8. Mr. Grace's arrival on the morning of the 4th day enabled Lord Dudley and Mr. Summers to meet him and Mr. Mackall privately in order to elaborate the discussion which had already taken place with Mr. Mackall and Mr. McKaig (see para. 6).

The extreme seriousness of the situation was impressed upon Mr. Grace, resulting from the complete loss of confidence in Europe in the methods of the sales executives of his own company and of the Steel Corporation and the damage to the prestige of the American Industry as a whole.

The fundamental changes which the delegation felt must be made in the method of approach to a completely effective agreement, as well as in the machinery on both sides of the Atlantic, were fully explained.

Mr. Grace, while, naturally, reserving his opinion on these questions, for subsequent discussion, reaffirmed his desire to reach a completely effective agreement and to ensure its strict observance.

It was agreed to develop the discussion after dinner that evening when Mr. Fairless and certain of the Vice Presidents of both Companies would be present. The delegation was entertained at lunch by Mr. Stettinius and Mr. Fairless of the Steel Corporation with the principal officials, and, in the afternoon, had the opportunity of a full and frank discussion with Mr. Fairless alone.

This disclosed that Mr. Fairless had had little knowledge of the agreement or of the difficulties which had arisen. He was good enough to undertake immediately, personal responsibility for the Steel Corporation in regard to the completion and observance of the agreement, with whatever changes in organization and personal might be required. Nothing could have been more reassuring to the delegation than the wholehearted way in which Mr. Fairless showed his determination, not only to put the Steel Corporation's own position right but to throw the full weight of their influence into the scales to bring Bethlehem and the other leading Companies into line.

He undertook to see Mr. Grace and to discuss the whole situation with him before the meeting at dinner.

10. The discussion developed after dinner as promised. It was conducted with the greatest ability and on the most constructive lines possible by Mr. Grace, who agreed to bring the principal executives of all the leading companies to New York for a meeting and luncheon 2 days later, with the object of securing their personal acceptance of the agreement itself as a whole, and of the responsibility of strict performance of all obligations on the part of their sales executives.

It was recognised that, for the operation of the Agreement; adequate machinery must be created. The memorandum referred to in 4. was discussed, and, while it was agreed that much of it was purely illustrative and that the London Committee must be left to work out its own system of control to secure realisation of quotas, the principle of establishing a London Committee to operate the Agreement received unqualified acceptance.

In addition both Mr. Grace and Mr. Fairless agreed that a representative for the American group of adequate experience and standing to serve on the London Committee and to attend Cartel meetings, as a principal, must be found as soon as possible and must be given proper authority and support. They also expressed complete confidence in the appointment of Messrs. Peat, Marwick Mitchell & Co. as controllers in respect of the Agreement and any of their partners-possibly Captain Roderick Peat-as the independent member of the London Committee.

11. On the following day the delegation was entertained to lunch by the President and Vice Presidents of Republic Steel, an occasion which served to strengthen further the friendly understanding already established with that important concern. Unfortunately, Mr. Girdler, the Chairman, was unable to return to New York from the west during the delegation's visit but Mr. Wysor, the President, on his behalf, accepted full responsibility for the operations of the Company in respect of the Agreement and was in every way as helpful and encouraging as Mr. Fairless had shown himself to be the day before. 12. The vital meeting which took place the following day with the principal Executives of all the leading companies, who had responded to Mr. Grace's invitation without exception-Mr. Weir of the National Steel Corporation, Controlling Weirton and Great Lakes, alone being unable to attend-resulted, happily, in complete and unanimous acceptance of the agreement and of full responsibility in respect of it.

A list of the principal Executives and the Companies they represent is attached marked "C."a

See exhibit S-84C, infra, p. 169.

Mr. Weir, of the National Steel Corporation, was due back from Bermuda the following day and Mr. Grace undertook to see him on arrival. His full acceptance and support was subsequently obtained, through Mr. Grace's good offices, and the picture thus completed so far as the principals were concerned.

In regard to the important question of completing a Sheet Agreement as well as for Hoop and Strip, the principals, while recognising the necessity of allowing the discussions between the sales executives who had been meeting continuously, to develop, undertook to enforce a final agreement and the acceptance of an appropriate starting date, before the delegations returned to Europe. The delegation insisted on the earliest possible starting date, March 1st being the latest they would consider, but to facilitate a settlement with the numerous Ouside companies, March 16th was subsequently accepted by them on undelivered balances of old orders, coupled with February 7th for new orders which must be debited in full as from that date.

In order to avoid any misunderstanding, it has also been agreed that fulfilment of orders shall be interpreted to mean "despatch from works to customer's order whether for shipment or for overland delivery to Canada."

13. The conclusion of these arrangements made it possible for M. Dieudonne and Mr. Elliot to enter into detailed discussions with the sales executives to determine procedure, pending the formation of the London Committee, and for Mr. Summers to deal similarly with the Sheet situation.

While, from the sales executives, figures had only been furnished representing the deliveries and sales of the Steel Corporation and Bethlehem for December (showing undelivered balances as at December 1st for certain products and January 1st for semis in accordance with the Agreement) Mr. Elliot had been able to obtain, through the shipping brokers to the British Iron and Steel Corporation, the complete figures for December from the Customs returns and for January from Ship's manifests in every port-see tables attached, marked "D." These tables disclosed a substantial excess for the American group in every product. Arrangements were therefore made with the sales executives to protect the European group's prices in every market, till further notice, on the lines indicated in the attached cables, marked "E." 5

It was agreed, with the full knowledge and approval of the principals that the British Iron and Steel Corporation's shipping brokers should continue to collect the figures in co-operation with the Steel Export Association officials, thus making approximate figures available week by week and enabling a check to be obtained on possible outsiders' exports.

14. Since some apprehension was expressed in regard to the possible introduction of new outsiders by leading brokers, especially for the Japanese market, Mr. Elliot made representations to three of the leading brokers with whom the British Iron and Steel Corporation has substantial business relations that they must at all times co-operate with the Steel Export Association in regard to Steel Exports.

These representations were accepted without hesitation, the brokers concerned being

The Debevoise Anderson Corp. Inc.
Luria Sons & Co. Inc.

The Schiavone-Bonomo Corp. Inc.

15. The representatives for Luxemburg and France, viz. The Amerlux Steel Products Co., Ltd., were also instructed to maintain close and continuous contact with the Steel Export Association on all matters connected with the Agreement. The German and Belgian groups will be requested to give similar instructions to their representatives viz: The Stahlunion Export Co. and Ucometal Products Ltd.

16. During the earlier discussions Mr. Grace and Mr. Fairless had referred to a possible representative of the American Group for the London Committee, who happened to be immediately available and who they believed would be acceptable to all concerned. The other principals, when consulted, expressed full approval and the gentleman in question (Mr. Todd, lately President in charge of sales of Jones and Laughlin) was at once approached and introduced to the British members of the Delegation. Mr. Todd, who left Jones and Laughlin in November to take a post in advertising, made a most favourable impression on us all and the appointment has now actually been made, on the understanding that he will leave at the earliest possible moment, and in any case, not later than March 1st.

See exhibit S-84D, infra, p. 169.
See exhibit S-84E, infra, p. 170.

17. As previously indicated, we believe that an immediate and radical reorganization of the Steel Exports Association is essential, not merely to ensure the smooth working of the Agreement between the American and European groups, but, quite as much, to give confidence to the American Companies, other than the Steel Corporation and Bethlehem, who are now parties to the Agreement. We are assured that they will insist on this and we believe that Mr. Fairless himself is determined to bring it about.

We must point out that, in point of fact, no written Agreement exists. The document signed by yourself as President of the British Iron and Steel Federation, by the principals of the Cartel countries, and by Mr. Mundle and Mr. Bash is not itself an agreement but a proposal, amounting at most to a promise, that an agreement shall be made as set out in the document if and when certain things have been achieved.

The letter from Mr. Outwater dated November 16th, 1937, does confirm that the conditions postulated have been achieved in respect of the products set out therein and within the limits indicated.

This, however, can hardly be regarded, as a satisfactory basis upon which an agreement of such importance should rest.

The possibility of obtaining the signatures of the principal executives of the co-operating companies was discussed with them but it was explained that this was impracticable and that such an agreement could only be made by a body incorporated under the Webb Pomerene Act.

It will be necessary, therefore, to draw up a fresh and more precisely worded Agreement for signature on behalf of the reformed Steel Export Association, possibly by the newly appointed London Representative.

The Emergency and Executive Committees of the Federation will, no doubt, give immediate consideration to the formation of the London Committee, to the question of the British representation on it and to suitable arrangements being made with Messrs. Peat. Marwick. Mitchell & Co. and to the general modus operandi, with a view to ensuring that no possible criticism can be made of failure to implement the responsibility for strict performance of the agreement which your representatives have accepted on behalf of the Federation.

The same considerations, naturally, apply equally to the Cartel, with whom an early joint discussion will, no doubt, be necessary.

18. Before sailing, personal messages of thanks and appreciation were sent by Lord Dudley to all the principal executives and others who had been parties to our discussions.

19. Finally, while we are of opinion that no more binding assurances could have been given by Mr. Grace and his associates than those we received, we wish again to emphasize that the position can only be regarded as satisfactory when the reorganisation of the Steel Export Association, preferred to in 17, has been accomplished and the requisite authority of Mr. Todd established and assured.

DUDLEY.

H. DIEUDONNE.
I. F. L. ELLIOT.

G. SPENCER SUMMERS.

17/2/1938.

EXHIBIT S-84A

1. The fundamental bases of collaboration are as follows: (i) Complete respect of quotas.

(ii) The fighting of competition with a view to increasing the total exports to be divided.

(iii) The maintenance of prices within the limits allowed by (ii) above. 2. The establishment of tonnages, to determine the quotas arranged at the Agreement of the 26th November last, will be entrusted to Messrs. Peat, Marwick, Mitchell & Co. Meanwhile, the quotas indicated in the Appendix of the said Agreement will be provisionally maintained.

3. The application of the quotas shall be based upon Export tonnages as at December 1st, 1937, in the case of shapes, bars, thick and medium plates and wire rods, and as at January 1st, 1938, in the case of semis.

4. Agreement must also be extended to strips and hoops and sheets black and galvanised, in default of which the European group shall have the option either of fixing another date on which the Agreement shall be brought into operation or of renouncing the Agreement altogether.

5. A Managing Committee shall be set up in London consisting of:

(i) A member of the American Group.

(ii) A member of the British Group.

(iii) A member of the Continental Group.

(iv) An impartial member nominated by Messrs. Peat, Marwick, Mitchell & Co.

The latter shall take the chair and have the casting vote, his object being to ensure the strict observance of the quotas.

6. The American, British, and Continental groups, who during the reference years 1934 and 1936, have made insignificant exports in any particular market, shall abstain from selling the said product in the said market. Except in so far as the small amount of business done shall have applied to "Specials," in which case they shall be allowed to continue to sell to the same extent, the same quality and the same product.

7. The London Committee shall be able, as long as the question of excesses and deficits necessitates it, to require a group to give adequate price protection in respect of a certain product, from several or from all the markets.

8. In the case of all principal markets, which shall be named by the London Committee, all the enquiries for Semis, ship plates, wire rods and also the enquiries in other products of a larger tonnage than the figure fixed by the London Committee according to circumstances, shall be submitted to the London Committee, who shall nominate the group authorised to take the business (the other groups being responsible for protecting the nominated group by quoting a higher price fixed by the committee).

9. If the question of excesses and deficits allows, the London Committee can nominate several groups to quote on the same terms and conditions, or conjointly, dividing the tonnage as may be agreed.

10. All important information regarding any market obtained by the various groups must be communicated immediately to the London Committee. No group other than a single group nominated to negotiate an order may vary the authorised price and conditions without the express sanction of the London Committee.

11. The groups shall submit to the London Committee weekly a statement of all dispatches from their works, all undelivered balances and all orders taken during the week in question. In addition, the booking of any business dealt with by the London Committee in terms of paragraph 8 must be reported immediately.

12. The London Committee shall establish a table of excesses and deficits, at the same time keeping account, as far as they are able, of deliveries made by outsiders, for which, according to the agreement, the various groups are responsible.

13. The figures given shall be regularly controlled by Peat, Marwick, Mitchell & Co., who may accept in order to avoid double audits, the results already arrived at by the Auditors controlling the different groups.

14. The London Committee will deal direct with as regards everything which concerns the American group and with the central bureaux of the product or products in question, as regards everything which concerns the European group.