THE REVISED PAYMENTS AGREEMENT, 1949-50
THE 1948-49 payments agreement made possible an expansion of intra-European trade by creating drawing rights. It did little, however, to get trade out of the ruts created by bilateral arrangements. To break down bilateralism and to increase competition in intra-European trade, the ECA proposed that during the second year of the payments agreement debtor countries should be allowed to use drawing rights any place in Western Europe, not just in the country originally granting them. Britain objected, largely for fear of losing dollars to Belgium and other Continental countries which, as a result of these arrangements, would accumulate large quantities of sterling. A compromise was reached permitting debtors to transfer 25 percent of their drawing rights from one country to another. At the same time, special arrangements were made to finance Belgium's expected export surplus to Britain, France, and Holland.
This chapter tells how these and other revisions altered the payments agreement. Largely as a result of devaluation, increased French exports, and the removal of some quotas on intra-European trade, many of the estimates on which the revision was based proved false. Thanks to new provisions, the OEEC could, to some extent, adapt the revised agreements to the changed circumstances. Nevertheless, it was clear by early 1950 that greater equilibrium in Western European trade had opened the way for new payments arrangements dispensing with the complications of drawing rights.