Dear Secretary,
I spent over four hours with our friend last night. Over half the time was spent arguing about the Pact a subject which he brought up at an early stage. We discussed the matter without any specific reference to the recent approach. He re-affirmed the U.S. line of non-intervention on the Partition issue - as a matter of deliberate policy and not because it would be inappropriate for them. I took my stand on recent Ministerial pronouncements confirmed by the last paragraph of the communiqué from the all party meeting. I endeavoured to persuade our friend that even from a cold-blooded self-interest approach to the question it seemed that the U.S. had more to gain by solving the problem than by maintaining their present attitude. I also queried the real value of the six counties to Western defence if a more active feeling on the question sprung up in Ireland now that the removal of the Commonwealth issue has given more scope for a concentrated united approach to the question. After a very wide discussion which was too lengthy to recount in this letter our friend more or less agreed with my line of argument as to the desirability in the U.S. interest of solving the question. He did not of course hold out any hope of action. Still I felt that my time was not entirely wasted. I understand that there is a proposal for reorganisation in State whereby each division such as European Affairs will now be under an Assistant Secretary instead of a Director and it is not certain that H.[ickerson] will get European Affairs as he had a quarrel with Acheson in the past. Nevertheless he was at the latter's side at his swearing-in ceremony. Under the proposed scheme Research and Intelligence will have improved direct independent access to the top.

I do not know whether you approve of the line I took above but I made it quite clear that I was giving my personal views only. One other point I might mention in connection with the above is that on this occasion our friend asked whether we would come to talks on the question. I gave it as my opinion that we would gladly come if they were for the purpose of exploring ways and means to meet our difficulty but that if they were solely for the purpose of changing our attitude without any concession to our point of view I could not see that they would be fruitful.

As regards ECA you will recollect that our 1949-50 program amounts to $75 million. ECA are submitting illustrative figures to Congress for each country. They are supposed to be entirely without prejudice to the final figure to be fixed by ECA after OEEC has made its recommendations. Nevertheless any figures announced by ECA to Congress are bound to influence OEEC and the final decision. I understand that at a recent meeting at which our figure was fixed the Treasury proposed a slash of $20 million down to $55 million. Miss Leighton of State (who was allowed to attend such a high level meeting only after a fight by Sweeney) is reported to have fought our corner very hard and brilliantly - we had earlier given her a lot of material - and she secured a restoration of our figure to $70 million. Her background is such that she could not be accused of being sympathetic to us. Subsequently to make up for some deficit of W. Germany there had to be cuts all round and our figure ended at $65 million. This figure has been assured through private channels and must not be used until released. You will however be able to pass it on to appropriate people at home. There is of course no guarantee of finality yet.

The suggestion has been put forward here - and I understand that it has found its way into the draft country study on Ireland - that we be given some conditional grants. This term is of course misleading as they would be grants to Britain to spend on her trade with Ireland - in other words they would mean convertibility for us to the extent of the grant. Our loans would of course be reduced accordingly. I think that the ECA mission in Dublin are being approached to ascertain informally our reaction to the proposal. If we dislike it, it should be scotched immediately before the country study is released with it in it. I have already hinted that we might not be too keen on it.

Our friend asked me whether we would maintain the parity of our pound with sterling in the event of the devaluation of the latter. I told him that I could not even give an opinion offhand but it seemed to me that the advantages which might accrue to Britain in such an event would not apply to the same extent in our case as the vast majority of our exports are to the Sterling market in Britain and it would therefore not stimulate our exports to any appreciable extent. We would however suffer by the increase in cost of our imports and the increased burden of repaying our fuller indebtedness. Our friend went on to say that there is a lot of high level talks going on here in relation to devaluation at present and we would be well advised to consider our probable attitude now and not be caught on the wrong foot if and when devaluation came.

Our friend had some other interesting comments to make on how we should develop our mission here etc. but in order not to delay this letter they can keep for another day.

As I did not hear from you in relation to my previous two reports, I was wondering whether you wished me to continue reporting in this manner. I have of course reported fully to the Minister here.