European Economic Co-Operation

Part of the debate – in the House of Commons at 12:00 am on 5 July 1948.

Alert me about debates like this

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East 12:00, 5 July 1948

No, it is not remittable. It is sterling belonging to the United States. The United States will themselves have done the remitting operation by paying the guarantee of dollars to the American investor.

Now we come to Article IV. This provides the machinery whereby the sterling equivalent of any grant aid is to be dealt with, and only grant aid—our Loan aid, in this case. The commodities or services granted will, of course, be sold in this country for sterling. The sterling equivalent of the dollar price paid for the goods will be paid into a special account at the Bank of England in the name of His Majesty's Government. The balance standing to the credit of the account will be published as a separate item each week in the Bank return. The sums paid into the account will consist, as I have said, of the sterling equivalent at the par value agreed with the International Monetary Fund—at present 4.03 dollars to £1. The sterling equivalent, on that basis, of the dollar cost to E.C.A. in the U.S.A. of the goods and services provided on a grant basis. The amount will, therefore, not necessarily be the same as the proceeds of sale received in this country where the goods will be sold in accordance with the ordinary price structure of the country. It will be the equivalent of the dollar amount paid for the goods.

Under the Article up to 5 per cent. of this fund will be allocated for expenditure by the Government of U.S.A. upon the local administrative services of the U.S.A. in connection with E.R.P. and for expenditure by the U.S.A. under Article V upon strategic materials. The effect of this latter provision is in effect to decrease the amount of grant by 5 per cent. because, up to that amount we shall probably be providing for sterling those goods for which otherwise we should have received dollars in the normal course of trade. In addition further sums will be made available out of the special account if necessary in connection with the costs of transport in the U.K. of relief supplies and packages under Article VI.

That leaves a balance of roughly 95 per cent. in the account to be drawn on under proposals made by His Majesty's Government and agreed by the U.S. Government as provided under Section 6 of Article IV. We plan to establish a close link between the machinery for depositing sterling in the special account and the arrangements for drawing out of that account. The particular avenues of disposal are indicated in paragraphs (a), (b) and (c) of Section 6.

Though purpose (c), "the effective retirement of the National Debt," comes third in the list, as I indicated when I spoke in the House about the matter earlier, we give it first place. The Economic Co-operation Act lays down "internal monetary and financial stabilization" as the first of the approved purposes to which the special account shall be put, and these words are reproduced in this paragraph of Article IV. This purpose can be most easily and effectively carried out by the extinction of Government Debt, either short-term or long-term, according as the internal monetary situation may require. The total amount of sterling to be paid into the special account will be very large and the bulk is bound to be applied in debt redemption, for which of course we already have the necessary Parliamentary authority.

I am glad to say that it has already been indicated to us that the United States Government share the view that first place should be given to debt extinction, and that the special account should be managed from the start so as to give continuous and continuing effect to this policy. We have in fact discussed with the United States the general principles of the use of these funds. In the course of these discussions the United States recognised our strong budgetary situation and our present desire to combat inflationary tendencies in our economy. I am sure therefore that the United States will promptly agree to any proposal for the release of funds in the special account for the purpose of cancelling in present circumstances, the floating debt. This will obviate an undue accumulation of funds in the Bank of England, and any undesirable repercussion on the credit structure of our economy. I may point out that this special account cannot be opened until after the Agreement has been signed. In the meanwhile, the funds which have accumulated are being held by the Paymaster General on suspense.

Section 7 deals with the disposal of the balance remaining after 30th June, 1952. This final disposal will require ratification by the U.S. Congress. We see no reason, however, why the principles governing drawings before 30th June, 1952, should not apply equally to the balance when the time comes. In these ways the sterling equivalent of the grant will be dealt with in such a way as to assist the objects of the Agreement and of European co-operation.

I now come to Article V, which is again a very important Article. It deals with materials originating in the United Kingdom for which purposes the acceding colonies are also included, which materials the Government of the U.S.A. desire to have for stock piling or other purposes, as a result of deficiencies, or potential deficiencies, of its own resources. It is right that in view of the large amount of materials to be supplied to us and other participating countries we should help to make available to the U.S.A. commodities of which they are or expect to be short.

These materials will be paid for in dollars, or their equivalent, except in so far as they can be bought with the 5 per cent. of the special sterling account which I have already dealt with under Article IV. We agree to facilitate the transfer upon such reasonable terms and in such reasonable quantities as we subsequently agree with the Government of the U.S.A. such materials as they require, due regard being had to our own reasonable requirements for domestic use and commercial export.

The interpretative note number 5 makes is clear that such reasonable use includes the maintenance of reasonable stocks and that commercial export may also include barter transactions. That note states that actual agreements negotiated under this article might appropriately include provisions for consultation—on the pattern of the Havana Charter—in the event of those stockpiles being liquidated, which might otherwise obviously cause trouble to world markets. We agree also to promote increased production of specific materials if this should prove necessary. Under section 2 of the article we agree, if so requested, to negotiate a plan of minimum availabilities to the U.S.A. of such materials at world market prices so that the U.S.A. may get a fair share of such materials.

We also agree to negotiate, where necessary, arrangements providing their nationals with equal treatment as compared with out own in access to such materials. That would of course apply almost exclusively to the colonial territories. It has long been our normal practice to extend such equality of treatment to the United States and, indeed, to other foreign firms, and under such arrangements we should need to do no more than undertake to continue this normal practice for a suitable future period. Finally, we agree to negotiate an agreed schedule of increased production of such materials if necessary on the basis of the United States taking a fair share of them. Any such arrangement, however, is to be on a long-term, and not on a short-term basis for the obvious reason that we might get landed with a largely expanded production for a short period which it would then be difficult to dispose of.