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Page 106 would otherwise have been used for less efficient types and partly because the balance of payments demands a greater foreign exchange contribution from the esources of this industry. We would say that we are not asking for our share in these contracts on grounds of need alone but also in the interests of N.A.T.O. because production in this country will be better, quicker and cheaper than in Europe. If discussions in Paris before the issue is transferred to Washington force us to say something of the above, it should be as little as possible, We should explain, if asked again, that we cannot yet assess the extent to which all this may affect our N.A.T.O. obligations; this will become apparent when we send in our answers under the N.A.T.O. Review. Bearing in mind that the Americans' offer was designed to fill a given gap in the N.A.T.O. programme and that our own reduction will increase that gap, we must recognise that what we say may produce violent repercussions in Paris. That is a risk which has to be faced; there are limits to the extent to which we can skate over the facts because of the detailed information about our present plans possessed by the international staff.

5.

I understand that the French have already sent a senior officer over to Washington to make their case. We ought not to allow ourselves to lose ground. I therefore propose that arrangements be made forthwith to present our case to the US Administration. I hope also to be able to mention it to Mr. Dean Acheson while he is over here.

6.

In conclusion, therefore, I recommend that:-

(a) we should make it clear to the Americans that unless we secure off-shore purchase for the aircraft included in our offer we shall be unable to produce the aircraft at all. We should explain that we are able to produce them partly because of a revision of our production programme and partly because of a review of our defence programme on account of the balance of payments. Essentially we must make it clear that the production in this country will be better, quicker and cheaper than in Europe. This should be put in hand in Washington forthwith.

(b) if something has to be said in Paris it should be as little as possible and we should explain, if necessary, that the effect of changes in the production programme will be made clear in the N.A.T.O. Review.

Foreign Office, S.W.1.

25th JUNE, 1952.

A.E.

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