financial assistance for the storage of coffee surpluses, but this does not commit the United States Government to the provision of such assistance. In connection with any consideration or planning with respect to this aspect of the question, it will certainly be necessary to avoid action which, as you say, would simply take existing surpluses off the hands of producing countries and leave them free to produce more surpluses. I therefore agree fully with your views that any assistance should involve their own internal cooperation and commitments and be part of reasonable sound arrangements to prevent further accumulation of surpluses.

6. I think you will see from the foregoing that our views, in the general approach, are very much in harmony, and that there have been no developments or action here which would in any substantial or serious way prevent or impede a program of joint cooperation between us. While of course the Governments of the other American Republics must be left to speak for themselves, I feel that certainly in concrete cases at least they would recognize the usefulness, if not the necessity of achieving a more substantial international basis through such joint action.

7. As regards the more specific methods discussed in your letter, here again I find no cause for substantial disagreement with you. In the light of our experience, I am inclined to believe that the most effective progress will be made at this time primarily through individual approach to particular commodities. Thus I would suggest continuing the efforts that have been initiated to deal with the cocoa problem, which seems to provide an especially significant instance for approaching the problem on a basis which includes both interAmerican and Anglo-American cooperation. We may before long wish to suggest the initiation of parallel action with respect to cotton. Your suggestion that the international wheat committee be revived has been sympathetically regarded here, and I believe that a more definite proposal to this end would without question elicit a favorable response from us,12

8. At the same time there are two other lines along which some work might well be initiated in cooperation. I have in mind, on the one hand, an assembly of the pertinent facts, statistics, regarding each commodity which may be, or show prospects of being, a candidate for treatment as a surplus commodity problem. It would be well to be as forehanded as possible in this regard, because it so frequently happens that when a problem does need to be actively taken up, either there is delay while the facts necessary to a clear picture are being assembled, or action is initiated without a clear understanding of what the situation is and what is needed.

12

See correspondence regarding the participation of the United States in the International Wheat Meeting at Washington, July 1941-April 1942, vol. 1, pp. 530 ff.

Secondly, I believe it would be useful at this time to undertake a review of the character of and experience under international commodity control schemes, whether governmental or otherwise, which have in the past been put into operation, and perhaps some of those which have reached a certain stage of agreement but failed to enter into effect.

In suggesting these lines of inquiry, I do not for a moment wish to seem to be detracting from the desirability of current action. On the contrary, such studies should in nowise be allowed to interfere with active endeavor on any specific commodities which are now the subject of consideration or which may for one reason or another be added to these.

9. This brings me, finally, to your suggestion of a joint general committee, which might be initiated on an Anglo-American basis as a means of taking the lead in this field, with a view to extension by adding representatives of other countries as the need and purpose develops. In principle I think your idea of such an agency, to formulate general lines of policy, to initiate action whenever appropriate, and perhaps to become a coordinating body for various committees on individual commodities, is well taken. Just what the constitution and terms of reference of such an agency might best be, however, perhaps ought to be left for further consideration in the light of developments along the lines of current or early activity on specific commodities and of studies of the nature I have suggested.

As you may perhaps already have learned when you receive this reply, I have resigned from my position as Assistant Secretary of State in order to take up the position of President of the American President Lines, one of our principal steamship companies operating principally from the West Coast. This does not mean at all that I shall be discontinuing my interest in these general problems of the international economic order with respect to which I have so much enjoyed our mutual discussions and collaboration. But of course in the circumstances further expression of this Government's interest and views in the subject must be left to the Department. I have desired to take this opportunity to express my own views on the subject at some length, and you may be sure that your further comment will be welcomed here. Perhaps the most useful way to proceed for the time being, if agreeable to you, would be by concurrent exchanges of views through your Embassy here and our Embassy in London. I am accordingly sending this letter to our Embassy for delivery to you, as I know from their telegrams that they have been in touch with you on the subject; and Sir Owen Chalkley 13 will be provided with a copy for the information of your people here.

18 Commercial Counselor of the British Embassy.

409021-597

With kind personal regards and the hope that we may meet again before very long, and under happier circumstances, I am

Sincerely yours,

HENRY F. GRADY

840.48/4844}

The Director General, British Ministry of Economic Warfare (LeithRoss), to the Assistant Secretary of State (Acheson)

14

[LONDON,] 14 February, 1941.

MY DEAR DEAN: I hope that you have had a chance to read my message to Henry Grady of the 30th November 148 and his reply dated 2nd January about the surpluses problem. At the end of his letter Grady says that my further comments would be welcome and suggests that I send them to the State Department, and I am venturing to interpret this as an invitation to reply to you. It seems to me clear that the prospect of finding any solution of the problem will depend on joint, or at any rate coordinated, action between our two countries and I am anxious, therefore, from the outset, that our policy should be directed on lines which will harmonise with yours. At present my Government have not committed themselves to any hard and fast ideas, but we are doing what we can to think out how the various aspects can best be tackled. My message to Grady was an effort to put down the trend of our thought at that time, and this is a continuation.

2. I was very encouraged to find from Grady's letter that there is no substantial difference between us on the main objectives. We both recognise the importance of the problem as well as the difficulties in the way of any solution. We are in agreement also that the problem has both short-term and long-term aspects. It follows that the shortterm policy ought to be framed in such a way as to lead up to or at any rate not to impede the formulation of a long-term policy, and that both aspects ought, so far as possible, to be kept in view in dealing with immediate cases that arise. Putting it concretely, you and we are being forced by circumstances into dealing with urgent cases of particular industries or particular countries which, for political or commercial reasons, we are impelled to help. We may have to improvise remedial measures for such cases but so far as possible, it is surely desirable to frame such measures so as to get the most constructive results, e. g. in connexion with post-war plans for relief in Europe and for stabilisation of commodity prices and for the adoption of saner economic policies all over the world. We feel that it would be

14 Transmitted to the Assistant Secretary of State by Sir Owen Chalkley, Commercial Counselor of the British Embassy, under covering letter dated March 24. Foreign Relations, 1940, vol. III, p. 138.

14a

a great pity simply to deal with immediate cases by palliative measures without taking every opportunity to further these wider aims.

3. As regards methods of approach, there are two different lines which have to be followed more or less simultaneously. First, the handling of actual commodity surpluses and any arrangements for regulating production, stockholding and marketing must unquestionably be approached by reference to the individual commodities. We are quite prepared to consult with you on this basis and you will be aware that such consultations have already been initiated about wheat, sugar 15 and cocoa. We are also approaching you about sisal, in conjunction with the Netherlands Government, and we have expressed our readiness to discuss cotton, on which we are also working. I fully agree with Grady that discussion of individual commodities affords the most realistic basis for cooperative action.

4. But side by side with this commodity approach, the economic difficulties of producers have also to be viewed geographically and politically, i. e. country by country. Some countries are so dependent on one crop that their position can be safeguarded by appropriate action in regard to this commodity. But such cases are the exception rather than the rule. In most cases the producing countries have some variety of economic activities, part of which may be depressed, others doing well. In such cases, the Government of that country should make the necessary effort to redistribute its national wealth so as to keep any depressed industries of national importance going. They may need some help for this purpose and your policy of financial credits, as explained in Grady's letter (paragraph 4) represents an effort to give them this help.

5. These two different approaches by commodities and by countries-will, however, at some stage have to be brought together and reviewed as a whole. This was what I meant by the phrase in my letter to Grady (which I am not sure came through correctly in my cabled message) that "the surpluses problem is a great deal more than a collection of problems of individual surpluses in particular countries". For example, whether or not your financial assistance to the South American countries is directly linked with purchases or loans on particular commodities, the prospect of their ultimate repayment must largely depend on whether the exports of the borrowing country can be maintained at a profitable level. The extension of financial credits therefore does not make it less but more advisable to proceed with arrangements for regulation of production, stockholding and marketing of particular commodities; and it may be a very useful lever for getting agreements of this kind.

15 For correspondence concerning arrangements for the wartime operation of the International Sugar Agreement, see Foreign Relations, 1939, vol. 1. pp. 948 ff.

6. Moreover, the question of storage for Europe (to which I will refer again later) cannot be treated adequately on the basis of particular commodities. Any programme for this purpose will raise difficult questions of financing on which we are not ready with any specific proposals; but the same questions are bound to crop up in discussing what stock of each particular commodity should be kept and it would appear advisable therefore that they should be examined as a general factor in the whole problem.

7. Another general factor to which Grady refers at the end of paragraph 3 of his letter is the possibility of increasing consumption. So long as the war lasts, this must be a rather theoretical question for us here, but it is one which certainly should be kept in view for the future. The pre-war consumption in Europe of many foodstuffs could certainly have been greatly expanded and the nutrition of the peoples concerned definitely improved if prices to the consumer could have been lowered by reducing protective duties and quantitative restrictions on imports and also by keeping down handling and distribution costs. Personally, I much hope that after the war action on these lines can be secured. This would be the best means of increasing general consumption; but efforts should also be made to encourage the adoption of special measures such as your Blue Stamp scheme, where they can be applied. Possibly both methods can be tried in combination.

8. For all the above reasons, I feel that the policy on surpluses needs to be worked out from a very broad standpoint and that effective action will depend on a strong lead which can only be taken by your Government and mine in cooperation. My idea was that, at the appropriate stage, some small organisation should be created which could speak with authority for our two countries. Norman Davis will bear me out that the International Sugar Agreement was only made possible by the efforts of the steering committee in which he played so large a part.16

Something of this kind seems necessary to stimulate progress in the detailed negotiations on specific commodities and to coordinate policy on the whole field. It may well be premature to set up such an organisation until we have made more progress on particular commodities, and I have not attempted to work out any constitution or terms of reference for it, but at a certain point I feel that some such organisation will be the most effective means of securing action. Possibly it might be started as a purely consultative body and allowed to evolve into an executive body.

16 Norman H. Davis was chairman of the American delegation to the International Sugar Conference held at London, April 5-May 6, 1937; the International Sugar Agreement was signed May 6, 1937. See Foreign Relations, 1937, vol. 1, pp. 931 ff.