1. Mr. Boland, accompanied by Messrs. Hogan and Cremin, met representatives of the British Executive Committee of the 'London (ERP) Committee' in the Treasury Chambers, London, at 11 a.m. on the 29th January. Those present on the British side were:-

   Messrs	R.W.B. Clarke (Chairman)
   	Grant and Van Loo	Treasury
   	H.J. Lintott	Board of Trade
   	R. Makins	Foreign Office
   	N. Pritchard	Commonwealth Relations Office

2. The Chairman apologised for the absence of Mr. Rowe-Dutton, who had, he said, to take at short notice another meeting to consider protective measures to meet the situation created by the French currency law. He stated that the Treasury were very perturbed by these French measures, and, while their precise nature was yet to some extent obscure, felt that they would have to examine very carefully the possible threat to sterling. They were particularly concerned at the risk of transactions on the French Free Market undermining, through the cross-rates, the exchange value of sterling, and were also concerned at the possibility of British exports being paid for through the French Free Market. One point about which the British were not yet clear was whether, and, if so, to what extent, French nationals holding gold and foreign hard currencies, would be in a position to sell them on the Free Market. In reply to an inquiry as to why the British were so perturbed about the effect of the French free market seeing that the Italians had been operating a somewhat similar device without occasioning a great stir, Mr. Clarke said that the Italian action had in fact been regarded as 'embarrassing and dangerous in the extreme' and that representations had been made to the Italian Government on the point. The British regarded exchange stability as essential for the maintenance of satisfactory systems of control in present circumstances. Instability would have damaging effects on the plans for European recovery.
3. The meeting proceeded to discuss the points raised by Mr. Boland the previous day.

4. Ireland's Dollar Availabilities.
Mr. Boland explained that Ireland, which is, of course, interested in the soundness of the sterling area reserves, might have to decide what line to adopt in the event of the Americans, in the course of their enquiries, asking whether we intended to draw on those reserves to meet our dollar requirements. Mr. Clarke stated that the British are rather anxious about some features of the American programme. In the first place, the Americans have taken as a net deficit for Great Britain the deficit of that area proper less the Colonial surplus (i.e. earnings from, e.g. Malay and West Africa). The British had hoped to be able to use this surplus to meet drawings by other members of the sterling area and to build up their reserves. They hoped to induce the Americans to omit the Colonial surplus in arriving at the net British deficit, but are doubtful whether they will succeed. They regard it as certain, in any case, that there will be a continuous drain on the sterling area reserve during the whole period of the ERP. They doubt whether, if Great Britain receives aid and is enabled as a result to relax austerity, Australia and New Zealand, who have only accepted a certain measure of austerity because of the fact that England is on a similar standard, will maintain the measures they have adopted, in which case there would be a definite draw on the Pool. South Africa is not a source of anxiety and will probably supply some gold throughout the period. India is, however, an unknown quantity and is likely to have a dollar deficit which must be met from the pool. There is a possibility that some dollars may be earned by supplies to Germany, which is shown as having a deficit of 200 million dollars during the first fifteen months. On the whole, however, there is likely to be pressure on the Sterling Area reserves during the four year period and it will, therefore, be necessary for Great Britain to exercise a strict control on imports from the Western Hemisphere other than imports of goods which she will receive under the Programme. According to the statements drawn-up by the US Administration, Britain will receive under ERP only food, tobacco and cotton, as well as certain smaller items of machinery. She will therefore have to press exports as well as control imports so as to be able to pay for other commodities from the Western Hemisphere. In view of this situation, it would be of definite advantage from the point of view of the Sterling Area Reserves if we were able to meet all our dollar requirements without drawing on the Pool and they therefore feel that we should press to receive under ERP our net dollar deficit: we could argue in favour of this arrangement that drawings on the Sterling Area Pool are bound to make it more difficult to achieve the primary object of ERP namely, that the participating countries should be able to pay their way at the end of the Programme. The British believe that the American Administration accepts the thesis that the Sterling Area Reserves should be sound when ERP ends. The Treasury agrees however that even if our net estimated dollar deficit should be completely covered by ERP we are, nevertheless, at all times entitled to draw on the Pool if necessary.

5. Sources of Supply
Mr. Boland raised the question as to whether, where a choice exists (e.g. grain from Australia or from the Western Hemisphere) it would be wiser in dealing with the Americans to look for our requirements or only a proportion of them from the Western Hemisphere. The British felt that it would be better to seek to get under ERP the greatest possible proportion of requirements but pointed out at the same time that it is important from the point of view of the ultimate strength of the sterling area to endeavour to get free of dependence on the Dollar Area. They, therefore, intend to try to develop long term sources of supply outside the Dollar Area. As far as Great Britain is concerned their statement of requirements to the Americans will depend on the nature of the Aid she will receive under ERP. Mr. Boland made the point that to draw requirements extensively from, say Australia, might mean that Australia would be supplying to the Sterling Area goods for which she might otherwise have obtained dollars to augment the Sterling Area Pool. It was finally agreed that the best course would be not to understate imports from the Dollar Area but in making purchases to bear in mind the desirability of developing long-term sources of supply outside the Dollar Area.

6. Dollar Borrowings
Mr. Boland informed the British of the nature of the observations we had submitted to the Americans following on Mr. Thorp's statements before the Congressional Committee. The British stated that they do not intend to borrow for current consumption goods and that while the Americans speak of having 20-40% of requirements met by borrowing, the British see nothing in their ERP allocations which could properly be financed by loan. They pointed out that of the sixteen countries only Norway, Portugal, Sweden, Switzerland and Turkey are either in or in sight of dollar equilibrium. Mr. Boland remarked that the impression gained in Washington was that capital (i.e. loan) goods would cover a very narrow range e.g. big plant installations and that all other goods could potentially be covered by grant.

7. Direct US Investment
In reply to a query as to British practice in this matter the Chairman explained that the British Government has adopted a liberal policy in recent years but examines each particular project by reference to the balance of payments position. Generally speaking the British would be disposed to permit direct American investment where it is a question of the introduction of a new US technique or where the project would lead to dollar exports. One such project which had been approved on these grounds came from the International Harvester Company. There had been observed, however, a tendency on the part of American enterprises to raise in Great Britain the bulk of the capital required at the low interest rates prevailing there and to repay this capital very rapidly with the result that all the earnings of the Company would tend to flow to the USA. This tendency is not welcomed by the British who prefer a fair division between British and US capital. The Treasury makes no difficulty about the transfer by American companies of genuine current earnings and have found that the promoters of some of the schemes have, so as to make their proposal more acceptable to the British, offered on their own initiative to refrain from making any transfers to the USA during an initial period. Between sixty and seventy projects covering direct US investment in Great Britain have been approved since the war.

In answer to a question from Mr. Clarke as to Ireland's attitude towards direct US investment Mr. Boland replied that the question had not yet been considered by the Government.

8. ERP for Intra-European Trade
Mr. Boland asked for the British views as to the possibility of dollars being made available under ERP to finance trade between European countries. He cited as an instance of what he had in mind a possibility of, say exports from one of the participating countries to the bizone being paid for in dollars. The Chairman stated that the British have not yet formed final views on this question. The Board of Trade representative indicated that his Department felt that such a scheme would be a good one and that it would be well if there were an arrangement by which say the import of waggons from Belgium to Denmark, which would bring the total Danish indebtedness to Belgium above the gold point, could be paid for by ERP funds. The Chairman remarked that a possible solution would be that of the total amount of dollars earmarked for Belgium under ERP a certain proportion would be held back to enable countries in deficit with Belgium to pay for Belgian exports. He felt, however, that the primary difficulty is that the total volume of Aid is likely to be insufficient to meet both the needs of each country and the payments required under such a scheme. The Board of Trade representative did not share this view and thought that a scheme could be worked out by which intra-CEEC country deficits could be paid for without affecting the position of each country under the programme.

9. Currency Transferability
The Chairman apologised for inability to have an expert on this question present as the only two real experts (of the Bank of England) were both not available. He stated however that as far as the Treasury knew this scheme had made little progress, the total transactions involved to date between the countries which had put it into operation being less than would be handled by the Bank of England in a week. The Board of Trade representative seemed to be rather in favour of the scheme which would, he suggested, be rather simple unless there were a persistent debtor or creditor. Belgium is in the latter position at the moment and hence most countries are not prepared to allow the transfer to Belgium of their currencies lest such transfers should bring the Belgian holdings above the gold point. In his view the best prospect of working the scheme would be for the ERP administration to hold funds for off-shore purchases with which to cover surpluses. The Chairman made it clear however that the Treasury are both sceptical and nervous about the transferability issue. They fear that the total ERP funds will not be adequate to meet all needs. They also think that there is a danger that to encourage a greater development of intra-European trade during the period of the Programme might divert the energies of the participating countries from concentrating on lines of production which would make possible increased exports to the dollar area at the end of the period. The British are in fact already experiencing difficulties in inducing their own manufacturers to divert exports from their traditional European markets to the Dollar Area as the manufacturers are primarily only concerned with the profit aspect of their transactions. For Great Britain the problem is primarily that of maximising exports to the Dollar Area. The Treasury would however take a different view of the transferability problem if Great Britain were to become a regular creditor in European trade.

10. Local Currency Deposits
The Chairman repeated that the British Government would expect to be able to use the special account in which the local currency funds would be placed as a source from which temporary advances might be made to the Exchequer. He pointed out that the moneys in such a special account would have to be invested in the ordinary way pending their final utilisation in accordance with the agreement between the British and American authorities and that consequently British Government loans could be taken up by that account.