FOREIGN ECONOMIC AND COMMERCIAL POLICY 731

weaken South Africa’s gold reserve position and to increase the likell-
hood of future increased discrimination in its import and exchange
controls. It will be important for the Fund to follow closely the opera-
tion of this gold sale agreement between South Africa and the United
Kingdom.

It appears that South Africa has taken a , maj or step - to reduce
greatly the area of discrimination in its trade and exchange control
practices. At the same time, economic and financial conditions sur-
rounding the South African economy have not changed in any way
which would indicate the desirability of modifying the Council’s pre-
vious conclusion that no discrimination is justified. However, since
there seems to be the prospect for so much improvement, it would prob-
ably not be desirable to press the Union for the complete elimination
of discrimination at the present time.

Particularly, there does not seem to be any real economic justifica-
tion for relating the small remaining area of discriminatory import
licenses to the inflow of capital from soft currency areas, but since this
is relatively small and the political background on this point is par-
ticularly delicate, it does not seem necessary to press for a final
resolution on this problem at the present time. |

It will be necessary to keep the situation under continuous review
and to follow closely the operation of the new plan. To this end the
Union should be pressed to furnish full and complete information as
to the commodity composition of its general and restricted import lists,
the actual flow of trade under these licenses, the extent of exchanges of
restricted licenses for general licenses, if that continues to be permitted,
and complete figures on gold production, gold sales, and capital
movements. | |

 

- NAC Files, Lot 60187, Box 367
Action No. 425 Taken Unanimously by the N ational Advisory Council

By Telephone Poll Completed on October 13, 1950, on South
African ftestrictions”

CONFIDENTIAL
Doc. No.

The Natio Advisory Council advises the U.S. Executive Direc-
tor of the International Monetary Fund that: |

1. He should take the position in connection with South African
exchange restrictions that: |

(a) The South African program proposed to be adopted in —
_ January, 1951, appears to represent a welcome and substantial
relaxation of discrimination ;