FOREIGN RELATIONS, 19 5 0 , VOLUME I


economic significance but because of their political importance in
Commonwealth relations. Mr. Burns said he did not think the effect
of preference reductions-should be discounted so much. Other coun-
tries would get very significant advantages-for instance if Australia
reduced the preferences it gave to the U.K.
   Mr. Burns said he thought it would be desirable to study the Depart-
 ment's memorandum carefully and to send it to London. He said he
 would doubtless be getting in touch with us again on the subject.

                             [Attachment]
            Informal Department of State Memorandum

                                     [WAsHINGTON,] August 10, 1950.
 PROPOSAL FOR UNILATERAL TARIFF REDUCTION BY THE UNITED-STATES
                            AT TORQUAY
   1. The three ultimate objectives in the trade field on which the
 United States and the United Kingdom reached agreement in the
 Proposals and the Charter were 1) the substantial reduction of tariffs,
 2) the elimination of preferences and 3) the elimination of quotas
 (and exchange-controls). The proposal for unilateral tariff reduction
 by the United States would in effect mean sacrificing the first two
 objectives in order to help speed up attainment of the third. This is
 so because once the negotiating process had been completed and the
 United States had brought about a substantial reduction of its own
 tariff to a moderate level, excessive tariffs and preferences would con-
 tinue to exist in other countries. Thus, even assuming that such action
 would materially hasten the elimination of quotas and exchange con-
 trols by the British and others, which is problematical, we would be
 left with a continuing system of Commonwealth preferences and con-
 tinuing instances in which excessive tariffs were imposed by other
 countries on United States exports.
 2. The United States is prepared to live up to its responsibilities as
 a creditor nation. This means that it is prepared to continue the process
 of reducing its tariff to a moderate level. However it does not mean
 that merely because the United States is a creditor nation other coun-
 tries should be entitled to maintain high tariffs or continue tariff pref-
 erences. If the 'United States affords adequate outlets for foreign
 exports to its market, and if nevertheless there continues to be a general
 imbalance in world trade and payments, the proper remedy lies in the
 adoption by foreign countries of appropriate internal and exchange
 policies (such as the prevention of inflation, the development of greater
mobility of resources and the adjustment of exchange rates) rather


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