39 Dedman to Chifley

Cablegram F6 LONDON, 15 July 1949, 1.59 p.m.

IMMEDIATE SECRET

Today the Ministers discussed separately the short term problem and longer term policies. Officials had preparatory discussion on longer-term policies.

2. The United Kingdom officials gave more detailed account than hitherto of Cripps-Snyder and Abbott discussions. They confirmed that the Americans had adopted a listening role. There is no indication of what the United States might do in 1949/50.

3. Australia questioned the adequacy of the United Kingdom 6 points (para 8 of our No.1) [1] and emphasised the necessity to take up with the Americans in September the following additional issues (a) Necessity for building pattern of self-balancing trade over wider area than sterling dollar area alone and to include Eastern Europe. International political policies may have to be adjusted for this purpose.

(b) Review of international machinery for investment.

(c) Need for changes in the structure of United States industry, particularly high cost agriculture, to accord with present status of United States in world economy.

4. New Zealand mentioned problems of German and Japanese trade and Asian Dominions stressed development needs on familiar lines. There will be further discussion of 6 points and of draft agreed conclusion which United Kingdom has circulated (see separate telegram).

5. On procedure, Cripps welcomed continuing consultations (details yet to be worked out) on approach to be made to Americans in September.

6. In first ministerial discussions of the immediate problem, Cripps underlined the necessity for action. He reported the latest figure for reserves as down to 385m.

7. I pointed out Australia's position with regard to difficulties of immediate reduction of dollar imports in view of licensing procedure, etc., but indicated that, subject to further examination by my Government, it was possible that a reduction of A10m. might be made in the level of licences issued during 1949/[5]0.

8. Other Commonwealth Ministers had indicated similar difficulties in making immediate cuts. India understood the necessity for adequate pooling of sterling resources of dollar supplies had to be dispensed with. There was more emphasis in the discussion on the problem of United Kingdom high costs. Cripps reasserted the United Kingdom intention to take remedial measures. He declined 1 or 2 opportunities to comment on devaluation. The discussion was adjourned without conclusions being reached.

9. One feature of the discussion was a comment by Abbott that Canada saw no prospect of making credits available under the present balance of payments position, primarily because of the United States dollar loss through United States commitments in many Canadian markets. In response to a question from Nash, Cripps expressed the opinion that because of the inclusion of R.S.A. [2] deficit in E.R.P. no United States dollar loans would be available for sterling area countries. We propose to follow up this point further.

10. Discussion on all aspects will continue tomorrow among both Ministers and Officials, and Officials will meet on Sunday to prepare for final plenary meeting on Monday.

1 Document 37.

2 i.e. the rest of the sterling area.

[AA: A9879, 3350/902]