Memorandum from the Secretary of State to President Harry S. Truman

THE SECRETARY OF STATE WASHINGTON MEMORANDUM TO THE PRESIDENT Subject: Status of U.S.-U.K. Economic Negotiations 1. Commercial Policy: Full agreement has been reached, conditional only on reaching agreement on the over-all financial question. 2. Lend-Lease and Surplus Property Settlement: Very good progress has been made on all questions of major principle, and it is expected that final agreement on terms of settlement may be reached during the next week or ten days. 3. Financial Questions: These are still under discussion wi th the following matters still to be resolved: (a) Amount: We have offered to recommend to the Congress legislation providing $3 billion 500 million of new money. The British insist on not THEMEN less than $4 billion. 3. ARCHIVES AND INATIONAL (b) Terms of Credit: RECORDS SERVICE" Disagreement continues over the rate of interest, the U.S. demanding that interest be calculated at 2% on the outstanding principal on any year after a five year period of grace, while the U.K. proposes an arrangement which would amount to 1% interest on the same basis. Agreement has been reached with respect to periods of maturity and provision for deferment of payments in bad balance of payments years. (c) Convertibility of Sterling: We have requested that sterling be made freely convertible after June 30, 1946, for current transactions with all parts of the world. The British are prepared to extend such convertibility for the entire sterling area and certain other countries, but we are continuing to discuss the convertibility of sterling with regard to certain countries of Europe and elsewhere which maintain strict exchange restrictions. 4. Telecommunications The British have agreed to cease all opposition to the establishment of a direct radio circuit between Saudi Arabia and the U.S. to be used for