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available should be taken into account.
As regards tourist expenditure
it was pointed out that the nature of the currency arrangements in the
sterling area precluded its control, whereas defence expenditure in the
sterling area was nonetheless disadvantageous in that it involved a long-
term charge against out balance of payments.
Germany
The Committee then turned to the consideration of the present position
on the tripartite discussions on the level of United Kingdom and United
States forces in Germany.
THE MINISTER OF STATE FOR FOREIGN AFFAIRS (MR. THOMSON) said that
the Federal German representative in the last round of these discussions
had offered no improvement on the earlier German offer to make offsetting civil purchases in 1967-68 to the value of £221 million: it was doubtful
whether some of these would in fact be genuinely additional to purcahses
which would otherwise have been made. It was understood that the
Federal German Government would take their decision on whatever eventual
offer they might be prepared to make at the meeting of their Cabinet on
15th March. The next round of the tripartite talks would be held in
Washington on 20th March, We should then seek to obtain as high a German
offset payment as possible and we should also seek United States agreement
that we should have a prior claim over the United States on German offset
payments in the future. Meanwhile, the Head of Defence Sales had
arranged to visit Germany to explore the possibilities of increasing sales of United Kingdom military supplies.
It was relevant in considering our future tactics that the Federal
German Chancellor was understood to take the view that since we should in
any event withdraw two brigade groups and that it was not practicable for
us to withdraw more, there was no reason why further German offset payments
should be made to us. We must maintain that in the absence of satis-
factory arrangements we might be forced in the upshot to withdraw further
troops and that this would in turn lead to substantial withdrawals of
United States forces, with consequent serious damage to the security of the Federal German Republic.
THE CHANCELLOR OF THE EXCHEQUER said that the Government had previously taken the view that we should be forced to withdraw troops from Germany
unless we were able to obtain an offset agreement which would relieve us
of the full extent of our foreign exchange expenditure there. At that
time, however, we had expected to obtain offset payments of at least the
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