398 Dedman to Chifley

Cablegram W41, HAVANA, 15 January 1948, 8.58 p.m.

SECRET

Clayton is not in Havana and will not be in Washington until weekend. My discussions with Wilcox indicate that he has no discretion to vary previous attitude. I have therefore made arrangements to go to Washington Sunday and expect to see Clayton early next week.

In the meantime the work on Articles 21 and 24 is proceeding in the Sub-Committee and it is clear that we will get no support for amendment to 21 unless we can obtain United States concurrence. Moreover I feel that progress of Conference on other issues indicates increasing desire to reach settlement which weakens our chances of defeating United States on 24. In order to avoid a possible adverse vote we may be forced, while reserving our position on both 21 and 24 to participate in discussions of alternative texts. Accordingly we have prepared following texts which I believe it possible United States would finally accept.

Article 21(2)(B). A member applying restrictions under sub-paragraph (A) shall progressively relax and ultimately eliminate them as its external financial position improves in accordance with the provisions of that sub-paragraph. This provision shall not be interpreted to mean that a member is required to relax or remove such restrictions if that relaxation or removal would thereupon produce conditions justifying the intensification or institution respectively of restrictions under sub-paragraph (A).

Article 24(2). In all cases in which the organisation is called upon to consider or deal with problems concerning monetary reserves, balance of payments or foreign exchange arrangements the organisation shall consult fully with the International Monetary Fund. In such consultation the Organisation shall accept all findings of statistical and other facts presented by the International Monetary Fund relating to foreign exchange, monetary reserves and balance of payments and shall accept the determination of the Fund as to whether action by a Member in exchange matters is in accordance with the Articles of Agreement of the International Monetary Fund or with the terms of a special exchange agreement between that Member and the Organisation. When the organisation for the purpose of reaching its final decision in case involving criteria set forth in paragraph 2(A) of Article 21 is examining a situation in the light of the relevant considerations under all the pertinent provisions of Article 21 it shall accept the determination of the International Monetary Fund as to what constitutes a serious decline in the Members monetary reserves, a very low level of its monetary reserves or a reasonable rate of increase in its monetary reserves and assures the financial aspects of other matters covered in consultation in such cases.

The text of 24 has been prepared so as to separate examination of relevant considerations from decision and to relate acceptance of Fund determination to the examination rather than to the decision. This makes it clear - (A) That the decision lies with the organisation.

(B) That the determination of the Fund is one but only one of the relevant considerations upon which decision shall be based.

Amendment to 21 is designed to make it clear that restrictions do not have to be withdrawn or liberalised until the economy is in reasonable condition to do without them. This is as far as we can go without in fact altering the criteria in 21(2)(A) which United States will with general support resist strongly.

[AA : A1068, ER47/1/33]