Anglo-American Economic Diplomacy during the Second World War and the Electrification of the Central Brazilian Railway
The SHAFR Guide Online
Throughout the Second World War British and American companies competed to gain the contract for the electrification of the central Brazilian railway. The British Foreign Office used this case to establish a broader principle with the US government that the conditions brought about by war would not be used by one country to gain commercial advantage at the expense of the other. While the US government supported this principle in theory, this article argues that they failed to adhere to it in
... adhere to it in practice. US actions in this case shed new light on the country's economic diplomacy with Britain during World War II. Beyond short-term measures aimed at winning the war, the major theme of the economic diplomacy between the United States and Great Britain during the Second World War was the economic shape of the postwar world. The most prominent aspect of this diplomacy was an attempt by the US State Department to break open Britain's closed trade regime -based on the sterling bloc and the imperial preference systemand replace it with its own liberal model -based on equality of access to global markets and resources. These efforts achieved a degree of success in August 1941 when point four of the Atlantic Charter declared that the US and Britain would endeavor to ensure future equal access, for all countries, 'to trade and to the raw materials of the world which are needed for their economic prosperity'. 1 The Master Lend-Lease Agreement, signed the following February, further pledged that the US and Britain would work towards 'the elimination of all forms of discriminatory treatment in international commerce, and to the reduction of tariffs and other barriers to trade'. 2 The traditional interpretation of this process depicted US efforts to install a liberal trade system as a prerequisite to achieving future international stability and Anglo-American Economic Diplomacy during World War II and the Electrification of the Central Brazilian Railway Thomas C. Mills 2 peace. Writing in his memoirs, the chief architect of this system, US Secretary of State, Cordell Hull, described how the freer trade achieved by nations under a global system based on economic liberalism would lead to greater prosperity for all. Such prosperity, he believed, would eliminate the economic dissatisfaction that had allowed the rise of the dictatorial regimes responsible for taking the world to war. 3 Given British control of large swathes of world trade, it was essential for US officials to gain their wartime ally's support for a liberal trade system if the economic foundations for peace were to be securely laid. Writing in the 1960's revisionist scholars described less altruistic motives fuelling US economic aims. Pointing to US economic superiority by the time of the Second World War, they noted that the equality of opportunity afforded under the US trade program principally acted to advance the country's own economic interests. Pitched against British scarcity under the duress of war, the US desire to promote a liberal trade system in this interpretation looked more like an opportunistic attempt to challenge British economic power. 4 More recently, a small number of studies have re-examined the shared assumption that united previous interpretations of Anglo-American economic diplomacy in World War II: the US commitment to a liberal trade system. Both by revisiting the negotiations between the two countries concerning the general economic structure of the postwar world, and by exploring specific instances of Anglo-American competition during the war, these authors have demonstrated the failure of the US to consistently pursue a liberal trade system for the postwar era in its diplomacy with Britain. 5 They have therefore suggested the need to re-characterize the true nature of US economic aims toward Britain during World War II. 3 This article considers Anglo-American competition concerning the electrification of the central Brazilian railway. The diplomacy between the two countries concerning this particular venture was not of great importance in itself. But as this article will seek to show, the negotiations took on significance beyond their own intrinsic worth, as the British Foreign Office used the case to try and establish a broader principle with the US government that the unique conditions brought about by the war would not be used by one country to try and gain commercial advantage for the postwar era at the expense of the other. Protection of British export markets was deemed by the British government to be an essential prerequisite of the country effectively participating in the kind of liberal trade system that the State Department wished to see take shape in the postwar world. For if these markets were not retained for the postwar era, such a system would not provide Britain the means to ensure a favorable balance of payments, which would be essential for the basic economic health of the country. Manufacturers to illustrate the mutual benefits to be obtained from Brazilian development. The study stated the truism that 'the economic value of trade between the United States and other countries increases in proportion to the development of the countries with which we trade'. As well as satisfying Brazilian desires, then, the US policy to encourage the industrial development of Brazil during the war would also increase the country's demand for imports, thereby providing the US with an expanded export market for the postwar years. 6 Despite the increasing dominance of the US in Brazil by the time of the Second World War, the country still provided British industry with an important Anglo-American Economic Diplomacy during World War II and the Electrification of the Central Brazilian Railway Thomas C. Mills 5 export market for steel and electrical manufactures. 7 Moreover, this market was predicted to be one of the fastest growing consumers of such goods in the postwar years. 8 Throughout the war, British officials looked to the Brazilian market as an essential future component of the planned export drive that would allow Britain to achieve a positive balance of payments in the postwar era. 9 If Brazil were to play this role in Britain's postwar economic policy it was essential that the established markets for British goods were maintained throughout the war years. Both British and US economic objectives toward Brazil led to a focus throughout the war years on the ongoing electrification of the central Brazilian railway. For Britain, this was a substantial contract that would firmly secure British manufacturing interests in the Brazilian market; for the US, this project was a major plank of Brazil's industrial development.