On 30th July last, the delegations of Belgium, the Netherlands and Luxembourg made certain joint proposals to the Committee of European Economic Co-operation with a view to the 'multilateralisation' of European trade and the breaking down of the obstacles which present bilateral payment agreements constitute. The CEEC sent these proposals to the Committee of Financial Experts for examination. The two documents attached,¹ Financial Experts 11/3 and 11/4, were prepared for the information of the Committee of Financial Experts, and have been adopted by that Committee as a basis of discussion. It is likely that the proposals made, as amended after discussion, will come up at an early date for approval by the CEEC.

The first of the documents has now been discussed by the Committee of Financial Experts. We are not formally represented on that Committee, but Mr. Colm Barry, Department of Industry and Commerce, attended the meetings of the Committee in the capacity of an observer. There was general agreement in the Committee on the principles outlined in the document. A number of amendments were adopted by the Committee, but these were concerned with modes of expression and the form of presentation, rather than with the substance of the Benelux proposals. The Committee finally decided that a new text, incorporating the amendments, should be prepared for the final consideration of the Committee at its next meeting on Monday, 18th inst. It seems certain, therefore, that these proposals will form the main part of the report of the Committee of Financial Experts to the CEEC.

Mr. Colm Barry had an informal discussion with Sir David Whaley, Chairman of the Committee on Balance of Current Payments and British delegate to the Committee of Financial Experts.

Sir David agreed that the present proposals might be held to be influenced by the desire of countries economically weak to lay their hands as soon as possible on as great as possible a part of whatever American dollars become available. This, however, was not out of harmony with the idea underlying the proposed American aid. The proposals envisaged not only the use of American aid to build or restore productive capacity, in Europe, which was a straight-forward and calculable proposition, but the use of that aid in the first instance to back European currencies so as to restore convertibility. While he was in favour of the proposal to end Exchange Controls and restore the convertibility of European currencies inter se, he thought convertibility was the symptom, rather than the cause, of economic health. Moreover he thought that the use of American aid to restore the free circulation of European currencies, meant that America must be asked to commit herself to an indefinite and incalculable expenditure. He doubted whether such a proposition could be put before the American people in a comprehensible and attractive way. He added, however, that his Government supported these proposals more warmly than he did himself. He had just received instructions to support the Benelux proposals warmly. Asked why he thought it was that his Government approved the proposals so strongly, he replied that he believed that, from a political point of view, they were attracted by the idea of convertibility. Moreover, the three countries concerned had been very co-operative and sympathetic with his own, and he thought this counted for much in the decision of his Government.

Sir David agreed with the suggestion that one danger of the proposals as they stood was that, inasmuch as American aid would not be directed primarily towards industrial expansion, some countries might expend it on non-productive goods, adding that there was also the opposite danger that the aid might be employed in setting up uneconomic industries, duplicating productive capacity existing elsewhere.

Sir David also said that it was his intention to make a statement at the appropriate meeting of the CEEC on his country's prospects during the coming years of balancing its foreign payments.

We should be glad to have as soon as possible any instructions which the Ministers concerned may have to give in connection with this Benelux proposal.

This report is necessarily written in great haste.