[12 December 1948] [1]

REPORT ON THE FOURTH SESSION OF THE ECONOMIC COMMISSION FOP, ASIA
AND THE FAR EAST

Held at Lapstone, N. S. W November 29th to December 11th 1948

[matter omitted]

4. Optimistic hopes about what might be achieved at the Fourth
Session were not realised. The Session was not without
distinguishable overall results but they were fundamentally of a
negative character. It did not simply result in a continuance of
the kind of work which had been carried out hitherto. Much was
recognized as being unprofitable, and although a new direction was
not given to the Commission's work, the ground was cleared for re-
examination of the functions and organization of the Commission
which will be possible when the Committee of the Whole meets in
March, 1949. This was not a spectacular achievement, but it can be
said that the fundamental questions about the kind of activity
which the Commission might profitably pursue, which were becoming
evident at the Third Session, were not sidestepped. They were
recognized and left for solution in March, by which time it is
hoped that member governments will have had time to digest
thoroughly the reports submitted so far and make specific
proposals. The Commission reached a turning point at the Fourth
Session, but the new direction it will take has not yet been
decided.

5. The crucial question of supplies of capital goods and financial
assistance from highly industrialised countries outside the region
seem to have been settled for the time being, at least, as a
result of discussions at the Fourth Session. This was the deciding
factor in forcing some revision of the Commission's work. At the
Third Session a resolution had been passed appealing to the more
advanced countries to set aside an 'adequate share of their
production of capital goods and basic materials' for Asia and the
Far East. Both the United Kingdom and the United States of America
submitted replies to this appeal at the Fourth Session which said,
in effect, that their respective countries fully appreciated the
desire of Asian countries to obtain greater supplies of these
items and that they were already doing all they could to meet the
demands. However, commitments at home, and the legitimate needs of
other countries, were so great that they could not hope to satisfy
all requirements. Their governments had only very limited controls
over the direction of exports and they could not promise anything
in the way of a special allocation for Asia and the Far East as
requested by the Commission. On the question of financial
assistance, especially for any project in the nature of an Asian
Recovery programme, the United States delegate said that his
Government did not favour financial provision through a multi-
governmental body such as ECAFE. The United States Government
believed that outside financial assistance should be provided
primarily through private investment, or when such investment was
not available on reasonable terms, through the International Bank
for Reconstruction and Development or the United States Export-
Import Bank for specific projects. Since the former constituted
the greatest potential source of financial assistance, Asian
countries should create the domestic conditions which would
encourage private foreign investment.

6. Hitherto, there had been some general feeling that ECAFE might
contribute substantially to the economic reconstruction and
development of Asia and the Far East by constituting at least a
co-ordinating point for the realisation of outside assistance. It
did manage, at the Fourth Session, to give some indication of the
magnitude of the foreign exchange requirements (7.2 billion
dollars) of the ECAFE countries for their five-year reconstruction
programmes, but it is clear now that blanket assistance for such
purposes is not forthcoming and the matter now rests with
individual countries to arrange whatever they can with private
investors, governments or governmental agencies.

7. This has produced a shrinkage in the possible sphere of
activity for ECAFE as an inter-governmental body. The problem of
the functions of ECAFE, as distinct from those of the individual
governments, was also raised in some of the reports submitted by
the Secretariat and Working Parties. In the 'Report on Financial
Arrangements to Facilitate the Trade of the Countries of the ECAFE
Region', for example, we find a recommendation 'that governments
reinforce their efforts to put a stop to the process of
inflation', and in the report on Industrial Development
governments are urged to increase coal production. These are
simply two examples from a considerable number of recommendations
scattered throughout the various reports which tell governments
the obvious about matters which are their own responsibility and
do not involve any further action by ECAFE. Recommendations of
this character do not justify the time and expense involved in
holding sessions of the Commission. They are largely technical
matters and committees of experts might well make such
recommendations direct to the governments concerned, though in
most cases the governments' own experts would probably be better
informed.

8. This is not a criticism of the Secretariat or the Working
Parties. It would be found that, generally speaking,
recommendations which concern individual governments are often the
only ones that can be made, because, in the ECAFE region, the
scope for inter-governmental action is much more limited than,
say, in Europe where the economies of the countries concerned are,
to a considerable degree, complementary. In the ECAFE region, on
the other hand, the economies of the countries are more
competitive than complementary (excluding, of course, Japan)
except, for example, in food supplies, which, however, must be
dealt with as a world problem and not on a regional basis.

Similarly, in the question of monetary arrangements, the attempt
to deal with these on a regional basis broke down because the
economic links at the basis of currency areas cut across the ECAFE
region. At present, in most cases, the ECAFE region is a
geographical rather than an economic or political unit.

[matter omitted]

46. Both the Australian and United Kingdom delegates criticised
the endeavour to deal with trade and financial arrangements on a
regional basis. The Australian delegate pointed out that
notwithstanding geography the basic trade pattern of the ECAFE
countries was not intra-regional. The important links were between
ECAFE countries and countries outside the region. The world
currency arrangements cut across the geographical relationship
because they corresponded to basic trade patterns. It was
therefore fruitless to press the question of regional currency
arrangements if the currencies which it was useful to hold were
world currencies. The Indian delegate was the most insistent for
further study of currency problems on a regional basis. It was
finally agreed to request the International Monetary Fund 'to
undertake a study of balance of payments, trade movements, etc.,
in the region, and advise in the light of such study and of
similar studies undertaken in other regions, whether and to what
extent the establishment of a multilateral clearing system for the
ECAFE region might be expected to remove any financial or payments
impediments to trade within the region or otherwise to increase
trade'. The Australian Delegation supported this resolution
because it steered the Commission away from what was obviously not
a profitable line of investigation and left the question to the
Monetary Fund which could treat it in its proper world
perspective. It also covered a recommendation in the report that a
study should be made of 'the total foreign exchange resources and
earnings of the region', with a view to examining the
possibilities of utilizing them most effectively for the benefit
of the region. A consolidated resolution on Measures to Promote
Trade was adopted which covered adequately the remaining questions
raised in the report.

[matter omitted]

CONCLUDING COMMENTS
76. So far as the economy of Asia and the Far East is concerned
the work of the Commission illustrates the supreme importance of
an increase in food production at this stage for the recovery of
the region. Food is the principal commodity in which the region
has some degree of inter-dependence and the level of production is
of supreme importance to both exporting and importing countries.

To countries such as Burma, Siam and Indo-China food is the
principal source of foreign exchange so that increased food
production means higher export income and greater capacity to
purchase imports needed for reconstruction and development. To the
importing countries such as India, Ceylon, Malaya and China, high
food prices are one of the principal causes of foreign exchange
difficulties and increased food production in the region would
mean higher living standards and the release of foreign exchange
for the purchase of their reconstruction and development
requirements. As the United
States delegate pointed out, it is paradoxical that a region which
is primarily food producing should be a net importer of food. It
may not strictly be a paradoxical state, but it is certainly an
indication of a basic weakness. Again many of the monetary
problems of the region may be traced to food shortages since it
has been home out by experience that when supplies of basic
necessities such as food are below customary levels, scarcity
prices tend to rule and influence the entire price structure
through the continuous pressure for higher money incomes. So long
as there are such shortages even the most rigid control is often
insufficient to prevent continuous inflation. Political
instability is an almost automatic consequence. Whichever way we
turn the supreme importance of an increase in food production is
inescapable. This sometimes tends to be obscured by attention to
the newer plans for industrial development but none of these plans
is likely to materialize until there is a marked improvement in
food production and agricultural output generally.

77. As mentioned already in this Report, the Commission's
activities in the field of Industrial Development have reached a
stage of re-examination. It is now a question of what inter-
governmental action is possible and profitable. It is clear that
spectacular activity involving large-scale outside financial
assistance for reconstruction and development programmes must be
written off, for the time being at least. This, however, although
it reduces the sphere of possible inter-governmental action
through ECAFE, does not eliminate it. Asian economic recovery and
development will involve a long period of co-operation between
East and West and within present limits set by shortages of
foreign exchange in the region and large demands on the world's
supply of capital goods there are still opportunities for at least
lessening the difficulties by continuous inter-governmental
consultation. One of the difficulties at present with the
Commission is that information is only presented for consideration
once every six months. But with a permanent committee requirements
of Asian countries could be brought forward continuously and
countries outside the region could make requests for the kind of
information they required through their representatives.

Australia, for example, would require detailed information on the
kinds of capital goods required by Asian countries because of the
restricted and specific nature of the kinds we might be able to
supply. These kinds of requests could be made more appropriately
through a permanent committee than to full sessions of the
Commission. Permanent committees would probably eliminate the need
for more than one session per year. The problem is largely one of
continuous examination of requirements alongside continuous
examination of capacity to assist. These remarks are put forward
as suggestions of the light in which proposals for reorganization
of the machinery of the Commission might be examined. Otherwise,
the Commission seems fated to become purely a fact finding and
liaison body. This would not justify the present scale and
frequency of the Commission's meetings.

E.E. WARD
Alternate Delegate