Memorandum of Conversation with Secretary of State Dean Acheson, Ambassador of Great Britain Sir Oliver Franks, and Ambassador Lewis Douglas

THEN 299 to the ARCHIVES CHATIONAL the RECORDS SERVICE'S AND 76 (mount? cord March 8, 1950 Negotiations with British on the Wheat Agreement Last night Ambassador Douglas and I dined with Sir Oliver Franks. The purpose was to have a general off-the-record talk of emerging problems, which discussion was not to be reported by eitiver of us a.s it was merely a preliminary survey. However, there was one matter which I said to Sir Oliver I was taking up officially and asked him to report, since dealing with the matter in this way would save him a trip to the Department. This matter had to do with the accession of Germany and Japan to the wheat agreement and had particular reference to Japan. He would recall that the accession of Germany and Japan to international agree- ments was in accord with the views of the three foreign ministers as formulated in Paris last November and there was no difference between us as to the importance and desirability as a matter of principle of having Germany and Japan in the wheat agreement. However, two difficulties had arisen; one with Canada and one with the UK. The difficulty with Canada had to do with the proportion of the German and Japanese wheat which should go to Canada under the agreement. This had happily now been resolved as a result of Secretary Brannan's trip to Ottawa. There remained the difficulty raised by the British. This difficulty, in turn, had two parts. The British felt first of all that if the Japanese purchased from Australia the full amount of wheat that they would be entitled to purchase, this exhaust sterling wheat by that amount for the British, who would then have to turn to dollar markets. This difficulty had been resolved by an agreement between Australia and Great Britain (or a proposed agreement) to the effect that in the beginning of any year the ustralians would first offer wheat to the British and only the agreement wheat which the British did not buy would then be available to the Japanese. While we are not enthusiastic about this agreement, we were not opposing it. However, the British went further and argued that the mere possibility that the Japanese were a potential purchaser would tend to raise the sterling price of wheat and they therefore wished the Japanese to agree that they would not buy more than a specified DECLASSIFIED E. O. 11652, Sec. 3(E) and 5(D) or (E) -29-75 Dept. of State letter, By NI.T- HC NARS Date 6.4.76