' -· t lay-fr • -t TOP Sli X RET J • · June 26 1947 SUl1' hL irf OF HIRO lctE ETIHG OF UMDER SEClU TAf Y CLAYTON lJ 'iD 'J' BASSADOR l'I'l'B BRITISL CABilf 3 T 1 112 Bl£RS Sir sta1'tord Cripps wes nor present at t111s meetillg but Si John Henry No and Jaaes Helooro represented the Boerd or Trade Sir i3o ward Bridges and Sir ' 1111' rld iady and llr R ii B Clarke were J res ent for the Treasury S1r Or e Sergen t and Sir L und Hall-Patoh represented the For eign O 'tic e Jl in previous nee tlni s Mr Peterson and 1 r Gunter ttended for the Embassy l l ertioipants at the ieoting had copies o r tho revised tte ide me -ooire tor the ore1gn Secretary Mr Bevin thought the llemOrl Jldut4 set forth accuratel y the views expree ed and received at previous meetin s He could not t ell what line Ylould be tni en at Paris or what the outcome would be but or hia guidance he thought he could use the me orond11111 with reaeoneble safet y as en approech in the Paris discussions While he knew the roen ore ndum was '1i thout commitment he eought a s3urance that it represented the U S Adml nistrntion • s approa ch to tile 1 1 11 -opean economic problem l r Clayton tho ught this 'llns ao The memorandwn contained some th1nes whi ch had not been discuaeed i n Washington tor OXl JllJ lo the outline of the difference between the e nergenoy phase and the long- term phase ot uropean xehabilitation There bad been little diacusaion of the whole subject at ash1 n6ton and none at all io tbe NAC which cOltmittoo was described and practically all or tbo eonaideration thus tar given--meeger indeed- bad beeL in the Oepartnent of State llfr Bevin understood that the 1 ar ahall idea encoapassed e relatlvely ahort - t erm se y tour yoars aqd in- volved help t o gui ope i n lta p ur chnses from the wes tern liellll aphere while EuropG itaelf waa getting und e1·we y Thia would be ol' tromendous help lolr Clayton sllid ho could on ly indicate wllat he tboueht tlle AMiinistration would r ecommend to Co o ress and believed that tho British authorities would underataml tbis distinction in our form o goverruoent which undorstamiing be thought wns highly 1 port nt I Ir Clayton thought somo countries woulli be round in no presen difficul ties as r04lards their be lance of Pfl Yments but that these m 1eht heve somo long-term development problem For tho latter tr e UN Or anization had establislied a bank Mr Bevin 1 10 01 uotl n · t cu t_ I I Oul · 0 D COD st- n _ ' Dank g ·r d per e e ries tion t o maet OW ussia · hat u jae t u evin TOP SECRET 4 r Bevin thought if lluS91a did not get i n on t ho short-t erm achene the r would not pl · in he 1 ars o ll rogrcu If so ho e ket Jr Clayton ct the Brit ish woul i be support d by the U s i n going along w1 th the others Mr Cla n on re9lied 1n the offirnative v Ir De l oll then 1tentiona 1 with regerd to the l oll£tern th et Runsia YJO S not a participant in tile Interr ation l Bank and tt e -etore could not borrow 1- owever it w a open to Huasia t o Join tho Eank but es aentioned by a Treasury repreee itotive thin see ied wlli kol y because ea n member the USSR woul d be l'eq i r ed to -e'7eal its gold ho d1ni8 L'r bevlo then brou ll up tho question of ba lanced bu dgets in uropo Doe t his ppl in the sliort or the long torn Ho montioned Fre noo wherei n a bal anced budget mil ht 01·ea e a difficult si uetioo 3 lt it e oalanced budget wes a oons16eration fo r tbo long- torm that Jllight ho r easonable fo r France Similar conditions obtttined in Italy Jr Be •in would look with B ' ent er f avor on bolanc eQ buogets s a cond1 1on 1n tho longer term ldr DotJElas ret'erl'ed to l e text 01· t he o eniorw du o and t he vJcrd s as sooo aa l OS 3iblc 11 • 1tr Be•1i n applied th is 91l rnse to France no ice the ngri_pesn c lreody arisi ng ron fiscal oeaaur es courageously introduced an l said he viou 1d not like the u s and tbo G Z to appear as a sourco of pr ossure--dotlat l ona ry pressu ra u9on the tr enc l people Mr Cla -to thought the lcnguage ot rticlo VII I could be accepted by any r as oneble int arpretotion r Dolton thought J rticle V lI cooteaploted e lllell Beable 'bulgetary posit1o n tho sort of t hiog be was doing i n tho u K Thore might be surpl s one year--detieit anothor-- but ovar a t ar of y ar s a balnnc od positi on should bo 80U5ht Mr Dou6la$ agree that ope wes 1n 8 dilapidated poai tion oucl of whic h ha I been i nherited bet h es 1·0garda t isoal u f l'aira a na roductivity Ile did not tlllnk the st11temcnt cont om1 la1 ed drastic budgetar y n aasures and• thought it meant r eosonablo steps L r Bevin lnturjeotecl that that would be sati sfactory • Douglas coutinaed t hat there should be a 1 inte clon to aa1nta1n a a nagaable buogetary posltio n althoueh he rea lized thac one government coi1ld not bind 1'ts sucoessor s 3 ev1n then nade what -ho ca lled a frie ndly s uggestion to the IT $ o use caut1oua langu9 4e 1n r eae ma t ers a the u X during the 1ep1•es•i on an at titud e eroso 'tanding to 'ole mo tl e U S - tor its ditric 1 alties and t J 1 8 caused ten years of u 11 leasent1 eS Caution was thert -ro1·0 v Al'ranted and ha agreed t o er d retNl but ssid care must bo taken to e v oi ti pol i 'ti oal r ow i ·r Clayton 701 SECP J T 5 r Clayton suggest eu hat 1n JUropoen relief es o whole tte distinction bet ee short and lons term asa1ata nce might ot be preci a n the tlllnking or various coW1t r1ea f - 'Urape and the Pu1a 1 1Get1ng wou ld or course tlnd it neces3ar to ta e 1Jl both prob oa s 'the onlj' d 1atinct1on t le U S desired was to drew a l ine betwcon U S essistane e and Interr ntional Ba nk esslsta ll ce I tr Be 1 in Juent i on eQ t3e attrac tion 01' the prospect or fre• a ssistAnce f'-or t hose in iire naod wi t11 wt1 oh Zr Ol yton ogrood I i x Be Ji 'l s1urur o rizod t hat we d et l l · at h t ho Ooneraas on dit·e n eed s and on t o l on - t erri must deal w1 th tile Ear r Bevin out l ining a r1$ r lans recosnized th e nee for e i eet $peed r e 'Jb n t ed c sa l l l 1 ep reseoto t Ive bod · r erhop s 'Cm fiVEt cou i trios 1uer tionJ ns r r s ncs czool oalovol le an l I tal to 1• ork u some pl' lponols ·c • early - usus t tor i se in th e s in JO 'tombe - ·r Cluyton ough- this Oula be s u tsfo c- o - · 4nd discusaico t her tu -r ed on tee i nclusion o ' I- t y on the coa lllitl ee 011 sub- coc r rl t ee substance or - ldoh f'l I 'teen p r viousl repor ed r Dovin then referred to tl u QdStorra iean 4 r ee U ex roG od bope tha't ' hat Le CfilloG tJ e ''Ge oe cycle · oou lU be reato tec l ' he os rd o-r rttdo r eµraseJ 'ter 1 vos oonri rnc c' 4 the 1J ort enc e ol' t l1s tiovin st ii l ile had once oaloulr itea ttrn e lplo tr t ent of t- et • 39n O c o cue l million persona in ti U • Cla endcG 011 It ely with po rt1culnr e r pl1esis in outh i 'o l ea H i- n al t on then r ef fJrr eC to tne oo v«rt1td J 1t y o b11sat10fl Cons16erini t he shor r-n•1 od bofo -o th e e f'foc t l v e tote a cne case s 01' 11 sq_uceza 11 aoe rr eQ liicel 1 to ar1e e He uno erstood th t i n i 1cai'li L 1 aj ct1n0a r olief 'rOl'll uo 1v $ l' t1 'ail t coul a b e l' 1·a t -r-d 1 t o u- -e e1·er ce to C01 '•'l'eea r Cle f t o u saiu tJ 10 wo a correc t _ r ltcn o6c f tc' iie RS rr ere y- o rint hi Lew so c11 nt ii' ltito t - isileC t o r-£ ise the c uei tiofi te would l cve t h e ftl°OJHtl Dosts Lr o 16 as ne i t io ieu t htt t th'3 reo acnt provided ror thia u be doue i n exce ional cesoa ill i tri l dy- said t he • tad o coOiUJ ot resent and a1c c 'lot conto i 3late ECt r 5enera oscop rrc11 t J convertltilJ t cblie et on but he onticipat ec t he need 'or ttdr 'Ol al' relief 1n le case o ' cou -rt1•1es hold lni S'te -1ine balenoos • it l which no a reen o -it could bi ret c heci O J uly 15 H• also uent ionec Chi na T1'e Bl' lt1$' o would c- ive w ir lpress17 e list of e ountrios with hioh convertib i lftiy w uld be J t oe o 11er a tive und ·t o r-l tnr balonce eereement• conclud ed c-ut Lhe - t 1 ht hovo c use Lhe oaco tio olauae J 'ot• India Er ' Jouc las c c t' Stod t hat r Dal ton wo rl out t lie pr-0pe r l roc uour o and ini' ox n us as promptly es posAible b ecau s e ao vnI Co 1 nform otion '1o uld evoid embarl ass en t The- inf'ormtlt1011 ouggostod would ba treated with extrc oe couti denoe f- r Lal ton 6 r valtcn olosed 011 the note that the t1llcetal le or ho r i nt nclel r eement - •as so wrongt1 Ho C id not blame tt e 1 s -- i t is oUl reul but ho doubted -nhethe r the ttret t on · ooda eg reecento 1hict'a cor tez plat ed a iveye r transition period would 1' 0 0 workable In the mea itime l t was d1ffi cw t foJ· t i1e 11 c t o - n ke t ho burde o oonvertibillty