REST OF LOAN FROZEN

Press, Volume LXXXIII, Issue 25269, 22 August 1947, Page 7

REST OF LOAN FROZEN

New, More Drastic Import Cuts BRITISH ENVOY’S STATEMENT (N.Z. Press Association—Copyright) (Rec. 11 p.m.) WASHINGTON, Aug. 20 Sir Wilfred Eady, leader of the British economic delegation in Washington, disclosed that Britain had notified the United States Treasury of her intention to withdraw between 150,000,000 and 200,000,000 dollars of the remaining loan funds. This amount would be made available to Britain and therefore the total to be frozen by to-day’s action would be approximately 650,000,000 to 700,000,000 dollars. [Dr. Dalton said in his message to the United States that Britain would not notify any further withdrawal from the line of credit, beyond that already notified, until consultations had been carried out.] Sir Wilfred Eady said that Bri- • tain must now make new and even more drastic import cuts over and above the drastic belttightening which Mr Attlee announced only a short time ago. Britain would start almost immediately to renegotiate approximately 25 convertibility agreements, those concluded with Argentina and other countries this year. These nations would not be put on a very short dollar ration. Special negotiations were already going on with Canada. He warned that it was almost certain that American trade would be affected immediately in some countries.

Reuters correspondent in Washington says: "High official sources disclose that the United States insisted on freezing the balance of the loan as the price for Britain’s action in halting convertibility. Officials expressed uncertainty as to how Britain, with this source of dollars temporarily cut off, would be ?ble to meet her present obligations in the United States. They suggested the sale of part of Britain’s gold stocks as a possible course.”

A Canadian Press report from Ottawa says: “The depletion of Canada’s reserve of American dollars is already serious. The temporary suspension of the conversion of sterling into dollars is likely to hit Canadian exporters selling to countries which have sterling but no United States dollars. Exporters will now have to insist on payment in dollars. “If Canadian reserves in American dollars are eliminated, Canada woqld probably have to float a loan in New York to obtain the necessary American funds or take steps to restrict imports from the United States.” Dominions* Support A Treasury spokesman in London said there was general confidence that the Dominions would give their support in full to Britain’s crisis action. No special consultations with the Dominions on the new measures had been arranged—they normally took place daily, in any case. The spokesman added that the nondiscrimination clause of the American loan agreement was not affected by the step Britain had taken, but it must be remembered that discussions were going on in Washington. Britaip, as part of he bargain, had volunteered to forgo what remained under the loan—about £100,000,000. The new step was not a sudden decision. It had been under consideration for a long time, though Sir Wilfred Eady’s mission to the United States had brought the subject ‘o a head.

‘Bridge Between Hemispheres Broken’ Authoritative comment in London on the momentous sterling action was: “There may be an interruption in world trade. The major bridge between the two hemispheres is for the present broken. “The whole American account area, comprising the United States, Canada, Central America, and the west coast of South America, has been severed from the rest of the world.”

The Treasury announced that Order No. 1785 had been issued, with effect from to-morrow, to give effect to the change which the Chancellor announced. The order repeats the substance of the existing payments orders, with the following amendments:— (1) Sterling can no longer be freely transferred from transferable accounts (of a non-resident of the sterling area) to American and Canadian accounts, but remains otherwise transferable as hitherto. (2) Sterling on a Canadian account may only be used in Canada or the sterling area. Canadian transferable accounts disappear. The Bank of England is issuing instructions *to the banks.