TREASURY STATEMENT

The new British Government has acted promptly and effectively to maintain the strength and stability of the pound sterling. Its temporary measures strike at the inflated imports which have been the principal source of immediate pressure on the pound. Its longer run measures affecting productivity, incomes, and prices can provide the improvement that is needed in the competitive position of the United Kingdom in world markets.

It is gratifying that the action taken is nondiscriminatory in form and avoids any damaging repercussions upon the functioning of the international monetary system. The import charges will, for a time, have a moderately adverse effect upon our trade as well as upon that of other countries, but there is no painless corrective, either for the United Kingdom or for the rest of the world. The United States welcomes the British determination to reduce and remove these import charges at the earliest opportunity.

Existing arrangements for international financial cooperation have proved their effectiveness in recent years and are again demonstrating their capacity to maintain the smooth functioning of the international monetary system.

Document IV-164

Provision of International Credit Facilities in Defense of the Pound Sterling Against Speculation: STATEMENT MADE BY THE PRESIDENT (JOHNSON) AT A NEWS CONFERENCE AT THE LBJ RANCH, JOHNSON CITY, TEX., NOVEMBER 28, 1964 (EXCERPT) *

45

46

This week we witnessed a remarkable demonstration of the strength of international monetary cooperation. Eleven nations, including the United States, and the Bank for International Settlements arranged with the United Kingdom to provide credit facilities totaling $3 billion to defend the pound sterling against speculative pressure. We are gratified that these arrangements were worked out so speedily and with such widespread international participation. This action should give the United Kingdom the breathing space needed to carry out an effective program for improving its balance-of-payments position." Of course, none of us was pleased that the Federal Reserve was obligated to raise our discount rate as a precautionary move in response to international developments. However, as Chairman Martin [Federal Reserve Board Chairman William McChesney Martin] has clearly stated, this move is not intended to restrict the

45

48

Department of State Bulletin, Dec. 14, 1964, p. 848.

46 The other assisting central banks were those of Austria, Belgium, Canada, France, the Federal Republic of Germany, Italy, Japan, the Netherlands, Sweden, Switzerland; of the $3 billion credit provision, $1 billion was raised by 11 U.S. central banks, Nov. 25, 1964.

47 See ante, docs. IV-162–163.

48 Some U.S. Federal Reserve Banks raised discount rates in response to a rise of Nov. 23, 1964, in the U.K. bank discount rate to 7 percent.

availability of credit to the domestic economy and does not lead us to expect any significant increase in the cost of domestic long-term credit, either from banks or in the capital market. We can count on monetary policies that continue to meet the credit needs of a noninflationary expansion.

Document IV-165

United Kingdom-United States Review of the Current International Situation: JOINT COMMUNIQUE ISSUED AT WASHINGTON BY THE PRESIDENT OF THE UNITED STATES (JOHNSON) AND THE PRIME MINISTER OF THE UNITED KINGDOM (WILSON), DECEMBER 8, 1964 49

The President of the United States and the Prime Minister of the United Kingdom met in Washington 7th December to 9th December. They were assisted by Secretary of State Rusk, Secretary of Defense McNamara and Under Secretary of State Ball and by the Foreign Secretary, Mr. [Patrick] Gordon Walker and the Secretary of State for Defence, Mr. [Denis] Healey.

In the course of a wide ranging exchange of views, the President and the Prime Minister reviewed the current international situation in light of the responsibilities which their countries carry for maintaining, together with their allies and friends, peace and stability throughout the world. They reaffirmed their determination to support the peace-keeping operations of the United Nations and to do all in their power to strengthen the systems of regional alliance in Europe, the Middle East and the Far East to which they both contribute.

They recognized the importance of strengthening the unity of the Atlantic Alliance in its strategic nuclear defense. They discussed existing proposals for this purpose and an outline of some new proposals presented by the British Government.50 They agreed that the objective in this field is to cooperate in finding the arrangements which best meet the legitimate interests of all members of the Alliance, while maintaining existing safeguards on the use of nuclear weapons, and preventing their further proliferation. A number of elements of this problem were considered during this initial exchange of views as a preliminary to further discussions among interested members of the Alliance.

They also agreed on the urgency of a world-wide effort to promote the non-dissemination and non-acquisition of nuclear weapons, and of continuing Western initiatives towards arms control and disarmament. They recognized the increasing need for initiatives of this kind in light of the recent detonation of a Chinese nuclear device.51

"Department of State Bulletin, Dec. 28, 1964, pp. 902-904. The Prime Minister of the United Kingdom, Harold Wilson, visited Washington, Dec. 6–9, 1964. 50 See ante, doc. IV-41.

The President and the Prime Minister reaffirmed their determination to continue to contribute to the maintenance of peace and stability in the Middle East and the Far East. In this connection they recognized the particular importance of the military effort which both their countries are making in support of legitimate Governments in South East Asia, particularly in Malaysia and South Vietnam, which seek to maintain their independence and to resist subversion.

They recognized also that a nation's defense policy must be based on a sound economy. The President and the Prime Minister, while determined that their countries should continue to play their full parts in the world-wide peace-keeping effort, affirmed their conviction that the burden of defense should be shared more equitably among the countries of the free world.

They agreed also on the need for improvement in the balance of payments and in the productivity and competitive position of both their economies in order to ensure the underlying economic strength which is essential for fulfilling their heavy international responsi bilities. In this connection they arranged to explore in detail the possibilities of closer cooperation between their two countries in defense research and development and in weapons production.

The President and the Prime Minister reaffirmed their belief in the importance of close allied cooperation in international affairs. They agreed that this meeting was only the first stage in their consultation in which the matters that they had discussed would need to be examined in greater detail. They looked forward, too, to continuing discussions at all levels both within the Alliance and in wider international negotiations in pursuit of nuclear and conventional disarmament and all measures to reduce world tension.

Part V

EASTERN EUROPE

[See also ante, docs. I-5, post, docs. VI-1-2, 4.]

Document V-1

The Need To Restore the Natural Relationship of Eastern Europe With the Rest of Europe and the Free World: STATEMENT MADE BY THE UNDER SECRETARY OF STATE FOR POLITICAL AFFAIRS (HARRIMAN) BEFORE THE SUBCOMMITTEE ON EUROPE OF THE HOUSE COMMITTEE ON FOREIGN AFFAIRS, MARCH 10, 1964 1

1

Eastern Europe is no longer the monolithic structure it was under Stalin. The forces of nationalism and self-interest, the desire for freedom and a better life, have worked fundamental changes.

These Eastern European countries face both serious economic problems and an increasing need to cope with the basic human demands of their people for more freedom, better living conditions, and recognition of national interests. The rising tide of nationalism is becoming increasingly a factor in all these countries. Under the pressure of these forces, and in the context of world Communist disunity and diminished authority on the part of Moscow, there is more inclination among the Eastern European governments to consider alternative ways of coping with the problems of their countries. In varying degrees they are taking a more independent line, including more practical approaches to dealing with the interests of their own people.

As a result, there has been a significant trend away from the rigid pattern and the uniformity that Moscow imposed on this region after the war. It is clear that this important evolution beginning with Stalin's death continues. It has a gradual but considerable effect upon the life of the Eastern European people and on their relations with both East and West. They are becoming less isolated from the West. It is true that they remain within the sphere of Soviet military domination which was imposed upon them by the advance of the Red Army after the war. Their governments remain allied with the Soviet Union, and are supported by Moscow. But this alliance and support has not been able to prevent the natural and national diversity of these countries from asserting itself increasingly.

1

1 Department of State Bulletin, Mar. 30, 1964, pp. 485–487.

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(617)

An exceptional case was that of Yugoslavia. In 1948, Tito broke with Stalin. Recently, Yugoslavia has established improved relations with Moscow, but Yugoslavia has retained its independence in political, military, economic, and sociological affairs.

Among the other Eastern European countries, the trend toward independence was seen first 8 years ago in Poland. That country has maintained its departure from orthodox Communist programs and from complete subordination to Moscow, which national feeling and economic problems forced upon the rulers in 1956. On religion and church-state relations, the Government has had to accept the role of the church as a major element in the life of the people, even though the church suffers from administrative controls and other restraints which we abhor. Rumania has recently demonstrated that it pursues an economic development program of its own choosing, involving greater industrial expansion and increased trade with the West in place of the program proposed by the economic organization of the bloc. In Hungary reforms in a moderate direction and efforts at national conciliation have made for some solid improvements for the people. Several bloc states have taken steps to relax the rules of collective farming so as to encourage output from private plots. In Poland, for example, 85 percent of the farmland is privately owned. There are other similar signs of a more pragmatic approach by the regimes, aimed at eliciting badly needed cooperation from the working population where the old dictatorial methods and harsh police controls have notoriously failed. Though these governments have a long way to go to create adequate incentives in their economic systems, here and there the problem at least seems to be recognized and certain initial and tentative steps are being taken in an effort to cope with it.

In their external relations, a sign of the times is the effort of all the Eastern European states to increase their already substantial trade with other Western countries and to open up commercial channels with us. Along with this they have been impelled to let down some of their other bars to communication with the rest of Europe and the West, to encourage tourism and permit more travel abroad, and to establish more contact with the West. Last year, for example, more than 80,000 Hungarians were permitted to visit Austria and other Western countries. In varying degrees, the Eastern European countries have now also exhibited an interest in developing exchanges with the West in cultural and other fields.

Much of the loosening up of programs and methods in the Eastern European Communist states since Stalin's time has been prompted by

2 Conciliatory visits were made by Yugoslav President Tito to the U.S.S.R.. Dec. 4-20, 1962; by Soviet Chairman Khrushchev to Yugoslavia, Aug. 20-Sept. 3, 1963.

3

A statement issued by the official Rumanian news agency, Agerpress, on Apr. 26, 1964, supported the Soviet side (peaceful coexistence) in the Sino-Soviet dispute, opposed a proposal for establishment of a supranational control body in the Soviet bloc's Council for Mutual Economic Assistance (Comecon), and indicated that Rumania would resist Comecon efforts to limit Rumanian industrial development in favor of raw material and food production. (Excerpts in East Europe, vol. 13, No. 6, June 1964, pp. 25-30.)