WASHINGTON, 1 August 1944,

SUPPLEMENTARY NOTES ON THE MONETARY CONFERENCE [1]

1. It is important to stress that the Conference did not discuss
international financial (and economic) collaboration in any broad
way. Discussion was confined to individual pieces of the machinery
which, was finally blue-printed in the Final Act. [2] Roosevelt's
direction to Morgenthau virtually prevented us or anyone else
opening a debate on the general principles on which the Joint
Statement of Principles tested-

'In formulating a definite proposal for an international monetary
fund both you and the other (American) delegates will be expected
to adhere to the joint statement of principles of an international
monetary fund announced April 21st, 1944.' [3]

2. This fact together with the terms of the invitation [4]
explains to some extent the closeness of the final document to the
Joint Statement, and the weak tactical position of ourselves in
seeking to have the employment agreement discussed, and of various
Latin Americans in introducing proposals affecting commodity and
commercial policy.

3. The procedure also underlines the value for Australia (assuming
that the subject is one in which we want to assist in getting a
final proposal) of participating in early 'expert' discussions
before we enter a full scale conference. In this Conference the
balance of forces was all against any radical departure from the
prior agreement between officials of the United States and United
Kingdom unless one of these two took the initiative (as in fact
U.K. was obliged to do over exchange rates following House of
Commons criticism).

4. A second conclusion one can draw is that, within limited
fields, we should respect the power of the Latin Americans, 19
strong and enjoying United States tolerance, to force their own
requirements through a conference of 43 heads. The only sensible
counter is the undemocratic method of avoiding votes, which was
the system generally used in the Conference. But on some issues
such as management and voting, location of head office, gold
depositaries, where U.S. and U.K. were not in agreement and the
matter was forced to a vote, El Salvador and Panama carried
mathematically twice the firepower of Australia. The decision to
allocate two Directors to Latin America indicates what may prove
to be an unfortunate defensive regionalism among economies with
whom Australia, New Zealand and others have extensive common
interests. I can offer no ready suggestion as to how best to meet
the situation, except perhaps through more direct and continuing
contacts.

5. I would refer you to Brigden's paragraphs 7 to 9 [5] on the
Latins. In addition I would add that United States tactics seemed
to be to keep Latin American quotas down, which also keeps their
voting strength down, but to flatter their status and win their
support on other matters such as those mentioned in 4 above by
giving them a loud voice on the Executive. United States officials
placed an emphasis on formal voting strength and election
technique which appeared quite exaggerated to those British and
Dutch delegates who have had some experience of the relative
importance of expertise and persuasiveness, in management of this
type of institution.

6. Presentation of the schedule of quotas after 15 of the original
19 days had gone by caused a dramatic interlude. One subject after
another, especially where determination of voting was required,
was 'deferred' pending decisions about quotas. Tempers were
becoming frayed at the suspense, especially among some Europeans,
India and others. From memory, I don't think many Latins showed
any uncertainty. After a series of individual interviews with
Morgenthau in which offers and responses were made in private, a
quota committee of 15 presented its list. Given the ceiling on the
total, Australia has not done badly relatively to some others.

7. After China, India, France, Greece, Australia and some others
had registered disappointment or flat reservation, the U.S.

spokesmen [6] stepped in to stop the rot. Throughout the previous
technical discussions the Americans had been at pains to stress
the stabilising functions of the Fund, and the irrelevance of war
devastation and reconstruction needs. But on this occasion Vinson,
in an atmosphere saturated with emotion, declared the greatness of
China, France and other Europeans, described their war sufferings
and promised that their needs would not be forgotten. These
sentiments, followed by an appeal for United Nations solidarity
which to my sceptical mind was misplaced in a technical conference
of officials, got the schedules of quotas accepted with formal
reservations only.

8. Nash was nettled that New Zealand, unlike many countries
including Australia, did not receive an increase over the figure
stated in the American draft [7] circulated last year, and hinted
at some behind the scenes activities in which New Zealand was not
a party.

9. The employment resolution [8] had a fair spin, but never had a
real chance since it was relegated with a mob of stray hobby
horses from Mexico, Norway and others to Commission III which was
postponed until almost the last week. There was no time to work
effectively on the delegates from Latin America and the Middle
East who were strongly represented on the Commission. Odd
suggestions kept cropping up to the effect that presentation of an
employment agreement implied a slur on national willingness to
carry out an employment policy. Stolid opposition came from the
U.S. delegates (Treasury and State Department) from the outset,
and their argument that the terms of reference did not allow
treatment of our proposal was supported by Canada. One or two
American officials in private conversations were quite frank about
the political difficulties raised by our proposal but Pasvolsky
[9] and Livesey [10] (particularly the first) hedged by
maintaining a rather abstract argument about the extent to which
national policies could properly (in five days) be established as
matters of international concern.

10. Ronald [11] for the U.K. supported us strongly at all times in
open session, and Nash was helpful. Nash had left before the final
session when the resolution went to the vote.

11. U.K. was very worried about the Committee dealing with
Mexico's bimetallic 'silver' proposals, which was loaded with
silver countries with U.S. holding the balance and threatened by
an aggressive letter from a large number of silver Senators and
Congressmen. However, a very tame resolution came forth. On the
initiative of the U.K., a resolution to make entry of Germany and
Japan into the Fund dependent on membership of a world political
organization was squashed. Similarly the U.K. played an active
part in ensuring that recommendations for action in respect of
axis assets in neutral territories and looted property did not
ignore the work which is allegedly being done already in this
field by an inter-allied committee. The U.K., too, succeeded in
eliminating from the resolution on commercial policy and commodity
policy anything which specifically recommended an international
conference, upon which some Latin Americans had set their hearts.

A. H. TANGE