UNITED NATIONS ECONOMIC PROPOSALS

1. The Australian Government has been invited [1] to send
officials to London on the 21st February to take part in Empire
discussions on various post-war economic proposals which were
drafted by United Kingdom and United States officials.

2. The proposals which are outlined in the attached document [2]

include:-

(a) An international monetary organisation for stabilising
currencies and alleviating balance of payment difficulties;

(b) An international investment bank to provide long-term capital
for development purposes;

(c) An international commodity organisation to supervise the
setting up and working of international commodity arrangements;

(d) An international commercial policy organisation to supervise
and assist implement an international code of commercial
behaviour;

(e) An international labour and employment organisation to
coordinate the policies of the above bodies, and to promote
policies of full employment;

(f) An international food and agricultural organisation to assist
in achieving increased consumption and increased productive
efficiency.

3. There have been several international conferences not on the
level of political responsibility but on the official or expert
level:-

(a) October, 1942. Officials from the Dominions and India met
United Kingdom officials in London to discuss the various
proposals. The monetary proposals were the only ones discussed
fully. [3]

(b) May, 1943. The United Nations Food and Agricultural Conference
at Hot Springs recommended that Governments should accept certain
obligations to raise standards of nutrition, and the setting up of
a permanent organisation. [4]

(c) May, 1943. Discussion on monetary proposals took place between
United States and Australian officials. [5]

(d) June, 1943. Officials from the Dominions and India met again
in London with United Kingdom officials this time to discuss
primarily commercial policy prior to an approach by United Kingdom
to United States. [6]

(e) Sept.-Oct. 1943. United Kingdom and United States' discussions
among officials at Washington on all proposals. Substantial
agreement reached on monetary proposals, and full discussions and
a measure of agreement on the other proposals. [7]

(f) Nov. 1943. America communicated outline of proposals to the
Russian Government, but did not commence discussions. [8]

(g) December, 1943. America held discussion with Canada. No
results known. [9]

(h) Feb. 1944. Further Empire discussions proposed prior to
continuing United Kingdom - United States discussions.

4. The Department of External Affairs has watched the progress of
all these discussions and the development of plans; wherever
possible it has caused an agreed inter-departmental point of view
to be put forward, and our overseas representatives have been
instructed to keep us in touch. My Department has taken the
responsibility for having the various proposals analysed, and for
having Australia's interests in relation to them carefully
considered. With the co-operation of the Department of Post-War
Reconstruction in all these matters, the Department of Commerce in
the proposals for the regulation of commodities, of the Department
of Customs in commercial policy and of the Treasury in monetary
and financial matters, departmental documents have been prepared
which give a considered view of Australian interests and the
attitude which might be adopted. An approach calculated to protect
Australian interests has been set out and is generally agreed
upon.

5. My own view of the proposals is briefly as follows:

Employment: Australian officials have consistently pressed for an
employment agreement which would be an undertaking by nations to
pursue policies of full employment, and to consult each other on
measures which might be adopted in following an employment policy.

Australia is particularly interested in the level of consumption
and therefore in the level of employment overseas, and we should
regard high levels of employment particularly in the United
Kingdom and the United States as a condition of our acceptance of
any significant restrictions of our freedom to protect our
economy. The employment proposals which Australian officials have
put forward are outlined briefly in the attached document."

Monetary Discussions : I see no reason why we should not attempt
to reach agreement on some plan for stabilising rates of exchange.

At the same time there appear to be many difficulties and the
position of dependent economies, like our own, is not adequately
safeguarded. New Zealand is in an even worse position than
ourselves. Having at her disposal a limited export income, New
Zealand must necessarily continue import restrictions in order
that those goods most required can be bought with the limited
resources at her disposal. Australia may be in a similar position.

If, however, our needs can be met adequately there may be certain
advantages in having an international monetary fund which would
guarantee to us a satisfactory quantity of overseas exchange, and
would increase the purchasing power of others. At the same time I
view the discussions with much scepticism and with no enthusiasm.

Commercial Policy: The scheme as it stands at present, which is
outlined in the attached document, I regard as quite out of the
question at present as a practical proposal. The United Kingdom
suggestions include the proposals that some percentage or general
reduction should be made throughout the world in all tariffs, that
there should be control of export subsidies, and that import
restrictions by licensing should be abolished except in certain
approved circumstances.

International Regulation of Primary Products: The Secretary of the
Department of Commerce, Mr. Murphy, in sending to my Department
his considered views on this subject, stated:-

'If agreements were negotiated and operated successfully for wool,
wheat, meat, butter and some fruits, Australia would not only lose
interest in Imperial Preference, but would no longer need to seek
bilateral agreements with foreign countries - unless our secondary
industries become sufficiently important to cause us to seek
favourable import terms for them in other countries.

It is possible, therefore, that the prospect of success for
international arrangements for a wide range of important primary
products might cause the great industrial countries of the world
to be apprehensive of their own bargaining power. Primary
producing countries would not be dependent on bilateral
agreements, and bilateral agreements might therefore be limited to
agreements between exporters of secondary products.

The great industrial countries might therefore prefer that there
should not be a series of successful international arrangements
for primary products.'

I agree with this view and I think that part of our constructive
policy should be to press for agreements of this character,
provided of course that they allowed for an extension rather than
a contraction of production and consumption.

6. I should like to emphasise further that I see no good reason
for disguising the fact that the interests of Australia and New
Zealand and other countries greatly affected by export markets for
primary products may not be in conformity with the interests of
industrial exporting countries like the United Kingdom and the
United States. While it may be in their interests to have tariff
reductions and not to have extensive commodity control schemes, it
is clearly in our interests to arrange for orderly marketing of
our primary exports, and until we can see more clearly world
conditions and our own industrial conditions to avoid any
commitment regarding tariff reductions. Cabinet should know that
for some years past we have on the departmental level been
attempting to negotiate a trade agreement with America which would
have given very real benefit to Australian export trade and would
in some way have compensated us for the concessions we made to
Britain in 1938 in order to help her make an agreement with
America. [11] I know from personal conversations that last June
Mr. Hull was in favour of the conclusion of this agreement.

However, owing very largely, I believe, to pressure from the
United Kingdom, he has been persuaded not to pursue the matter,
giving as his reason 'domestic political reasons'. [12]

7. The policy which I believe we should adopt is to press for an
order in which these agreements are discussed and brought into
effect, giving a higher priority to employment agreements and to
certain aspects of the monetary discussions, commodity
arrangements, and putting such aspects of commercial policy as
tariffs etc. low down on the list. Our suggestion should be that
commercial policy agreements involving reductions or modifications
of protection should not be concluded until after the war when we
are confident that full employment is being maintained, not only
in Australia, but in other parts of the world.

8. If we adopt this approach, it is not necessary to raise a storm
by questioning the broad principles or objects of Article VII. We
merely state that in our considered opinion, the best way, and in
fact the only way, of achieving the objects of Article VII is to
seek first those conditions of expanding production and full
employment set out in that Article, and then when this has been
substantially achieved, to consider the remaining matters
associated with commercial policy.

9. As important as the details of the plans to my mind is the
method of consultation which has been followed in these matters.

All proposals, with the exception of the employment proposals
which the Australian officials have put forward, are the result of
United Kingdom United States discussions. These two countries are
not as greatly dependent upon overseas conditions as ourselves,
New Zealand, South Africa, and in fact most of the others of the
United Nations. The intention is to consult China and Russia prior
to United Nations conferences. But these four countries are the
four least affected by overseas conditions and as yet the point of
view of countries dependent upon overseas trade has not been
seriously considered. In the case of the Relief Agreement [13]
these four countries not only put forward the draft agreement, but
also set themselves up as the Central Committee. I did my utmost
to qualify this and succeeded to some extent. [14] But we must see
where we are going.

10. We have made it quite clear that in our opinion we should be
consulted at an early stage of discussions and informally we have
pressed for inclusion in all discussions. But I find that in
answer to a question in the British House of Commons, this was
denied by the President of the Board of Trade on 19th October
last. The question and answer are illuminating.

Mr. Quintin Hogg : 'Is it not a fact that informal protests were
made on behalf of the Australian Government with a possibility to
their being represented in these informal and exploratory
discussions and is it not a fact that these protests were
rejected?'
Mr. Dalton: 'No, sir.'
11. So far all these discussions have been on the offical or
expert level and it has been emphasised that there is no
government commitment.

In fact this is a misleading statement. The Food Conference was a
conference of officials but all the United Nations were asked to
adopt the proposals made, and in fact there was by way of
recommendation an implied commitment which was almost impossible
to avoid. It so happened in this case that we did not wish to
avoid the commitment and we succeeded in putting forward our main
principle, viz. full employment. The stage has been reached when
there is a large measure of agreement between the officials of the
United Kingdom and the United States and I suggest our attitude
should be that no further discussions should take place on the
purely official level, and that so far as possible governments
should appoint their own ministerial representatives to all future
meetings, or that their officials should act under clear
government instructions.

This is of particular importance in regard to commercial policy
because the present proposals appear to be somewhat academic and
at least politically impracticable. Realistic political
considerations could be more adequately taken into account if some
degree of government responsibility were involved.

12. These comments of mine have been seen by Mr. Chifley, who is
in general agreement with them, and I believe they reflect to a
very large extent the attitude which departmental advisers have
adopted in the documents referred to in paragraph 4.

13. I recommend therefore that:-

(a) A telegram be sent to the United Kingdom Government accepting
the invitation to Empire discussions and stating that we consider
the United Kingdom - United States discussions should now be
broadened to include the point of view of countries more dependent
upon external conditions.

(b) That any Australian official taking part in international
discussions even on an expert plane with no government commitment
should have some government direction, and that we should inform
the United Kingdom and United States Governments that in our view
the time has now arrived for government responsibility in
discussions of these matters.

(c) That the Australian Government officials be instructed to urge
that greater importance be attached to employment agreements (as
outlined in the attached document paras. 1-7) and that an order of
priority be adopted as indicated in paragraph 7 above.

(d) That a Sub-Committee of this Cabinet be appointed to determine
what our attitude should be on the details of these proposals.

[15]

H. V. EVATT