FOREIGN ECONOMIC AND COMMERCIAL POLICY


755


been requested, with the exception of Southern Rhodesia. Being in
the common currency quota of the U.K., Southern Rhodesia might
appropriately be grouped with the U.K. in a single report. These
reports would set forth the facts as to the payments position of each
of the individual countries with the dollar area.
  Where it is apparent that an individual country is itself achieving
a surplus in its relations with the dollar area, the Fund's report
should recommend some relaxation in the severity of the discrimi-
natory restrictions applied to imports from the dollar area, without
referring to or relating the problem to the trend of--or the level of-
the gold and dollar reserves of the United Kingdom. Since the U.K.'s
reserves are rising and since the recommendation is the same for the
U.K. itself, it seems possible to recommend some relaxation in these
other countries without the recommendation appearing to be a chal-
lenge to the sterling area system. If an individual country appears to
be in balance or incurring a deficit with the dollar area, the Fund
need take no account of whether the country in deficit might negotiate
with the U.K. for dollars and share the relaxations.
   It should be recognized, of course, that the Fund's report could be
utilized as a justification for a further tightening of import restric-
tions against the dollar area if the particular country in deficit should
so desire.
  The recommendations in the report covering the United Kingdom
should also be based upon the surplus or deficit with the dollar area
rather than upon the trend of reserves. The United Kingdom and the
dependent territories which are a part of its common currency quota
in the International Monetary Fund should be treated as a unit and
the report should recommend that the United Kingdom and its
dependent territories devote a significant portion of any anticipated
earned dollar surplus, taking the rearmament effort into considera-
tion to the relaxation of restrictions on imports from the dollar area.
   United Kingdom reserves at present equal in value the imports of
 the United Kingdom for a period of between four and five months.
 While there is no satisfactory method of determining a country's mini-
 mum reserve requirements, there seems to be no justification for the
 position that Britain's gold and dollar reserves are so low as to require
 that the entire amount of any earned surplus of dollar transactions
 needs to be devoted to a further rebuilding of reserves. On the other
 hand we should avoid pressing too hard initially and permit some
 margin of safety as protection against a reversal of the recent favor-
 able trend in the international accounts of these countries. This is
 particularly true at the present time when many countries are rapidly
 increasing their defense expenditures with consequent major reper-