6 Nimmo to Department of the Treasury

Cablegram 728 LONDON, 1 March 1948, 4.32 p.m.

SECRET

Our 706 to Prime Minister sent Friday covers nearly every important point mentioned by Cripps. Talk included some window dressing but little prospect of Sterling area even with Marshall Aid on scale at present anticipated, achieving dollar surplus during next 5 years unless there is substantial improvement in terms of trade or considerable cut in living standards. We must recognise that problem is a long-term one.

Cripps emphasised that additional dollar economies are wanted between now and receipt of Marshall Aid in order to maintain central reserves. Personally believe appeal should have been based on urgency of tackling long-term problem partly because action taken immediately will not be effective till after receipt Marshall Aid.

Crude calculations (sent in today's bag) [1] show reduction in dollar deficit for Sterling area other than United Kingdom and South Africa between 1947 and 1948 at about 60 per cent. I put Australia's cut at less than 50 per cent.

We must remember that if Marshall Aid approved Britain will obtain increased supplies food and wide range of materials at time when she is asking Australia and other Dominions to introduce further economies. Additional food if properly balanced is, however, required to raise present diet to minimum number of calories needed for human efficiency and large part of increased supply of materials win go into exports (some benefit to Australia) and essential home investment.

Note especially Cripps stated that pending discussion Marshall Aid United Kingdom not making any dollar import cuts which will endanger full employment in this country.

My personal opinion is that Australia, in view of her still relatively high dollar drawings and now that South Africa has virtually withdrawn from Sterling area may be singled out for special appeal. There is an undoubted lack of appreciation by officials here of what particular restrictions mean to Australia.

Am suggesting in my letter we should tighten food rationing in order increase exports of meat and sugar. Meat especially wanted here. Any further cut in oil consumption would be welcomed by this country.

In answer to question by Australia, Cripps closely implied that receipt of Marshall Aid by United Kingdom will not provide grounds for any relaxation in dollar restrictions in Dominions. Rather the reverse. We must then look to United Kingdom for increased imports. But increased supplies of materials will only be translated by this country into the processed goods we desire if there is an improvement in productive efficiency or longer hours are worked.

Cripps left no doubt about seriousness of European situation.

Europe's ability to pay for imports is increasing very slowly and willingness to pay may be altered by political changes overnight.

1 Document 5.

[AA: A1838, 708/12A]