[matter omitted]

Possibility of E.C.A. Grant
Having localized in the State Department the main opposition to our receiving some of our E.C.A. Aid in the form of grant, I thought it well to make a determined effort to convert some of the people there. With this in mind I called on Paul Nitze who had been deputy to Willard Thorp, Assistant Secretary for Economic Affairs, and is now attached to the Central Policy and Planning staff. I made our case for a grant to him stressing the fact that our ability to repay a loan was no greater than that of Great Britain, having regard to the necessity for our drawing on the sterling area dollar pool at the end of the E.R.P. period to bridge our dollar deficit. I also called today on Joseph Burke-Knappe,¹ Director of the Office of Financial and Development Policy in the State Department and made the same case to him.

Both officers listened attentively to the points made. Mr. Nitze seemed impressed with the force of our argument and undertook to speak to the other parties concerned in the State Department. While he himself works on the economic aspects of planning, he is not directly concerned with the issue at the moment although he is fully aware of the situation. Mr. Knappe endeavoured to reply to our argument by saying that we will be able to repay a loan if Britain provides us with the necessary dollars out of the pool to service the loan in addition to our minimum essential dollar requirements. This is, of course, not an answer to the point of principle involved.

In the course of my discussions with both officials I gathered the impression that they (together with others in the Administration) were convinced that we were not making a determined effort to increase our dollar earnings. Nitze evidenced this by the report that was going around in Administration circles that you could not get Scotch whiskey in Britain because they were exporting it for dollars but that in Ireland you were told that they could not export whiskey for dollars because they needed it for consumption at home. Knapp made the comment which we have heard so often already that a passing visit through Shannon airport would not convince the visitor that everything possible was being done to earn dollars there or to attract transit passengers to say awhile in the country. I understand that this point is already receiving attention at home.²

I am lunching with Wayne Jackson³ and Ranney of the Britain-Ireland desk in the State Department and I shall raise the matter there as well.