396 Dedman to Chifley

Cablegram W26, HAVANA, 6 January 1948, 5.46 p.m.

SECRET

Reference your No. 1.[1]

Clayton[2] is not due in Havana until tomorrow but Wilcox[3] repeated, when I told him we intended to go ahead with the amendment, his statement that if they were defeated on this issue they would not put the Charter to Congress. He indicated, however, that in the debate they would adopt a conciliatory tone as they fear that if the importance of this issue to them is realised, it may obtain support solely because it offers an opportunity to bargain for further concessions from the United States.

Debate on our amendment took place on Saturday and you will have received a summary of my statement. Statements on the amendment showed approximate equal division. We obtained support from non-members of the Fund such as New Zealand, Sweden, Switzerland and also from Norway, Poland and Brazil. On the other hand we were opposed by the United States, the United Kingdom, Canada, Cuba, Chile and Egypt. In doing this some Delegations have to some extent retreated from the stand that determination of Fund was final. French and Canadian support for our views has been withdrawn as the result of United States approaches at the political level and it seems likely that countries which did not participate in the debate will tend to support the existing arrangement, partly because of a desire to conciliate the United States on a matter which is not important to themselves but partly also because there seems to be fairly general goodwill towards the Fund in South American countries as a result of the elasticity of the Fund's approach to South American exchange problems. The Americans claim that the French were a party to the bargain made with the United Kingdom by which the United States made the concession in relation to examination in return for French and United Kingdom support on this question. A feature of the decision, however, was the relatively conciliatory tone taken by the United States and the emphasis placed by them and other speakers against our amendment on the discretion left to the Organisation despite a requirement that it should accept the determination of the Fund on matters referred to in Article 24, paragraph 2.

It would appear possible, although far from certain, that we could reach a compromise by which it would be made clear that the Organisation would be able to approve the institution, maintenance or intensification of import restrictions even if the Fund had ruled that a member's reserves were not very low or experiencing a serious decline if in the opinion of the Organisation this was necessary because - (1) Special factors were affecting the Members reserves or need for reserves (see Article 21 paragraph 2(A));

(2) The import restrictions were necessary as a step towards equilibrium during the post-war period as a result of the difficulties of post-war adjustment (see paragraph (3)(A));

(3) Unless restrictions were imposed it would be necessary to change domestic Policy (see paragraph (3)(B)(I)).

This together with the existing discretion in relation to the extent of restrictions necessary and in relation to non-financial aspects of an imminent threat to monetary reserves would appear to give the Organisation a substantial degree of discretion in reaching a decision on import restrictions for balance of payments reasons.

If it is necessary I will telegraph again after I have seen Clayton but I would be glad of your advice as to whether we should seek a compromise which would either by amendment or official interpretation emphasise the discretion in decision remaining to the Organisation despite its obligation to accept fund determination.

With regard to Article 21(2)(B) our amendment has gone to sub-Committee which meets tomorrow. Private conversations indicate that United States, United Kingdom and Canada fear that proposed wording might weaken provisions of Paragraph (2)(A) which they are unwilling to do.

[1] Document 394. An error had occurred in the reference used in an intervening cablegram (H9, dispatched 6 January 1948).

[2] William L. Clayton, former Under-Secretary of State for Economic Affairs, chairman of the US delegation.

[3] Clair Wilcox, Director, Office of International Trade Policy, US Department of State; vice-chairman of the US delegation.

[AA : A1068, ER47/1/33]