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firms." We feel that this addition is necessary in the light of reports this Department has received concerning discrimination against American firms.

HULL

841.24/720: Telegram

The Ambassador in the United Kingdom (Winant) to the Secretary

of State

LONDON, September 3, 1941-8 p. m. [Received 8:35 p.m.]

4059. For the Secretary and Under Secretary. The day following receipt of your 3466, August 28, 7 p. m., I discussed the question of the modifications you asked for which required amendments to the Chancellor's statement forwarded in my 3310 and asked for their acceptance. At the Chancellor's request, I sent him a letter containing the amendments and the substance of the Department's interpretative comment. He asked for time for consideration and consultation. On September 2, I received a letter from him which read in part as follows:

"My colleagues and I have considered these amendments and subject to the drafting points which I mention below we are glad to accept them.

On the amendment to paragraph 4, I have no comments to make. We agree with it entirely.

The amendment to paragraph 2 is entirely satisfactory when read together with your comments on it; but, owing to the fact that in the case of some commodities, such as cotton, I regret that segregation is completely impossible, we feel that, unless the qualifications which you propose is incorporated in the text itself we run too near the risk of undertaking the impossible. I therefore suggest that paragraph 2 of the memorandum should run as follows:

'Lend-lease materials sent to this country have not been used for export and every effort will be made in the future to ensure that they are not used for export, subject to the principle that where complete physical segregation of lendlease materials is impracticable domestic consumption of the material in question in the United Kingdom shall be at least equal to the amounts received under Lend-Lease.'

We accept the essence of the second amendment but it would not be easy for the Board of Trade to administer it unless it were made a little more precise; and the principle which it embodies is so important that I should like to give it rather more emphasis. I suggest, therefore, that we should leave the end of paragraph 3 as it is, but insert between the revised paragraph 2 and paragraph 3 a new paragraph as follows:

'His Majesty's Government have not applied and will not apply any lend-lease materials in such a way as to enable their exporters to enter new markets or to extend their export trade at the expense of the United States exporters. Owing to the need to devote all available capacity and man power to war production, the United Kingdom export trade is restricted to the irreducible minimum necessary to supply or obtain materials essential to the war effort.'"

The Chancellor, and particularly Sir Andrew Duncan, President of the Board of Trade, in agreement with other Ministers, felt that it would be far easier from the British point of view and ultimately create less friction as between the United States and Great Britain if the interpretation in paragraph 2 of your 3466 was made a part of paragraph 1 section 2 as amended.

I believe the second suggested change is simply an effort at precision and to facilitate administration. [Apparent omission] no objection to it. The amendment to paragraph 4 is accepted without

comment.

In order to set up a possible alternative to the British position and because I realize that the Department had reason for excluding from the agreement the interpretation of paragraph 1 section 2, I suggested an exchange of notes to cover interpretation of this section. The question of publication of the interpretation was raised. The British would accept the Department's decision on the matter.

I feel that Duncan is tough but honest and would like to get the negotiations in exact terms and in the open on a practical working agreement so as to minimize friction and misunderstanding on both sides and that he genuinely accepts the moral and military need of restricting "exports to their irreducible minimum necessary to supply or obtain materials essential to the war effort".

For your convenience I am setting out below the paragraphs under discussion, giving first, the version in the Chancellor's statement forwarded in 3310, secondly, the suggested amendments contained in 3466 from the Department, and thirdly, the amendments contained in the letter of September 2 from the Chancellor, which is quoted above.

1. Paragraph 2.

(a) Chancellor's original statement reads: "No lend-lease materials sent to this country have been used for export".

(b) Amendment suggested by Department: "Lend-lease materials sent to this country have not been used for export and every effort will be made in the future to ensure that they are not used for export". (c) Chancellor's amended statement: "Lend-lease materials sent to this country have not been used for export and every effort will be made in the future to ensure that they are not used for export, subject to the principle that where complete physical segregation of lendlease materials is impracticable, domestic consumption of the material in question in the United Kingdom shall be at least equal to the amounts received under Lend-Lease".

2. End of paragraph 3.

(a) Chancellor's original statement: "Materials which are not in short supply in the United States but which we obtain on lend-lease terms will not be used for export in quantities greater than those which we ourselves produce or buy from any source.

(6) Amendment suggested by Department: "Where materials being provided through lend-lease funds are not in short supply in the United States, the export of similar materials or articles made

of similar materials will not be restricted except in cases where such exports compete with American exports. In such cases of competition, every effort will be made to restrict such exports to their irreducible minimum necessary to supply or obtain materials essential to the war effort".

(c) Chancellor's amended statement: The Chancellor proposes that a new paragraph shall be inserted between the revised paragraph 2 and paragraph 3 as follows: "His Majesty's Government have not applied and will not apply any lend-lease materials in such a way as to enable their exporters to enter new markets or to extend their export trade at the expense of United States exporters. Owing to the need to devote all available capacity and man power to war production, the United Kingdom export trade is restricted to the irreducible minimum necessary to supply or obtain materials essential to the war effort".

The Chancellor proposes that the end of paragraph 3 shall remain as in the original draft: "Materials which are not in short supply in the United States but which we obtain on lend-lease terms will not be used for export in quantities greater than those which we ourselves produce or buy from any source."

3. Addition to paragraph 4.

(b) Suggested statement by Department: "In the distribution of lend-lease goods there will be no discrimination against United States firms".

(c) The Chancellor's amended statement: "In the distribution of lend-lease goods there will be no discrimination against United States firms".

An early decision on this matter would help here.

841.24/720: Telegram

WINANT

The Secretary of State to the Ambassador in the United Kingdom

(Winant)

WASHINGTON, September 5, 1941-midnight. 3613. In reply to your 4059 33 the changes suggested by the Chancellor are satisfactory, subject to minor drafting changes suggested below to make clear the understanding that references to "LendLease materials" appearing subsequent to Paragraph 1 of Section 2 mean materials similar to those provided under Lend-Lease and not actual Lend-Lease materials themselves. Otherwise there would be an inconsistency with Paragraph 1 of Section 2.

To accomplish this result suggest the following: First sentence of new paragraph proposed by Chancellor for insertion between revised Paragraph 2 and Paragraph 3 to read:

"His Majesty's Government have not applied and will not apply any materials similar to those supplied under Lend-Lease in such a way as

83 Supra.

to enable their exporters to enter new markets or to extend their export trade at the expense of United States exporters.

Subdivision (i) of Paragraph 3 of the Chancellor's original statement to begin "In the future no materials of a type the use of which is being restricted in the United States, etc."

The last sentence of Paragraph 3 of the Chancellor's original statement to read "Materials similar to those being provided under LendLease which are not in short supply in the United States will not be used for export in quantities greater than those which we ourselves produce or buy from any source."

We would like very much to announce this agreement in the President's Lend-Lease report to Congress, planned for September 9. Can you advise at your early convenience if foregoing is satisfactory.

HULL

841.24/741: Telegram

The Ambassador in the United Kingdom (Winant) to the Secretary

of State

LONDON, September 7, 1941-5 p. m. [Received September 7-2: 19 p. m.]

4130. This morning the Chancellor telephoned me to say that his Government was glad to accept the drafting changes asked for in your 3613, September 5, midnight.

He suggested that there be an exchange of letters between Mr. Eden, the Foreign Secretary, and myself to establish formal acceptance. I am sending the texts they suggest to you in a separate message. You may want to suggest some other method of confirmation. The British are anxious to have a simultaneous release timed with our release from Washington. Their release will be in the form of a White Paper. They are asking their Embassy at Washington to arrange the timing with the Department.

WINANT

841.24/740: Telegram

The Ambassador in the United Kingdom (Winant) to the Secretary

of State

LONDON, September 7, 1941-11 p. m. [Received September 7-6: 55 p. m.]

4133. My 4130, September 7, 5 p. m. Following suggested drafts of letters for exchange between Mr. Eden and myself just received from the Foreign Office.

"8th September 1941.

My Dear Ambassador: With reference to the conversations about lend-lease material which have recently taken place in London and in which you have participated I enclose an agreed memorandum on the policy which His Majesty's Government intend to follow with regard to exports from this country and with regard to the distribution here of lend-lease material. I shall be glad if you will transmit it to your Government. Yours sincerely, (sd.) Anthony Eden.”

"8th September 1941.

Dear Mr. Eden, Thank you for your letter of September 8th, enclosing a memorandum on United Kingdom export policy and on the distribution of lend-lease material. I have caused the memorandum to be transmitted immediately to Washington for the information of my Government. Sincerely yours, (sd.) John G. Winant."

Foreign Office states it is requesting British Embassy at Washington to arrange with you for release of the President's report at 12 noon on Tuesday, Washington time or as near thereto as possible so that the British White Paper may be released at 6 p. m.

See my immediately following telegram 34 for final text of the memorandum as received from the Foreign Office with the draft exchange of letters.

841.24/742: Telegram

WINANT

The Ambassador in the United Kingdom (Winant) to the Secretary

of State

LONDON, September 7, 1941-midnight. [Received September 7-10: 25 p. m.]

4134. My 4133, September 7, 11 p. m. Following text of memoran- . dum on export and distribution of lease-lend material received from Foreign Office together with draft exchange of letters.

"Memorandum.

1. All materials which we obtain under the Lend-Lease Act are required for the prosecution of the war effort. This principle governs all question of the distribution and use of such goods and His Majesty's Government have taken and will continue to take action to secure that these goods are not in any case diverted to the furtherance of private interests.

Export Policy.

2. Lend-lease materials sent to this country have not been used for export and every effort will be made in the future to ensure that they are not used for export subject to the principle that where complete physical segregation of lend-lease materials is impracticable domestic consumption of the material in question shall be at least equal to the amounts received under Lend-Lease.

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