§ Statement on discussions held June 29 by Chancellor of the Exchequer James Callaghan of Great Britain and Secretary of the Treasury Henry H. Fowler at the United States Treasury:
§ British Chancellor of the Exchequer James Callaghan and Secretary of the Treasury Henry H. Fowler agreed in their talks at the United States Treasury that in present circumstances the primary contribution of both the United Kingdom and the United States to international financial stability and the improvement in the international monetary system is to achieve and sustain a broad equilibrium in their international balance of payments.
§ Secretary Fowler noted that the voluntary effort by American bankers and businessmen to reduce their net dollar outlays abroad undertaken earlier this year at the President's request is having an encouraging effect. Provisional indications are that this and the wide range of other efforts being made to end the United States payments deficit resulted in surpluses during March, April and probably in May, however the United States plans no relaxation of its efforts. The country is now entering the period of the year when tourist expenditures increase dollar payments to foreigners markedly. Imports are rising with continued internal expansion and there are increased dollar outlays in South Vietnam and in the Dominican Republic. The accumulation of dollars in reserve holdings abroad in past years is the cause of large continued gold outflows, such as those of the current year.
§ The Chancellor of the Exchequer and Secretary Fowler agreed that the prospects for an early and sustained equilibrium in the United States balance of payments resulting from the efforts of the last four years were good, and that there should be no relaxation in the execution of President Johnson's programme of February 10, 1965.
§ The Chancellor said that a substantial improvement had taken place in the British balance of payments during the first quarter of 1965. He expected a big reduction in the deficit on current and long-term capital account for 1965 as a whole. The measures which the British Government had taken in the fields of fiscal policy, credit control, the stimulation of industrial efficiency, incomes policy and economic planning were beginning to work 1098 through the economy—and he reiterated his aim of balancing Britain's overseas payments in the second half of 1966.
§ In discussing the interaction of the balance-of-payments programmes of the two countries, the Chancellor drew attention to the effect on the British position of the measures which the United States had undertaken to correct its balance of payments. In this connection, Secretary Fowler emphasised that the guidelines for the voluntary restraint programme take into account the United Kingdom payments problem. The United States pointed out that the British Government's programme described by Mr. Callaghan to the British Parliament on April 12, for continuing to raise gradually the proportion of the British Government's holdings of non-sterling securities in a liquid form, and their use to reinforce the reserves, would involve an adverse impact on the United States balance of payments. Secretary Fowler recognised the need for this British programme and the Chancellor reiterated earlier assurances that the British authorities would continue to co-operate by managing the portfolio in such a way as to minimise the impact of the operations on the United States balance of payments and avoid any significant impact on the United State security markets. He added that these operations had now been carried to a point where the portfolio could be used to reinforce the United Kingdom reserves at short notice.
§ With respect to the problem of international liquidity, it was felt that a number of countries will require time to consider their attitudes in the light of changing developments in international payments, and with the benefit of technical studies now being completed in the Group of Ten. In this connection, the Chancellor referred to discussions which he had held with M. Giscard d'Estaing, the French Minister of Finance, and Secretary Fowler indicated that he hoped to have talks with the Finance Ministers of other major countries in the latter part of the year on the subject of international liquidity.
§ These talks would explore the various possibilities with a view towards any reinforcement that would help to assure a payments system fully responsive to the continued growth of international trade.
§ The British and American Ministers were agreed that any such reinforcement must await the development, out of the present divergent opinions, of an international consensus on this subject, but that constant and persistent efforts should be pressed at the ministerial level, both during and after the meetings of the World Bank and International Monetary Fund. In this connection the Chancellor stressed the importance of the needs of the developing countries.
§ The Ministers agreed that the two reserve currencies would continue to play an essential part in the financing of international trade and as a medium in which to hold reserves. They recognised that the interests of the two currencies were closely bound up with one another. This identity of interests had already been recognised in the measures of financial co-operation taken by the two countries which should be maintained and intensified.1099
§ In addition to the Chancellor and the Secretary, participants in the Treasury discussion included:
- Sir Patrick Dean, British Ambassador to the United States,
- Sir William Armstrong, Joint Permanent Secretary of the British Treasury,
- Sir Denis Rickett, Second Secretary of the British Treasury,
- Mr. Robert Neild, Economic Adviser to the British Treasury,
- Mr. M. H. Parsons, Executive Director, Bank of England, and
- Mr. John Stevens, Economic Minister in the British Embassy, Washington.
- Mr. Joseph W. Barr, Under Secretary of the United States Treasury,
- Mr. Frederick L. Deming, Under Secretary of the Treasury for Monetary Affairs,
- Mr. Merlyn N. Trued, Assistant Secretary of the Treasury for International Affairs, and
- Mr. Stanley S. Surrey, Assistant Secretary of the Treasury for Tax Policy.
§ LORD ERROLL OF HALE
My Lords, I should like to thank the noble Lord for his courtesy in reading out the Statement made by the Chancellor of the Exchequer in another place. It seems to me that this was one of those occasions when the talks were undoubtedly useful, but when there was not perhaps a very great deal to put in a Statement after the talks themselves. Perhaps I might be allowed to say that we are glad that the Chancellor was able to go to Washington in the midst of a very complicated Bill in another place, and to have had talks which showed the full co-operation existing between Ministers in Washington and the Chancellor of the Exchequer in this country. Could the noble Lord say what the Chancellor of the Exchequer is going to do next? Is he going to prepare for a major initiative at the Bank and Fund meetings in September?
§ LORD SHEPHERD
My Lords, I am glad that the noble Lord has welcomed this Statement. I think he will understand if I fail to answer the question which he has just put. I think it would be wrong for me in this House, not being a Treasury Minister, to make any comment as to what actions the Chancellor of the Exchequer intends to take, except to repeat the words in his Statement, that we shall continue with tenacity and a sense of urgency in pursing this infinitely difficult task.
§ LORD ERROLL OF HALE
My Lords, could the noble Lord perhaps convey to the Chancellor of the Exchequer our wish that he would take such an initiative and thereby continue the good work carried out by his predecessor in this field?
§ LORD SHEPHERD
My Lords, that, I should have thought, was a double-edged question. But certainly I respond to the noble Lord's first suggestion and will convey his remarks.