449 Lord Cranborne, U.K. Secretary of State for Dominion Affairs, to Commonwealth Government

Cablegram 334 LONDON, 11 May 1941, 2.35 a.m.

My telegram 167 of 15th March. [1]

Your telegram 186 of 27th March. [2]

The British Supply Council in the United States have been actively pursuing the question of the treatment which the United States Administration are prepared to give to Dominion requirements of non-armament stores under the Lease Lend Act. Reports received recently make it possible to give some indication of the position though it has not yet been fully clarified.

2. The Commonwealth Government will be familiar through its representatives in the United States with the general developments since enactment of the Lease Lend Act and of approval by Congress of an appropriation of 7,000,000,000 dollars under it. The decision of the United States Administration as to the amount of this appropriation was not directly related to requirements filed by the British Supply Council. It represented the largest amount that the President [3] was prepared to submit for approval of Congress at that time. This appropriation which, of course, has also to cover assistance given by the United States to other countries is not sufficient to cover estimated requirements up to 30th June, 1942 of the United Kingdom and the rest of the Empire as notified through the British Supply Council. We can only hope that when the appropriation is becoming exhausted the United States Government will be prepared to ask Congress for a further appropriation. Nevertheless for this reason and for the reasons set out below a portion of our requirements in the United States will still have to be paid for in gold or dollars.

3. My immediately following telegram [4] gives a general summary of the present arrangements and the procedure in the United States in connection with the Act.

4. As regards supplies to Empire Countries other than the United Kingdom the general attitude of the Administration as explained in paragraph 5 of my telegram 101 [5] is to insist that requirements of the Empire should be dealt with through one channel. This implies that all such requirements so far as they are to be covered by the Lease Lend terms would have to be handled by the appropriate United Kingdom organisations working in the United States under the British Supply Council and would be Lease Lent in the first place to the United Kingdom. In this connection section 4 of the Act has to be taken into account. This reads: 'All contracts or agreements made for disposition of any defence article or defence information pursuant to Section 3 shall contain a clause by which the foreign Government undertakes that it will not without the consent of the President transfer the title to or possession of such defence article or defence information by gift, sale or otherwise, or permit its use by anyone not an officer, employee or agent of such foreign Government'.

It will be seen that this section governs both transfer by the United Kingdom of defence articles to other parts of the Empire and other countries and domestic distribution of non-warlike defence articles after they have been delivered to the Governments.

5. The following is an extract from a recent report from the British Supply Council on their discussions with the United States administration on these problems.

'While various questions under Section 4 of the Act are still not settled we think it wise to give you an interim report on the present position.

The position has been constantly discussed with the Administration over the past few weeks. Close contact with Hopkins [6] and with his legal advisers shows that the President's unwillingness to give clear cut decisions of principle on the Lease Lend questions involved is due to his fear that some of our requests if divulged to American public at this stage might have unfavourable political repercussions.

On the other hand we have reason to believe that wherever our vital needs are concerned we shall in practice receive necessary support to cover the following:

a. Transfer of non-warlike defence articles by commercial treaty or otherwise to persons in the United Kingdom.

b. Transfer of warlike defence articles and main items of non- warlike articles to Dominion, Indian, and Colonial Governments, due notice being given to the United States of the Government to which we intend to transfer them.

c. Transfer of non-warlike articles by Dominion etc. Governments within their own territories as under (a).

d. Free discretion to permit the use of warlike articles by, or to transfer them to, Dominions etc. or Allies on the field of battle.

This support may take the form of (a) an exchange of letters with Hopkins which will have the effect of recording the Administration's knowledge and acquiescence in the above outline procedure, (b) an oral Presidential consent on the lines of an agreed memorandum, (c) verbal understanding that in fact the President consents as and when the goods are handed over to us.' 6. As regards the needs of Empire countries other than United Kingdom the British Supply Council have reported as follows:

'We are regularly sending in requisitions for all kinds of goods for use in the United Kingdom regardless of the method of distribution and we now propose to put in requisitions for transfer to Dominions etc. for the following classes of goods besides arms and munitions (including aircraft) viz: iron and steel (including alloy steel), non-ferrous metals, oil and other petroleum products, fertilizers, chemicals, machine tools, miscellaneous machinery, civil aircraft, merchant ships and shipping stores and motor vehicles.

All such requisitions show the destination of the goods. If the Administration object they can refuse to accept the requisition.

If they do not object we think that we can assume that the requisite consent will be forthcoming. Failing clear-cut decisions of principle which as we have explained we do not believe can be obtained, we think it better to allow any difficulties that may come up to arise on submission of individual requisitions'.

7. The following general points in connection with the Lease Lend procedure are of special importance:

a. Existing contracts are not being brought within the scope of the act.

b. Goods can only be obtained on Lease Lend terms if they are purchased by a United States Government department and transferred to the United Kingdom Government. Purchases through private channels cannot be brought within the scope of the Act. The organisation for public purchase by the United Kingdom Government of food, and most important raw materials already exists and arrangements are being made to extend the field of public purchases to cover other raw materials and miscellaneous purchases wherever Administrative difficulties are not too great.

c. As regards distribution there are obvious difficulties from the point of view of United States Administration especially in view of Article 4 of the Act, in the sale by the receiving Government of the goods which they are obtaining at the expense of the United States tax payer. No blanket or formal consent to such sales is therefore likely to be obtained. On the other hand the United States Administration recognise that for a large number of commodities, free distribution by the receiving Government is impossible and in a number of cases they have already given such consent to the sale by us to consumers in the United Kingdom on condition that where distribution has to take place through intermediaries these should act as agents of the United Kingdom Government and not as profit making principals.

8. The Commonwealth Government will appreciate from the foregoing that to benefit under the Lease Lend Act in respect of non-warlike 'defence articles' they will have to arrange for public and controlled purchases of any commodities to be obtained under these terms and where necessary also make appropriate arrangements for sale to consumers. We should be grateful if they could consider their existing organisation and controls from this point of view.

9. It will also be necessary for there to be arrangements in the United States by which detailed requirements can be transmitted by the British Supply organisation together with evidence of their essential requirements. Paragraph 3 (b) of my immediately following telegram gives indication of the kind of details required.

Doubtless the Commonwealth Government will be able to use or adapt their existing organisation in the United States for this purpose.

Their representatives in the United States may wish to discuss the matter with the British Supply Council.

10. We hope that the foregoing statement of the position will be of assistance to the Commonwealth Government. If there are any points on which further information is available we will endeavour to supply it though the situation is of course not yet entirely clear.

1 On file AA: A1608, A59/2/1, i.

2 On file cited in note 1.

3 Franklin D. Roosevelt.

4 Cablegram 335 (AA: A3195, 1941, 1.7456).

5 Document 306.

6 Director of U.S. Lend Lease Program.

[AA: A3195, 1941, 1.7457]