AGREEMENT SIGNED

Press, Volume LXXXI, Issue 24744, 8 December 1945, Page 7

AGREEMENT SIGNED

Loan To Britain ADVANTAGES FOR AMERICA (N.Z. Press Association—Copyright) (Rec. 8 p.m.) LONDON, December 6. The agreement for the United Stales credits of 4,400,000,000 dol- «," L , to Bril ain was signed ,in Washington this morning. Lord Halifax was the signatory for Britain and Mr Frederick Vinson, Secretary of the Treasury, for the United .States. Mr Vinson said:—"The BritishAmerican discussions have resulted in a happy conclusion, embracing many advantages for American businessmen, farmers, and workers." Mr William Clayton, Assistant ' Secretary of State, told the press that the entire 3,750,000,000 dollars' loan would indirectly in due course be spent in the United States. Furthermore, it would enable Brit- ?> n I°. .** ke ful * partnership with the United States in a policy of trading with many nations instead of making agreements with nations .separately or drawing them together in a bloc.

The Secretary of State (Mr James Byrnes), at the signing ceremony, commented that the financial and trade agreements represented an effort "to establish one world economically." Lord Halifax said that BritishAmerican co-operation had not ended with the end of the war. Another high British official said: "Frankly, the negotiations were not too bad, although we have not received as much as we wanted.

The Associated Press says that the f"tish first asked for credits of 6,000.000,000 dollars, interest free. In their joint announcement of the United States credits to Eritain, Mr .Truman and Mr Attlee said that the purposes were as follows:

To facilitate purchases by the United Kingdom of goods and services from the United States.

"To assist the United Kingdom to meet transitional post-war deficits in its current balance of payments "To help the United Kingdom to rrointain adequate reserves of gold and dollars and to assist the United Kingdom to assume its obligations of multilateral trade.

'This credit would make it possible for the United Kingdom to relax im.port and exchange controls, including exchange arrangements affecting the sterling area, and generally move forward with the United States and other countries towards the common objective of expanded multilateral tre.de."

TEXT OF AGREEMENT The financial agreement says:— "(1) The effective date of the agreement shall be the date on which the United States notifies the United Kingdom that Congress has made available the funds necessary to extend the line of credit in accordance with the provisions of the agreement. "(2) The United States will extend to the United Kingdom the line of credit of 3,750,000,000 dollars which may be drawn upon at any time between the effective date of the agreement and December 31, 1951, inclusive. "(3) The amount of the line of credit drawn by December 31, 1951, shall be repaid in 50 annual instalments begining on December 31, 1951, with interest of 2 per cent. The interest for 1951 shall be computed on the amount outstanding on December 31, 1951, and for each year thereafter the interest shall be computed on the amount outstanding on January 1 each year. Fortynine annual instalments of principal repayments and interest shall be equal, calculated at the rate of 31,823,000 dollars for each 1,000,000,000 dollars of the line of credit drawn by December 31. 1951; and the fiftieth annual instalment shall be at the rate of 31.840,736 dollars and 65 cents for each 1,000,000.000 dollars. Each Instalment shall consist of the full amount of interest due and the remainder of the instalment shall be the principal to be repaid in that year. The United Kingdom may accelerate the repayment of the amount drawn under this line of credit. WAIVING INTEREST PAYMENTS

" (4) In any year in which the United Kingdom requests the United States to waive the amount of interest due in the instalment of that year, the United States will grant a waiver if the United Kingdom finds a waiver necessary in view of the present and prospective conditions of international exchange and the level of its gold and foreign exchange reserves, and if the International Monetary Fund certifies that the United Kingdom's income from home produce exports, plus its net income from invisible current transactions in its balance of payments, was, on an average over the preceding five years, less than the average annual amount of United Kingdom imports during 1936 to 1938, fixed at £866,000,000. Any amount in excess of £43,750,000 released or paid in any year'on account of sterling balances accumulated to the credit of overseas governments, monetary authorities, and banks before the effective date of this agreement shall be regarded as a capital transaction and therefore shall not be included in the above calculation of net income from invisible current transactions for that year. If a waiver is requested for an interest payment prior to the payment due in 1955, average income shall be computed for the calendar years from 1950 up to and including the year preceding that in which the request is made. "(5) It is understood that any amounts required to discharge United Kingdom obligations to third countries outstanding on the effective'date of this agreement would be found from resources other than this line of credit. The United Kingdom will not arrange any long-term loans from governments within the British Commonwealth after December 6, 1945, and before the end of 1951, on terms more" favourable to the lender than the ,terms of this line of credit. A waiver of interest will not be requested or allowed under Section 4 in any year unless the aggregate of releases or payments in that year of sterling balances accumulated to the credit of overseas governments, monetary authorities, and banks (except in the case of colonial dependencies) before the effective date of this agreement is reduced proportionately, and unless interest payments due that year are waived. The proportionate reduction of releases or payments of sterling balances shall be calculated in relation to the aggregate of releases and payments in the most recent years in which a waiver of interest was not requested. The application of the principles set forth in this section shall be subject to full consultation between the two Governments as occasion may arise.

STERLING TRANSACTIONS "(6) The United Kingdom will complete arrangements as early as prac- ; ticable—and in any case not later than lone year after the effective date of this agreement, unless in exceptional cases a later date is agreed upon—whereunder, immediately after the completion of such arrangements, sterling receipts from current transactions of all sterling area countries (apart from any receipts arising from military exnenditure by the United Kingdom before December 31. 1948. to the extent to which they are treated by agreement with countries concerned on the same basis as balances accumulated during the war) will be freely available for current transactions in any currency area without discrimination arising from the so-called sterling area. The dollar pool will be entirely removed, and each member of the sterling area will have its current sterling and dollar receipts at its' free disposition for current transactions anywhere. EXCHANGE RESTRICTIONS

"(7) The United Kingdom agrees that after the effective date of this

agreement, it will not apply exchange controls in such a manner as to restrict payments or transfers in respect of products of the United States permitted to be imported into the United Kingdom or other curreut transactions between the two countries,- or to restrict the use of sterling balances to the credit of residents of the. United. States arising from current transactions. Both Governments agree that not later than one year after the effective date of the agreement, unless in exceptional cases a later date is agreed upon after consultation, they will impose no restrictions on payments and transfers for current transactions. These obligations shall not apply to the balances. of third countries and their nationals, accumulated before this paragraph becomes effective, or to restrictions imposed in conformity with the articles of agreement of the International Monetary Fund, provided that both governments will not continue to invoke the provision of Article 4. Section n of these articles after this paragraph becomes effective, unless in exceptional cases, after consultation, they agree otherwise, or to restrictions imposed in connexion with measures designed to uncover and dispose of assets of Germany and Japan. This section and Section VIII, which are in anticipation of more comprehensive arrangements by multilateral agreement shall operate until December 31. 1951. IMPORT RESTRICTIONS "(8) If either Britain or America m. poses or maintains quantitative import restrictions, such restrictions shall be administered on a basis which does not discriminate against imports from the other country in respect of any product, provided that this Undertaking shall not apply in cases in which its application would have the effect of preventing the country imposing such restrictions from utilising for the purchase of needed imports convertible currencies accumulated up to December 31, 1946, or if there may be a special necessity for the country imposing such restrictions to assist, by measures not involving any substantial departure from the general rule of r.on-discrimination, a country whose economy has been disrupted by war, or if either government imposes quantitative restrictions having an equivaIfnt effect to the exchange restriction which that government is authorised tt- impose in conformity with article 7 o* the articles of agreement of the International Monetary Fund. The provisions of this section shall become effective as soon as possible and not loter than December 31, 1946. RELEASE OF STERLING "(P.) The United Kingdom intends to make agreements with the countries concerned, according to the circumstances in each case, for an early settlement covering sterling balances accumulated by the sterling area and other countries prior to such settlement, together with any future re- ! ceipls arising from military expenditure by the United Kingdom to the extent to which they are treated on the same basis by agreement with the countries concerned. Settlements with the sterling area countries will be on a basis of dividing these accumulated balances into three categories: (1) bflances to be released immediately and convertible into currency for current transactions; (2) balances to be similarly released by instalments over a period of years beginning in 1951; v 3) balances to be adjusted as a contribution to the settlement of war and post-war indebtedness and in recognition of benefits which the countries concerned might be expected to gain from such settlements. The United Kingdom will make every endeavour tc secure an early completion of these arrangebents. In consideration of the fact that an important purpose of the present line of credit is to Dromote the development of multilateral trade and facilitate its early resumption •on a non-discriminatory basis, the United Kingdom agrees that any sterling balances released or otherwise available for current payments will, not later than one year after the effective date of this agreement (unless in special Cfses a later date is agreed upon after consultation), be freely available for current transactions in any currency area without discrimination."