FOREIGN RELATIONS, 1950, VOLUME ]


situation clearly requiring further US-UK discussions. In meantime
they wld hope to avoid airing of differences in GATT. However, UK
may feel obliged challenge Fund report if presented to CP's because
of their feeling it denies validity sterling area solidarity on import
restrictions and suggests time is ripe for relaxing such restrictions.
  2. Allege Fund has gone beyond proper scope of consultations in
proposing action based on present fin situation. UK of course not
prepared acquiesce that consultations 'arranged at Geneva can prop-
erly be extended to period beyond Jul 49. However, Brit prepared
consult de novo on current situation after establishing pt indicated
-bove.
  -Brit main objective seemed to be that of emphasizing above pt's and
'eliciting UK [US?] view on what shld be end result of consultation.
We indicated as our present thinking that matter wld be referred by
plenary to working party to prepare report along the lines indicated
Fund report and our position paper which we sketched in gen terms.
Report need not raise explicitly general question validity sterling area
arrangements under GATT. Brit indicated strong preference for
Working Party report which set out two positions and reached no
conclusions, since they believe that agreement on common conclusion
not possible. Dept did not comment on this suggestion. Treas indicated
some reservations re feasibility such approach.
   UK Reps then made fol gen observations:
   (a) No prospect UK or other sterling area members taking major
 policy moves now in direction removal discrimination. Consider dol
 impact such action might be heavy, since unlikely sterling area mem-
 bers except UK able limit relaxation to "small amount" only. They
 cited recent ICommonwealth agreement, presumably Colombo Con-
 ference, to continue strict economy dol expenditures, maximum dol
 exports, and build up reserves, as indication unanimity with-which this
 view held by sterling area members. Only indication given that any
 relaxation contemplated was that maintenance dol imports 75 percent
 1948 levels is no longer controlling and deviations from this rule may
 be made for purpose of mtg exigencies particular situations including
 specific import requirements for spare parts, etc., rather than real
 relaxation. Spoke of more gen relaxation as possibility only after
 "period of years".
    (b) Considerable stress laid by Brit on uncertainties present situa-
 tion and strong prospect worsening UK's own dol position in connec-
 tion defense programs. Also pointed to such factors as proposed ex-
 tension transferable account area to include OEEC countries, further
 progress towards trade ,liberalization in Eur, and particularly action
 just taken to suspend ECA aid as prominent in Brit thinking. UK
 cabinet also mindful unfortunate developments resulting from
 convertibility and "slippage" of -import controls during 1947-48.
    In partial reply to Brit views we indicated that we cld not agree that
 start towards relaxation shld be postponed until specific level of re-
 serves attained, If such moves as extension transferable acct area pre-


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