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Historical documents

37 Dedman to Chifley

Cablegram 1 LONDON, 13 July 1949, 12-45 a.m.

IMMEDIATE SECRET

Received 14 July 1949
Formal opening of the Conference this morning was followed by a
meeting of the heads of delegations. Concurrently there were
preliminary discussions among officials. At the Ministerial
Meeting, Cripps circulated a copy of a communique issued after
talks with Abbott and Snyder. In case you have not got the full
text, I am repeating it in my immediately following telegram.

Cripps did not break any new ground and the discussion was mainly
confined to a reaffirmation of the desirability of achieving the
long-term objective of multilateral trading conditions. It was
then agreed after the discussion, that the Conference would
discuss the problems under three heads-
(a) The long-term objective of achieving multilateralism.

(b) The intermediate problem of achieving increased dollar
earnings.

(c) The immediate problem of checking the drain on reserves in
1949-50.

It was decided that item (a) would be discussed at this
afternoon's meeting.

2. At the meeting of Ministers and Officials this afternoon,
Cripps asked for the views of delegations on the long-term
problem.

3. The Canadian Minister of Finance, Abbott, referred to Canada's
special position as a member of the Commonwealth, but outside the
sterling area. Speaking frankly he said that political and
security aspects of relations with the United States should
influence discussions on solutions for the dollar problem. Canada
subscribed to the general objectives of multilateral trade and had
particular interest because of heavy cuts in sterling area
purchases from Canada.

4. He felt too much weight was given to the United States
recession which was relatively minor and in any case, the United
States could not be expected to maintain inflation to help other
countries. The United States income levels are still high by any
test. Furthermore, Truman's message to the Nation emphasised the
need to maintain imports and to adjust budget policies in relation
to the external situation. Abbott also challenged the over-all
effects of restrictions which tended to create an insulated high
cost area. He conceded the need [for] urgent first aid measures.

Nash indicated New Zealand's willingness to fit in with both long
and short term plans to meet difficulties. He felt that
multilateralism and convertibility which are interdependent are
not yet practicable. He also stressed the importance of efforts to
raise living standards.

6. Havenga [1] raised gold aspects on familiar lines.

7. The Indian Finance Minister, Matthai, stated necessary
prerequisites for
multilateral system-
(a) Balanced two-way trade at adequate level.

(b) Free movement of capital for investment purposes.

(c) Adequate geographic distribution of gold reserves.

8. Matthai referred, however, to uncomfortable transition period
in which sterling area must develop resources and set up machinery
for ascertaining such resources. Suggested special bilateral
arrangements with the dollar area and [Russia]. [2] President of
the Board of Trade [3] summed up a rather nebulous discussion up
to that stage by stating that there seemed to be general agreement
on long term objective of one world economy rather than, say [3]
blocs dollar, sterling, rouble. He then indicated six lines along
which the United Kingdom proposed to explore the solution of the
long-term dollar problem.

(a) Surplus countries must free their markets to imports from
deficiency countries.

(b) The reserves of deficiency countries must be protected.

(c) Non-dollar countries must achieve costs reasonably comparable
to those in the dollar area.

(d) Dollar countries must pay reasonable prices for their
purchases of staple commodities from the sterling area, i.e.

support prices for primary products must not be confined to those
produced in the United States. This implies the conclusion of more
international commodity agreements.

(e) Full employment must be maintained, especially by surplus
countries.

(f) Need to clarify the position and improve prospects for United
States investments abroad by surplus countries either by providing
conditions for flow of 'risk' capital, or by planned over[sea] [4]
investment.

9. Wilson summed up by reiterating the objectives of one world
economy, multilateral trade and convertible currencies.

10. At this stage, I suggested that the discussion so far had not
faced up to the real issues involved in a solution of the long-
term problem. I made clear that Australia joined with other
delegations in supporting the broad long-term objectives of
multilateralism, but pointed out that, as one of the purposes of
this Conference was to consider an immediate intensification of
discrimination, it was necessary to consider how the immediate
necessities could be reconciled with the long-term objective and
the conditions necessary for the achievement of that objective
brought about. I emphasised the obligations of creditor countries
which Australia had stressed at Bretton Woods, Geneva and Havana.

America, for instance, might consider tariff reductions increased
investment abroad, further contributions to development of
backward areas, such as in Asia, and might re-examine political
policy in order to assist expansion of trade between East and West
Europe, which could make an important contribution both to the
dollar problem and the easing of the political tension.

11. I concluded by expressing the hope that the Chancellor would
give some indication of the concrete proposals which the United
Kingdom had in mind for further discussion with U.S.A. and Canada
as a means of solving the long-term problem. I pointed out that,
although these matters might necessarily be handled by the United
Kingdom as leader of the sterling area, Australia was vitally
interested in the issues. Cripps merely indicated that Wilson's
outline of broad objectives (see paragraph 8 above) would be the
basis of the September talks in Washington, and that it would not
be wise to say more at this stage.

12. Cripps concluded by suggesting that officials be instructed to
draft agreed minutes, recording the outcome of the day's
discussions. I shall keep you fully in touch with developments on
this.

13. There is some suggestion that the agreed minutes should
included a subscription by the whole conference to the text of the
communique issued after United Kingdom talks with Snyder and
Abbott.

14. On timetable, the United Kingdom desires the Conference to
complete its policy discussions among Ministers by Sunday night
(Cripps has indicated very confidentially that for medical
reasons, (he will not be available after Monday). As a result a
concentrated programme of meetings through the weekend is
contemplated. With the Chancellor occupied in the House on
Thursday there will be a meeting of Ministers and officials on
petroleum products in the morning. In addition officials are to
meet to discuss-
(a) Statistical appreciation of the position in 1949-50.] [5]

(b) Preliminary aspects of short term action.

15. My general feeling is that discussion of the long-term problem
today was rather unsatisfactory and that as yet, little progress
has been made.

1 N.C. Havenga, South African Minister of Finance.

2 Word in square brackets inserted from correcting cablegram 3,
dispatched 14 July 1949.

3 J. Harold Wilson.

4 Matter in suare brackets corrected from cablegrams 3, dispatched
14 July 1949
5 Portion in square brackets inserted from correcting cablegram 3,
dispatched 14 July 1949.


[AA: A9879, 3350/902]
Last Updated: 11 September 2013
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