Lease-Lend Agreement. At direction of President [1], Acheson [2]
saw British Ambassador [3] on 29th January with advice that United
States Administration would like an early decision so that
agreement could be signed. This has been communicated to London.

President and his advisers are taking the view that in continuing
to approach Congress for lease-lend funds they must be supported
by an agreement indicating among other points general basis to be
aimed at in the ultimate settlement.

British Embassy here appears to hold the view that the proposed
agreement deals more with past transactions and possibly with
current approaches to Congress for funds. Men handling the subject
at British Embassy have apparently agreed among themselves that in
future it is likely there will be much more pooling of goods
without effort at identification or without regard to the
particular Government which ultimately uses the goods. Thus they
suggest lease-lend transactions may, with the entry of America
into the war, be logically expected to become less and even
possibly to disappear. When in an informal talk this was put to
Americans by us, answer non-committal. Notwithstanding their view
on this aspect, United Kingdom representatives here think they
have got to make an agreement now even if ultimately it is found
to be in consideration of past lease-lend tranactions only.

There is a further point of principle that there might be
'offsets' in the shape of services rendered by United Kingdom and
other Governments such as equipment, even foodstuffs for American
troops in (for example) British areas. As far as we can learn,
however, this has not yet been seriously discussed.

Points around which all discussions have centred are those
contained in Article 7 which it is understood has been forwarded
to you. There have been several drafts however and in order to
avoid the possibility of confusion the last (drafted by the United
States) is quoted.

[Matter omitted. Article 7 as redrafted is published in paragraph
5 of Document 324.]

Points they desire to cover in this article are:

(A) There shall be no war debts. This is the significance of the
passage containing the words 'such as not to burden commerce'.

(B) Agreements which have for their objective the expansion of
international trade by the removal of barriers. In particular,
elimination of discriminatory measures, reduction of tariff and
adjustment of currency difficulties.

(C) It is also clear that the Americans have fears that after the
war England might revert to [4] policies of bilateralism-
statements of Keynes [5] (when he was in the United States a few
months ago) raised these fears. I am informed that Phillips
(United Kingdom Treasury Representative here) who supported post-
war bilateral idea has now changed to the extent that he now
supports the above-quoted proposed agreement.

In discussion, the Americans admitted they have in mind the
removal of Imperial preferences, though they say it is an
objective and not a specific undertaking and that ways and means
have got to be explored in an effort to reach the objective. They
said 'agreed action directed to' did not mean that an agreement to
removal of margins was being made. Our impression is that they do
not hope to secure the entire removal, but to make material
progress to this end. The point was put by us to Hawkins [6] that
one of the strong reasons for Imperial preference was the
extraordinarily high American duties. The United Kingdom and the
Dominions might argue that American duties should be reduced more
heavily than the present Trade Agreement Law permits to justify
substantial or entire removal of preferential margins. He agreed
that the point was legitimate but came back to his often-repeated
argument that American protective duties (or for that matter
Australian protective duties) were in an entirely different
category to duties not designed to protect industries of the
country imposing them. Under this principle they contended that
British Imperial preference was wrong as, of course, their
treatment of Cuba and the Philippines. He agreed, however, that
bargaining must cover both (as current treaty negotiations
demonstrated) and speaking for himself only, he thought before
they could claim that the whole of the preferential duties be
removed America would probably have to bring her duties below 50%
of their present level.

It is clear they have designs on Imperial preference though they
think it should be one only of several measures designed to make
and keep international trade fluid.

The United Kingdom reply said it was undoubtedly an attack on
Imperial preference, but it would have to be faced. They did not
seem to think it meant complete elimination, however, and they
quoted the words 'directed to' in Article 7.

Both British representatives here and Americans consider inter
alia the agreements are in accordance with the last paragraph of
Article 7 and (hat Article 7 strengthens the case for proceeding
with trade treaty negotiations. The Americans are definite in
saying that, in their view, continuance of the present
negotiations is in fact one of the most fruitful of the lines of
the 'agreed action' contemplated by Article 7 and would be
considered by them to be one important form of compliance with
Article 7.

The British Embassy representatives handling the subject spoke
freely in informal conversation, but asked that their views be not
quoted.

I learned confidentially that Canada has notified her agreement
with the whole proposed agreement including Article 7 in the form
as quoted above in the telegram.

I believe you will receive telegraphed views shortly from the
British Government on the agreement and Article 7. [7]

CASEY