Cablegram H319 (extract), LONDON, 28 July 1948, 11.07 p.m.
CONFIDENTIAL
2. One other important subject discussed between the Chancellor and Mr. Hoffman[1] and between United Kingdom and United States officials concerns the treatment of the rest of the sterling area deficit in connection with E.R.P. programming. Both Mr. Hoffman in conversation with the Chancellor and United States officials, particularly Mr. Bissell[2] in conversation with United Kingdom officials made it clear that there was no desire in any official quarter in Washington to see the sterling area disappear or broken up as a monetary area. Its significance and working and its value as a multilateral trading area was now fully understood.
3. As regards the rest of the sterling area deficit Bissell said that in view of the legislative history of E.R.P. it would be difficult to accept a simple statement of the United Kingdom dollar balance of payments which included the rest of the sterling area deficit as such. United States officials however had been considering other ways of meeting it. One possibility which occurred to them was to set off the colonial dollar surplus against the rest of the sterling area deficit. Another was by financing the trade or participating countries with countries in the rest of the sterling area. Under an arrangement of the latter kind France would buy from a sterling dominion, the dollar equivalent of these purchases would be added to the United Kingdom dollar application in return for the United Kingdom making an equivalent amount of sterling available to France.
_[1] Paul G. Hoffman, Administrator, US Economic Cooperation Administration.
[2] Richard M. Bissell, Director of Programs, Operations and Supply, US Economic Cooperation Administration.
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[AA : A3195, 1948, I.12211]