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Sir Edgar Cohen Oral History Interview

Oral History Interview with
Sir Edgar Cohen

British Board of Trade, 1932-53, Under Secretary, 1947; Second Secretary, 1952. Chairman of U.N. Interim Coordinating Committee for International Commodity Arrangements, 1953-54

Sussex, England
June 12, 1970
by Theodore A. Wilson

[Notices and Restrictions | Interview Transcript | List of Subjects Discussed]


This is a transcript of a tape-recorded interview conducted for the Harry S. Truman Library. A draft of this transcript was edited by the interviewee but only minor emendations were made; therefore, the reader should remember that this is essentially a transcript of the spoken, rather than the written word.

Numbers appearing in square brackets (ex. [45]) within the transcript indicate the pagination in the original, hardcopy version of the oral history interview.

This oral history transcript may be read, quoted from, cited, and reproduced for purposes of research. It may not be published in full except by permission of the Harry S. Truman Library.

Opened June, 1984
Harry S. Truman Library
Independence, Missouri

[Top of the Page | Notices and Restrictions | Interview Transcript | List of Subjects Discussed]


Oral History Interview with
Sir Edgar Cohen


Sussex, England
June 12, 1970
by Theodore A. Wilson



COHEN: The main problem immediately after the war was that the countries hadn't the money and the resources to import freely from one another. They had a tradition from before the war, many of them, of restrictionism, and nobody would take the lead in getting trade going again. It was a very difficult situation, in fact, when the Marshall plan started, I remember. One couldn't see very far ahead, and we had had the loan, of course, from the United States in 1945-46.

We were committed to certain conditions of convertibility and non-discrimination. That gave



a breath of fresh air in Europe. It was seized after the way water is in a drought. I mean the money available to conversion was sucked in, wherever anyone could suck it because they were so short. And nobody was prepared to use it as an opportunity to restore freer trade, instead of making it an opportunity to get hold of some gold or dollars to pay off debt or to meet immediate and urgent requirements of American raw materials and equipment. But as far as that went, it was a drop in the ocean in any event. I mean the money went in a fraction of the time expected, as you remember, and we had to become inconvertible again. We had to stop it.

Apart from one or two countries like Belgium, which emerged from the war rather stronger than some, and Switzerland, which hadn't been in the war, or Sweden, which was a trading country on the periphery, nobody had the resources, or the possibility, really, of getting trade moving in a normal way. One of the things the Marshall plan did was to provide a great opportunity for that,



because as we saw it in England, the need was there and the Marshall plan should be partly used to enable people to meet the need, issue imports more freely. If we don't import more freely from you, you run into a certain amount of deficit. If you got support from the United States -- and you'd be lesser alarmed at that prospect -- within reason you get a little bit deeper into the swimming pool and see if you can't swim a bit. But without that, people absolutely are at the shallow end dabbling, you know, and very much afraid of moving.

WILSON: By your reference to trade in the normal way at the end of the war, this was thought of as an attempt to restore what had been normal commercial intercourse in the period between the wars, before the breakdown in the thirties?

COHEN: Yes. That's right.

And also, as further moves towards the reduction of other barriers and closer restrictions; that was left to the GATT [General Agreements on Tariff and Trade] in Geneva. But there were at



the end of 1945 joint Anglo-American proposals for the freeing of trade in a more generalized way with nondiscrimination and reduced tariffs. Which has still survived in the GATT in Geneva.

WILSON: Yes. This is marked on the American side, of course. Some of the persons whom I've interviewed have used the word "obsession" to describe Americans who were pushing for trade liberalization as a solution to almost all problems.

COHEN: Well, it was a necessary condition for the solving of problems on a basis of private enterprise, and they were quite right. They were quite right I think. They've had to justify what they did. But in the authority dealing with tariffs and the broad experiment on discrimination, you want a world basis for what you're doing, and that we got through the GATT. Insofar as you want to get the people shattered by the war to restore their old economies and to build up again, and be able to play a responsible part in world affairs,



it was a geographical problem of Western Europe, and that's where the Marshall plan came in. You will put up this much money to it and now see if they can't get on their feet again. You know, from others, how the United States provided equipment, raw materials, and food in an enormous quantity into Western Europe and gave these people a chance to breathe and recover. The whole thing had to be restored. Germany had to recover again.

WILSON: Some of the information which I have been given suggests that the thrust of American aid in this period, perhaps even, before the Marshall plan, viewed Europe as a cohesive trading unit rather than at a part of the world economy, and that this indeed in part defeated the effort to reintegrate Europe into the world economy.

COHEN: I think that there may have been an attempt to do things that way. It's awfully difficult for me to say without asking the individual Americans who were doing it. But I don't think it defeated anything.



I think it was a necessary step. You put it this way, that on the worldwide philosophy that the United States had, and the British shared, you would work on an issue of non-discrimination worldwide. None of these countries could afford to trade freely; they hadn't the resources. They all have what's called "balance of payments" difficulties. The demand in that country was far in excess of what they had in resources. They got Central banks to finance.

Therefore, under the system of international law that was built up in the GATT, the administration of the GATT, everybody could impose restrictions. I think what the United States felt there -- and what we felt -- our common approach was inside Europe there was a possibility, as a sort of limited "hot house" experiment, to say, "Here as against one another, we don't exercise our rights under international treaties to restrict imports from one another. This time, let's set a more generous basis among ourselves, and then when we are strong



enough, we can extend it more fully."

Then of course, the great problem later on was when the United States demanded, quite rightly, that these things should be extended to imports from the United States. But let's start now. The more you buy from one another, the more one another can buy from you. See what I mean? So let's try and break it down a bit. And we, independently, in Britain were interested in liberalizing our trade. We had always been a world trading nation and we reckoned that our industry would be healthier if it had to face some import competition. I think it was a natural. We were better equipped for export trade, and it was a natural requirement for development of the British Commonwealth, to get away from close restrictionism.

Now the difficulty of doing that is that of course you run into balance of payments difficulties if you do it too fast, and as other countries are doing it at the same time. So the American move



for liberalization coincided with our own judgment of what really was in the interest of ourselves and our neighbors, We saw it in the same way, and we had our plans by 1948-49 to start liberalizing our imports. We brought that into Europe, and in OEEC broader plans were made, which subsumed our plans, generally on the basis of liberalizing, giving percentages of your trade in manufactures, raw materials, and foodstuffs separately -- as you all moved forward steadily at the same pace. When you got to 75 percent you were beginning to get somewhere. The main difficulty was, of course, that some countries were more inflationary than others, and therefore tended to suck in more, while others tended to squeeze out more exports. That led to a balance of payments dis-equilibrium, which had to be dealt with.

The parallel contribution, you see, the United States then made under the Marshall plan was to say, "Now, you chaps liberalize your trade as hard as you can, and we will finance the union for clearing payments -- a European Payments Union -- so there



will be an element of credit between you. There will be a certain amount of gold there for your international settlement. You can settle credit, one country with another, and that will give you the financial basis on which you can be more courageous about lowering trade barriers."

WILSON: Just how strongly did the United States -- the American representatives -- carry forward the plan?

COHEN: They carried it forward all right.

WILSON: I know 500 million...

COHEN: I forget the figure, the amount they put into aid in the EPU [European Payments Union]; that must be readily available. They did put a substantial sum into the EPU of Marshall plan money. It was very well used, because the money in there enabled the Europeans to buy more from one another and hence facilitated their own industrial reconstruction, and thereby become more independent of American aid. It was money very well spent. There's no



use just giving people food and materials and machinery; they can sit back and say, "Thank you very much." It's a very pleasant way of living. But this money was used to get all producing and trading with one another on a scale which they could not otherwise have afforded, and therefore, to get their industries restored more quickly. The European Payments Union was really, I think, a major achievement of the OPEC. But it was introduced out of the efforts of liberalization of trade, which previously had been facilitated by payments arrangements of a more primitive kind, what we called "drawing rights." It was then carried forward much more effectively when the EPU multi-lateralized the credit arrangements, when each country had a settlement on a multilateral. basis, whether or not its debtors were good for the money, so to speak. But if you sold to Greece, and bought from Belgium, you could convert a part of the surplus by paying it into EPU. You settle through the EPU, and the American money was there. You couldn't have got



out of Athens.

The principle was that you could cash in your credits and your deficits, strike the net balance. If you wanted your net balance you had to surrender, you had to pay proportionately, in gold. The amount you had to settle increased according to the extent to which you had drawn up your quota of credit. The more deeply you got in, the more you had to pay; the bigger the proportion that was demanded of you. That naturally was the sanction. Equally, if you were a creditor, you had to give credit first, and the bigger your credit position, the more you could claim as a settlement in gold. The American money, you see, helped to finance it and to make it possible for the European countries to do it. It treated all countries as equally sound financially; that is to say, the American money enabled you to obtain, within limits set by EPU, a convertibility of any of the currencies involved, because you paid in your chips, your IOU's, and they



counted towards your creditor or debtor position. That meant that people didn't need to be selective as the partner trade developed. That is something that was overcome when European recovery had reached the point, had passed the point, where these countries could, on their own resources, finance these deficits. It anticipated a position that was artificial at first.

Once the position was reached, where the countries could settle these claims -- it wasn't all that difficult once countries got their industries going again -- then we reached a point where we didn't need the EPU any longer. We were able to convert our currencies from one another on a worldwide basis.

Looking back on the thing, one is bound to admit that it was a very great success. I don't think it's exaggerating it to say that it was a successful venture, carried through by a handful of extremely able men.

WILSON: Might you identify the ones that you...



COHEN: I forget the main people but there were obviously my people, a handful of them, the people who devised the European Payments Union, the people who devised the payments agreement. The payments plans, which they started with, were quite an ingenious device. What they said in effect was that, look at a country like Belgium, she came out of the war fairly well -- Belgium, you might say, well she hadn't gotten dollars, she hadn't gotten hard currency, to afford the credit. But she didn't need help from the United States, except to the extent that if she sold to people who couldn't pay in hard currency, she was making what were formerly bad debts, but if she was to sell her steel to the British, we will say, she must charge convertible money for it, because she needed that to buy from the United States. For the other half, she could balance her account subject to being paid.

Then the United States in effect said, "Well, we will give you Marshall aid, on condition that



you give as much aid to European countries immediately as you got from us." In other words, we'll convert the money for you. But the Belgians in that case would be given, shall we say, condition