ABSTRACT
ONE OF THE REASONS why Franks was appointed to the Washington Embassy was his expertise in economics. Even before the North Atlantic Treaty was approved by Congress (it was ratified on 21 July and came into effect on 24 August 1949) the British economy was encountering difficulties. It was natural, therefore, that he should assume a prominent position in the British response to the problem. For the only time during his ambassadorship he was to become involved in talks on the handling of a crisis in London as well as in Washington. With the help of an allocation of $1,293 million of Marshall Aid for the year 1948-49 the balance of payments on current account moved into surplus in 1948 for the first time since the end of the war.1 But in early 1949 it moved back into deficit. The basic problem lay in a shortage of dollars in the sterling area to pay for the imports of American goods, which at that stage were not available elsewhere. The British economy was not earning enough dollars to cover these imports. Too many British exports went to soft currency countries; they were what were called unrequited exports. Then the US economy suffered a mild recession, thereby reducing the opportunities for increased dollar earnings. The US economy contracted from November 1948 to October 1949. Industrial production fell by 10 per cent and GNP dropped by a little over 5 per cent.2 There was a sharp fall in US raw material and foodstuff purchases from Malaya, Ceylon, Australia and New Zealand; and the British trade deficit with the United States, Canada and Latin America increased.3 The dollar shortage due to exports to soft currency areas was a problem for all the European countries but the British difficulties were the key ones, for something like half the world’s visible and invisible trade was then conducted in sterling.4
