URGENT

PROPOSED INTERNATIONAL ECONOMIC AGREEMENTS

I understand that the recent proposed international agreements
under Article VII, including the international Monetary Fund, are
not on the agenda for discussion in London by Prime Ministers.

Nevertheless I found an expectation both in London and Ottawa that
they would be raised. Canada particularly is keen to see the
Commonwealth countries committed to agreements that would
stabilise currencies and reduce barriers to trade. Our interests,
in some vital respects, are not the same as those of more highly
industrialised countries such as the U.K., the U.S.A., or even
Canada. Some of these differences are stated in my report on the
London Conference [1], which I have already handed to you. It
seems to me, therefore, that our policy should be to avoid
accepting commitments until we have had an opportunity to study
the proposals more thoroughly.

You may have had an opportunity to consider whether it is possible
by means of subsidies to give protection to industries to
supplement that allowed by the Commercial Policy proposals. It
seems to me there may be serious political, fiscal and
administrative obstacles in the way of the payment of subsidies.

Moreover, industrialists planning new enterprises might be
deterred by the uncertainty of subsidies. If subsidies are thought
to be either impracticable or undesirable, then the Commercial
Policy proposals would have very destructive effects upon
Australian industry and gravely hinder the industrial development
of the country. Without this development I can see no way of
keeping the Australian people employed or of materially increasing
our population, both of which I take to be major aims of the
Government.

My views on the latest draft of the proposed International
Monetary
Fund are stated briefly in the attached cable [2] which I have
sent to Canberra. You will note that, as now drafted, the Fund
seems to me to be opposed to Australian interests. Considerable
modifications, which will be difficult to secure, would be needed
before we should, in my view, approve it. On the other hand, if
the Fund is found to be acceptable to other countries, it may be
difficult for us not to join.

Because of my doubts about the proposals under discussion, I feel
they need much more critical examination before we should proceed
with them or become in any way committed to their acceptance. in
particular I should like to discuss the proposals with Ministers
and officials in Canberra and have an opportunity to give them my
criticisms based on the conference proceedings and discussions I
have had with many people in London, Washington, and Ottawa. I
cannot be back in Australia before the middle of May at the
earliest and may not arrive until early in June.

For all these reasons, I would strongly advise you to try to avoid
any discussion of the proposals at the Conference of Prime
Ministers in London if an attempt is made to have them raised
there. If discussion cannot be avoided, then I would suggest you
should seek to keep the discussion very general and non-committal.

It is important that you should be aware of the deep division of
opinion in the United Kingdom about these proposals and I would
urge you, if you can find time, to read at least the first six
pages of my report on the London Discussions. [3]

L. G. MELVILLE