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32 Note of Meeting with Plowden

NOTE OF A MEETING HELD IN SIR EDWIN PLOWDEN'S ROOM ON
14TH OCTOBER 1948, AT 5 P.M.

Present:-

Sir Edwin Plowden (in the Chair)

Sir Sydney Caine)
Mr. T. L. Rowan) Treasure

Mr. E. A. Hitchman Central Economic Planning Staff
Mr R. L. Hall Economic Section, Cabinet Office

Dr. H. C. Coombs)
Mr. Wheeler Australia
Mr. Wilson

Mr. D.A.V. Allen
Lord Amberley

The meeting was called to consider some of the points made by the
Deputy Prime Minister of Australia at the meeting of Commonwealth
Prime Ministers on Wednesday, 13th October.

U.K. Purchases from Australia
The Australian officials represented that the U.K. Long-Term
Programme suggested an unnecessary limitation of purchases from
the sterling area. in the case of Australia it assumed that the
U.K. would not be able to spend any more upon Australian products
in 1952-53 than in the current year. The Australians considered
this limitation unnecessary. If the U.K. purchased more from
Australia the Australians would almost certainly use the sterling
they received for purchases within the sterling area, including
purchases of U.K. exports and within Eastern Europe, or hold
higher sterling balances. They could be trusted not to increase
their dollar spending. The Australians attached great importance
to this problem because they were afraid that the estimates in the
Long-Term Programme would inevitably influence policy. They
thought that there was some evidence already that the attitude to
certain minor purchases was being affected. The small industries
producing the so-called less essential goods were of particular
importance to Australia because they were borderline industries.

They thought it would be disastrous if a pessimistic view of sales
led to a general restriction of trade between the U.K. and
Australia, with both countries having unused export capacity.

While there might be some risks involved to the U.K. if no limit
were placed upon purchases from the sterling area, it would be
impossible to re-establish a multilateral pattern of trade, which
was a declared objective of U.K. policy, unless risks were taken
at some time.

The U.K. officials said that the Long-Term Programme had been
worked out for planning purposes on a conservative basis. It was
not proposed to take decisions now about the purchases of
inessentials from Australia in 1952. While the U.K. could agree
with many of the points made by the Australians, there was a
danger that if purchases from the sterling area were increased the
extra sterling would be used to purchase exports from the U.K.,
which might otherwise have gone to dollar markets to pay for
essentials. There was also the possibility that as the volume of
trade on both sides was expanded the point might be reached when
the U.K. consumer would prefer the goods which were exported to
the imports they made possible.

The Australians should not overlook the fact that special measures
were necessary to secure the U.K. export targets and the
Australian arguments were not entirely valid in a situation when
considerable controls over imports and exports were in force.

The Australians were given an assurance that the points they had
made had been taken and that the suggestion that current year
purchases were being affected would be examined.

Relationship of the Sterling Area and Western Europe
The Australians were concerned about the size of the deficiency of
Western Europe and what might happen when the Payments Agreement
came to an end. They were afraid that an attempt might be made to
bring about a bilateral balance of trade between Western Europe
and the sterling area. Such a step would inevitably reduce the
volume of trade.

The other participating countries must therefore be constantly
pressed to earn a surplus in acceptable currencies elsewhere in
the world, with which to balance their sterling area deficit. The
United Kingdom was in the best position to press this point of
view.

The U.K. and Australian officials were in general agreement about
the nature of the problem and that in any event the basis of a
solution must be increased production in Europe as a whole in
order that Europe should be able to pay for its imports. The U.K.

were particularly interested in this because at present a heavy
subsidy from the U.K. to Europe was necessary and the Australians
might be assured that their point of view would not be overlooked.

The difficulty of the problem should not, however, be under-
estimated.

Multilateral Trade with Dollar Areas and Long-Term Contracts
The Australians said that it was the conclusion of the United
Kingdom Long-Term Programme that it would not be possible in 1952-
53 to have a multilateral world which included the dollar area.

This might be disturbing to United States opinion, the more so as
no speedy return to full multilateralism could be envisaged. They
therefore urged that the conditions which would make
multilateralism and convertibility possible should be thoroughly
examined. They suggested that the solution lay in finding
somewhere in the world an area which could on balance be a
substantial dollar earner as were Malaya and the Netherlands East
Indies before the war. Australia was very much interested in
achieving a multilateral pattern of trade if this were possible.

As an illustration of the problems involved, they instanced the
increased production of certain commodities such as sugar would be
uneconomic in full competition with similar products from the
dollar areas. Since producers could not always rapidly turn to the
production of other products, the Australians thought that their
long-term guarantees about markets were necessary if they were to
undertake the increased sugar production which the U.K. had
suggested. They added that since the possibilities of multilateral
trade depended very much upon the willingness of the United States
to take increased imports, the long-term programmes of the
O.E.E.C. countries might provide a means of influencing opinion in
the United States on this point.

The U.K. officials thought that the main problem was the future of
U.S. commercial policy itself, which was extremely difficult to
predict. They agreed that when suitably handled, the long-term
programmes of O.E.E.C. might provide a means of influencing U.S.

opinion. The Australian arguments about multilateral trade were
well taken and would be noted. So far as long-term contracts for
Australian products were concerned, there was no objection to
these in principle, but it would be necessary to examine each
individual contract in detail when it was proposed.

[AA: A609, 552/69/1]


[LONDON], 14 October 1948
Last Updated: 11 September 2013
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