FOREIGN RELATIONS, 1050, VOLUME- I


restrictions by South :Africa. The Fund would have to advise GATT
within the next few weeks as to whether it considered the restrictions
imposed by South Africa justified on balance of payments grounds.
   Mr. Glendinning pointed out that about two-thirds of South Africa's
 current earnings of foreign exchange were in the form of gold and hard
 currency, the greater part being derived from newly mined gold. In the
 postwar period South Africa had been running a substantial deficit on
 current account, financed by drawing down reserves and by a capital
 outflow from the United Kmngdom, which in 1947 reached a peak of the
 equivalent of $700 million a year. This outflow declined in 1948, and
 for a short time reversed itself, but again appeared to be assuming
 important dimensions.
   With reference to the system of controls in effect in South Africa,
 Mr. Glendinning added that South Africa expected to issue "universal"
 exchange permits, payable in gold or dollars, to the approximate
 equivalent of the total of its gold and dollar earnings. In addition,
 South Africa would issue permits which could be used only for pur-
 chases in the soft currency area and which presumably would absorb
 whatever resources came in the form Of capital inflow from the United
 Kingdom. The commodities included in -the list for which global
 permits would be issued were designed to insure a certain minimum
 gold earning for the United Kingdom. Mr. iHavenga had estimated
 that this minimum would be $100 million and possibly might reach
 $200 million.
 The United Kingdom apparently favored theso arrangements on
 the assumption that if the capital outflow were permitted and South
 Africa maintained discriminatory import restrictions, the United
 Kingdom would obtain a larger proportion of South Africa's gold
 than if South Africa's restrictions were non-discrminatory. Presum-
 ably South Africa had entered into the arrangements in order to insure
 the continuation of capital inflow from the United Kingdom and also
 to insure that Britain would not restrict South African non-essential
 exports to the United Kingdom.
 Mr. Glendinning pointed out that the problem raised far reaching
 questions with respect to sterling area arrangements, such as unre-
 stricted capital outflow from the United Kingdom to sterling area
 countries, that went far beyond South African restrictions alone.5
 With respect to the proposed action Mr. Glendinning stated that the

   For documentation with respect to U.S. policy regarding sterling area
import
restrictions, see pp. 810 ff.


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