could
from the U n i t e d States a u t h o r i t i e s .
T h e Chancellor said t h a t t h e r e h a d been no f u r t h e r acceleration
in the r a t e of dollar d r a w i n g s since he circulated h i s memorandum
C P . (47) 233 on 16th A u g u s t . D r a w i n g s h a d totalled $60 million
on 16th a n d 17th A u g u s t , a n d $16 million on 18th A u g u s t ; and the
B a n k of E n g l a n d estimated t h a t d r a w i n g s m i g h t amount to
$30 million on 19th A u g u s t , a n d $ 1 5 - $ 3 0 million on 20th August.
P o s t p o n e m e n t for twenty-four h o u r s might, therefore, result in the
loss of $ 3 0 million but, a g a i n s t that, there w a s the risk that
p r e c i p i t a t e action on our p a r t m i g h t j e o p a r d i s e our ability to draw
t h e balance of t h e Credit, which, a p a r t from t h e d r a w i n g s already
notified, a m o u n t e d to $500 million. A p a r t from t h i s purely financial
consideration, there were s t r o n g political a r g u m e n t s in favour of
w a i t i n g a n o t h e r day if w e could thereby secure the acquiescence of
t h e U n i t e d S t a t e s Government in the action w e were proposing to
take.
The Foreign Secretary
agreed t h a t it would be advisable to
accept a postponement of twenty-four hours. H e t h o u g h t it would
be i n e x p e d i e n t to agree to an exchange of letters involving an
i m m e d i a t e prohibition of f u r t h e r d r a w i n g s on the C r e d i t ; for this
w o u l d p u t t h e U n i t e d S t a t e s Government in a very s t r o n g bargaining
position in the subsequent discussions.
There w a s general a g r e e m e n t w i t h the views expressed by the
Chancellor of t h e Exchequer a n d the F o r e i g n Secretary.
The Chancellor of the Exchequer recalled t h a t , a t the C a b i n e t ' s
previous discussion on 17th A u g u s t , it h a d been suggested t h a t t h e r e
w a s a serious risk of l e a k a g e of o u r dollar resources if, as suggested
in C P . (47) 233, t h e s t e r l i n g area countries w e r e t r e a t e d differently
from the non-sterling a r e a countries. H e h a d since ascertained,
however, t h a t i n the p a s t six weeks t h e dollar e x p e n d i t u r e in respect
of the s t e r l i n g a r e a ( a p a r t from the U n i t e d K i n g d o m ) h a d in f a c t
been only a small p r o p o r t i o n of the whole, a n d he w a s satisfied t h a t
there w a s no need to a p p l y the same controls to the s t e r l i n g a r e a
countries as to t h e o t h e r s . Those countries would, however, be asked
to exercise the utmost r e s t r a i n t in t h e i r dollar e x p e n d i t u r e , a n d he
h a d no doubt they w o u l d do so.
The Cabinet—
- -
A g r e e d t h a t t h e leader of the B r i t i s h Mission i n
W a s h i n g t o n should be a u t h o r i s e d to i n f o r m the U n i t e d
States Government t h a t H i s M a j e s t y ' s Government w e r e
p r e p a r e d to postpone for t w e n t y - f o u r hours, i.e., u n t i l
9 p.m. on W e d n e s d a y , 20th A u g u s t , t h e action o u t l i n e d in
A n n e x I I to C P . (47) 233 for l i m i t i n g the convertibility
of sterling, b u t t h a t there could be no question of a n y
f u r t h e r postponement.
Food.
Australian
Wheat.
(Previous
Reference:
C.M.(47)4th
Conclusions,
M i n u t e 3.)
Food and R a w
Materials.
Government
Bulk
Purchase.
(Previous
Reference:
C M . (47) 39th
Conclusions,
Minute
5.)
2. I n the course of a general discussion on t h e balance of
p a y m e n t s the C a b i n e t w e r e informed t h a t t h e A u s t r a l i a n Govern­
m e n t m i g h t shortly be r a i s i n g t h e question of a long-term c o n t r a c t
for the p u r c h a s e of A u s t r a l i a n w h e a t by t h e U n i t e d K i n g d o m .
I t w a s recalled t h a t , in earlier discussions on world s u p p l i e s of
cereals both i n the C a b i n e t a n d t h e F o o d S u p p l i e s Committee,
M i n i s t e r s h a d agreed t h a t i t should be one of our long-term objec­
tives to resume the i m p o r t of A u s t r a l i a n w h e a t i n t o the U n i t e d
K i n g d o m . They h a d contemplated t h a t the diversion t o I n d i a of
t h e whole of A u s t r a l i a ' s exportable s u r p l u s of w h e a t should be a
t e m p o r a r y m e a s u r e ; a n d t h e a m o u n t of our a n n u a l p u r c h a s e s u n d e r
t h e long-term w h e a t c o n t r a c t w i t h C a n a d a h a d been deliberately
fixed a t a level w h i c h left ample n i c L r g i i i t o r i m p o r t s from A u s t r a l i a
a n d elsewhere. I n these circumstances overtures for a long-term
c o n t r a c t for t h e s u p p l y of A u s t r a l i a n w h e a t to the U n i t e d K i n g d o m
should be welcomed. I t would, however, be desirable t h a t , before
such a contract w a s concluded, we should o b t a i n s a t i s f a c t o r y
assurances of a c o n t i n u i n g m a r k e t in A u s t r a l i a for e x p o r t s of m a n u ­
f a c t u r e d goods from the U n i t e d K i n g d o m .
3. I n t h e discussion recorded i n t h e p r e c e d i n g M i n u t e , it w a s
suggested t h a t it would be a d v a n t a g e o u s if a somewhat l a r g e r
p r o p o r t i o n of the food supplies of the U n i t e d K i n g d o m could be
bought t h r o u g h the n o r m a l channels of t r a d e . So long a s a s u b s t a n ­
tial p a r t of o u r t o t a l r e q u i r e m e n t s of a p a r t i c u l a r commodity w a s
assured by G o v e r n m e n t bulk purchase, u n d e r long-term c o n t r a c t s
or otherwise, t h e r e m i g h t be a d v a n t a g e s in g i v i n g scope for commer­
cial b u y i n g over t h e r e m a i n d e r of t h e field. W h i l e so m u c h of o u r
t o t a l needs were covered by Government bulk purchase, there w e r e
risks of political p r e s s u r e from foreign Governments, which w a s
specially d a n g e r o u s in time of economic crisis.
It
was
w o r t h considering w h e t h e r there would be long-term a d v a n t a g e s , to
t h i s country and t o t h e B r i t i s h Commonwealth a s a whole, in
e n c o u r a g i n g the r e - o p e n i n g of t h e f u t u r e s m a r k e t s in c e r t a i n commo­
dities by seeking to o b t a i n a p r o p o r t i o n , say 30 to 40 per cent., of
o u r r e q u i r e m e n t s of those commodities t h r o u g h commercial b u y i n g .
The Prime Minister
undertook to a s c e r t a i n t h e views of t h e
P r e s i d e n t of the B o a r d of T r a d e a n d the M i n i s t e r of Food on t h e
p o i n t s raised in t h i s discussion.
Trade
Negotiations at
Geneva. (Previous Reference:
C M . (47) 70th Conclusions, Minute
4.) 4. The Secretary for Overseas Trade recalled t h a t , as stated
i n C P . (47) 230, the B r i t i s h Delegation a t Geneva h a d been
i n s t r u c t e d t h a t the n o n - d i s c r i m i n a t i o n provisions of the d r a f t
C h a r t e r for an I n t e r n a t i o n a l T r a d e O r g a n i s a t i o n should be accepted
only on the u n d e r s t a n d i n g t h a t the provisions r e q u i r i n g the prior
a p p r o v a l of t h e O r g a n i s a t i o n for d i s c r i m i n a t o r y practices would
n o t become effective before 1952. T h e U n i t e d States Delegation
h a d now accepted our view on tihis m a t t e r . T h e y h a d also indicated
to t h e F r e n c h Delegation t h a t they were p r e p a r e d to agree t h a t
t h e r e should be complete freedom to d i s c r i m i n a t e u p to the end of
1948. Thereafter, u n t i l M a r c h 1952, there would be a r i g h t of
subsequent challenge by t h e O r g a n i s a t i o n or by any Member, but
there w a s little risk of successful challenge in view of the fact t h a t
d u r i n g this period the m a j o r i t y of Members would themselves be
likely to wish to h a v e recourse t o d i s c r i m i n a t o r y practices. We
should always h a v e t h e final s a f e g u a r d of a r i g h t to resign our
membership of the O r g a n i s a t i o n a t sixty d a y s ' notice. H e proposed
to circulate a p a p e r to t h e Cabinet on t h e present position of the
Geneva discussions.
The C a b i n e t Took note of the s t a t e m e n t by t h e Secretarv for Overseas
Trade.
Cabinet Office, S.W. I ,
lUh A ugust, 1947.