PROMPT LOAN TO BRITAIN URGED

Gisborne Herald, Volume LXXIII, Issue 21935, 1 February 1946, Page 4

PROMPT LOAN TO BRITAIN URGED

PRESIDENT’S MESSAGE TO CONGRESS

UNIFIED DRIVE FOR TRADE EXPANSION

WASHINGTON, January 30

A prompt grant of 3,750,000,000 dollars to Great Britain was urged by President Truman in a message to Congress. President Truman said that such a grant would lead to expanded production, consumption, employment and rising standards of living everywhere. He urged early action on the agreement, which also includes an additional credit of 650,000,000 dollars settling lendlease obligations

President Truman said the loan will permit the United States and Britain to move, side by side towards the goal of expanded world trade.

Time Opportune for Adjustments

“The United Kingdom, as a result of the war, must continue for a long period many of its emergency wartime financial controls unless it obtains additional working capital,” he said. “It is apparent that in the case of the principal member of the International Monetary Fund, we can ill afford to v/ait for the period permitted by the Bretton Woods agreements for the removal of these hindrances to financial and commercial relationships between the nations.

“Now is the time to establish postwar monetary and financial policies of the United Nations. Now is the time to take action to enable the United Kingdom to move with- the United States towards the prompt abolition of these restrictions. For these reasons the next order of international business before Congress should be financial relations with the United Kingdom. “The problems involved, which are severe but not insoluble, are the direct consequences of the war. They are matters of great urgency, and I believe that the financial agreement which I am transmitting herewith furnishes the real basis for their solution. It is not too much to say that the agreement now transmitted will set the. course _ of British-American economic relations for many years to come. In so doing, it will have a decisive influence on' international trade throughout the world. Solid Foundation for Relations

“Those who represented the United States in these discussions and those who represented the United Kingdom were fully aware of the fundamental nature of the problems before them. After long and careful consideration, they agreed upon the arrangements which, in my opinion, will provide a solid foundation for the successful conduct of economic relations with each other and with the world.

“TTie financial agreement will, by its terms, come into operation only after Congress has made available the funds necessary to extend to the United Kingdom a credit of 3,750,000,000 dollars. Britain needs this credit and needs it now. It will assist her to meet the expected deficit in her balance of payments during the next six years. It will enable her to buy from the world supplies of food and raw materials essential to the life and work of the British people and ,at the same time, keep open the market for those United States surpluses which are customarily exriorted to the United Kingdom. “These are important short-term purposes, but the financial agreement is much more a credit. Its most important nurpose from our point of view is to cause the removal of the emergency controls exercised by the United Kingdom over its international transactions far more speedily than is required by the Bretton Woods Agreement. The credit, which will be extended to the United Kingdom under the agreement may be drawn upon until the end of 1951 when the United Kingdom will be obliged to begin the repayment of the principal, with interest, and those payments will continue over a period of 50 years. Waiver of Interest

“These terms are neither unusual nor difficult to understand,” declared President Truman. “There is one new concept, however, embodied in the terms of credit. We have recognised that conditions may exist temporarily during such a long period which would make the payment of interest on such a large amount difficult, if not impossible. Accordingly, provision has been made for a waiver of interest by the United States after certification by the International Monetary Fund as to the facts regarding the balance of payments and the position of the United Kingdom. “It is not to our advantage to press for payment of interest when payment is impossible and thus force a default and the crumbling of international economic relations. “The financial assistance which the United Kingdom would receive under the agreement made it possible for the two Governments to agree on a specific course of action which, in a short period, will result in the removal of I the emergency controls over foreign ex-

change and discriminatory import restrictions and re-establishment of peace-time practices designed to promote the recovery of world trade. British Concessions “Britain has agreed to abolish the so-called .‘sterling area dollar pool.’ She has agreed to give up most of her rights during the transition period provided for in the International Monetary Fund agreement, and thus abandon controls over foreign exchange which she would otherwise be permitted by terms of that agreement to continue for a considerable time. “In addition to the direct benefits which will now from this stimulus to British-American trade, there will be added benefits derived from the ability of other nations to relax their restrictions once the United Kingdom leads the way. _ . , , “Another troublesome financial problem which has been fully and frankly discussed by the two nations is that of the sterling liabilities of Great Britain, which resulted from her large expenditures abroad during the war. “The British Government has undertaken to adjust and settle these obligations from resources other thou V! e American credit and has outlined ’ts intentions respecting their settlement. Twofold Objective “Our concern in this connection is two-fold: First, we want other countries in a position to do so to grant assistance to the United Kmgdoffi within their means. Those which hold large sterling balances can do so by scaling them down; secondly, we want to be certain that the liquidation of these balances will not discriminate against American trade. “The financial agreement contains a specific undertaking by the United Kingdom that no such discrimination shall result from these settlements. The financial agreement also makes it possible for the United Kingdom to give whole-hearted support to the proposals for the expansion of world trade and ' employment which the United States recently put forward as a basis for international discussions. In a joint statement on commercial policy, published at the same time as the financial agreement, the United Kingdom has undertaken to support these proposals and to use its best endeavours in co-operation with the United States to bring to a successful conclusion the international discussions based thereon. “The implementation of the financial agreement will be a great contribution to the establishment of a permanent state of peace and prosperity. We are all aware of the dangers inherent in unchecked economic rivalry and economic warfare. These dangers can be eliminated by the firm resolution of this nation and the United Kingdom to carry forward the work which has been so well begun. The financial agreement transmitted with this means that, instead of econocic controversy between the two countries, the wise rules of the Bretton Woods’ agreements will be fully effective much sooner than we believed possible when Congress enacted the Bretton Woods Agreement Act. Objection Likely in Senate Shortly after President Truman’s message reached the House, the Chairman of the House Banking Committee, Mr. Spence, introduced legislation calling for the loan’s approval. He said the committee would hold full and fair hearings to bring out all the facts.

The Democrat leader. Senator Barkley. was baulked in efforts to introduce similar legislation in the Senate where unanimous consent is necessary before new legislation can be introduced. Senator Langer (Republican, North Dakota), without stating his reasons, objected and the legislation will have to wait.

The Associated Press says that there are unmistakable indications that the loan faces trouble in the Senate. Many Senators demand to be shown, firstly, that the loan can and will be repaid; secondly, that it is reallv in American national interest that it be made; and, thirdly, that the United States can afford to lend the money abroad.