459 War Cabinet Minute 4601

CANBERRA, 18 December 1945

DISCUSSION WITH RT. HON. S.M. BRUCE, C.H., M.C.

The Prime Minister welcomed Mr. Bruce on his return to Australia and expressed on behalf of the Government, its appreciation of his services as High Commissioner in London.

Mr. Bruce gave the following resume of his impressions on the matters indicated:-

(i) UNITED STATES - UNITED KINGDOM LOAN AGREEMENT There was a considerable body of opinion which believed that the United States would be faced with serious financial and economic difficulties in a few years, and that the repercussions would fall on the United Kingdom if she became tied to the United States economy through the Loan Agreement. It was considered, however, that the American financial and economic position was so dominant that the United Kingdom would inevitably suffer the repercussions of any depression in the United States, irrespective of the Agreement. Moreover, if the loan had been rejected, dollar credit could not have been created and conditions in United Kingdom would sink to a level lower than during the war. It was essential to obtain credit from America to rebuild British industry and increase its efficiency, so that it would be in a better position to meet the critical period if and when it came.

Two important reservations were, however, made by the United Kingdom in the course of the negotiations:-

(a) The United Kingdom would not consider any modification of the policy of Empire preference, except on the basis of a quid pro quo by America in regard to her tariff.

(b) That a formula should be evolved setting out the conditions under which interest payments by the United Kingdom under the loan would be automatically waived.

The objective in (b) had been achieved, but no arrangement had been entered into in regard to (a) on which further discussions were to take place in 1946.

(ii) EMPIRE CO-OPERATION Mr. Bruce said that there was a keen desire on the part of the United Kingdom Government for closer Empire co-operation, but past attempts to establish the necessary machinery had failed, mainly because thought on this question had hitherto been based on the unified concept of the British Empire and later the British Commonwealth.

He considered that the matter should be approached from the angle of a group of separate British Nations. If we are prepared to participate in the formation of a world organisation for all nations, then it should not be impossible to establish a Council of British Nations.

In the meantime Empire co-operation should continue to be achieved by means of bilateral or multi-lateral arrangements between the separate parts of the British Commonwealth.

(iii) UNITED NATIONS ORGANISATION Mr. Bruce expressed the following personal views on Russia and the importance of leadership by the Great Powers in the United Nations Organisation:-

(a) Russia It was impossible to envisage a successful world organisation without Russia. Her attitude in regard to the control of Bulgaria and Roumania where she sought a dominant voice could be likened to the United States attitude in the Pacific. She is most anxious to participate in the United Nations Organisation and be respected.

Any idea that she was out for world domination or the spread of Communism was wrong. Her actions in relation to countries on her borders were in the nature of an insurance policy to ensure her own security. But this attitude could be overcome if she is brought into the United Nations Organisation and her suspicions allayed.

In regard to the break down of the Foreign Ministers' Conference, Mr. Bevin has determined that Russia's skilful 'nibbling' to gain advantages without a quid pro quo should cease. His attitude in this connection was supported by Mr. Byrnes.

Russia has her hands full with her own affairs and she is anxious to press on with them, particularly the need to raise the standard of living, which her people now know compares unfavourably with other countries.

(b) Importance of Leadership by the Great Powers Mr. Bruce expressed the opinion that as the United Nations Charter had now been established, it was necessary that the Great Powers should be allowed to press on with the work of the United Nations Organisation, and that it would be a mistake for the smaller nations to take up an attitude which might hinder them in this work. The leadership of the Great Powers was essential to the success of the Organisation. It was the lack of this leadership which caused the failure of the League of Nations.

[AA : A2673, VOL. 16]