Sterling Area and the British Loan

March 28, 1946

Report Outline
British Loan and Freedom for World Trade
The Sterling Bloc and the Sterling Area
British Commitments in Financial Agreement
Accord with Britain on World Trade Policy

British Loan and Freedom for World Trade

Purpose of the Proposed Loan to Great Britain

THE Senate Committee on Banking and Currency, which concluded two weeks of hearings on the British loan agreement March 20, is expected momentarily to report out the joint resolution authorizing the proposed $3,750,000,000 line of credit. While only three witnesses appeared before the committee to oppose the loan, informal polls of the Senate indicate that members are closely divided on the issue. Lively debate is likely to precede final action by Congress.

Provision for the loan to Britain is part of a joint financial and commercial program worked out by representatives of the American and British governments at conferences in Washington last autumn. On Dec. 6, 1945, President Truman and Prime Minister Attlee announced the conclusion of three agreements: (1) a financial agreement, setting forth the terms of the proposed loan; (2) a final settlement of lend-lease and related war accounts and claims; and (3) an understanding on commercial policy. The financial agreement was approved by the House of Commons on Dec. 13 and by the House of Lords on Dec. 18.

Great Britain's need of a large foreign loan is occasioned by the serious impairment of her balance-of-payments position brought about by the war. Conversion of export industries to war production, liquidation of overseas investments, and loss of merchant shipping sharply cut into the sources of income formerly relied upon to pay for essential imports of food and raw materials. Lend-lease took care of the situation from 1941 to the end of the war. With the return of peace, it was estimated that Britain would have to expand her exports by from 50 to 75 per cent over prewar levels to balance her international accounts. In the meantime, with lend-lease terminated, she would need foreign assistance to finance an inevitable trade deficit during the transition to full peacetime activity.

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