During the period in which I have had the honour to act in China as His Majesty's Minister for the Commonwealth of Australia, I have had an opportunity of studying the situation in the Eastern theatre of war and the policies of various Pacific states. I have also seen the reactions of leaders of these states to the statements of war aims or peace objectives which have been issued.
I have, therefore, formed some views of the type of peace settlement which is necessary for the stability of the Pacific and how this can be adjusted to a world settlement. I have the honour to present these views in this despatch.
I shall approach the subject as a regional problem. It is true that the war is a world war and peace is indivisible. Thus Pacific and Atlantic issues interact on one another; forces, economic and military, do not confine themselves within lines marked on the map. But every man has his domicile; the centre of his interests and his ideas is in the country in which he makes his home. A dweller in the Pacific looks on war issues in quite a different way from a European. An Englishman will adopt quite a different attitude towards the disposal of the Pacific Islands from that held by those who are in the neighbourhood.
There is no such thing as global opinion. There is opinion on global issues but its actual character will be affected by the place where the thinker lives. Recent history shows that it is necessary for those in the Pacific to assert their point of view.
Europeans have shown an interest in the Pacific which is surprisingly small when the magnitude of their economic stake is considered. On the other hand, opinion in Pacific communities has not received the weight to which it was entitled. This is probably due to the fact that such opinion has not been consistently formulated and supported by expert research.
It may well be that the European point of view is the right one or that the Pacific peoples, even if their view is correct, have not the strength or the cohesion to enforce the acceptance of their viewpoint. If so, the European view will have to be adopted; but those who live in the Pacific will have the satisfaction of having put their case. I have, therefore, confined myself in this despatch to the consideration of the problems of peace as they affect Pacific countries dealing with the interests of Western Powers in the Pacific as they arise.
It is sometimes thought that the sole function of a peace treaty is to bring a war to an end satisfactory to the victors. It is now universally recognised that this will not be enough. The ravages of war have imposed a superhuman task of reconstruction. Such declarations as the Atlantic Charter have promised great improvements in the pre-war system. The fact is that the coming peace must register the conclusion of an ideological war between belligerents who are fighting to establish antagonistic conceptions of a world order. The Axis Powers seek to impose on the world a totalitarian autocracy ruled by one or two nations to which all the rest are subject. This attempt is no doubt the expression of a philosophy which regards force as the proper determinant of all human relations but it is also supported by its advocates on the ground that it is the only rational system for which average men are fitted, that it permits a more scientific organisation, gives more security and greater production and, therefore, higher living standards.
These ideas are illusory. The activities of human beings cannot be evoked by mechanisation of this kind. The United Nations are fighting for a democratic way of life which includes free institutions within the state and the rights of small nations to live in the company of large ones. They have the faith that this way of life will not only produce happiness and political satisfaction but that it will preserve initiative and spontaneity and, in this way, produce more of the various goods which are needed.
It is universally agreed that the Four Freedoms  were not being realised in the pre-war world and most people will subscribe to the view that these freedoms cannot be attained when every state is pursuing a selfish policy regardless of the interests of others and unless there is some organisation in which their common interests can be mutually determined.
It is also true that while in the last 100 years modern inventions led to production of unprecedented magnitude, this has increased international tension rather than reduced it. This was probably because the political system of separate sovereignties had not adapted itself to the potentialities of economic development. The result has been a world-wide instability which was a potent underlying factor in the origins both of the last and of the present war. These wars mark the efforts of an uncoordinated system to adjust itself to new scientific forces which, although mainly beneficial, are so powerful that, if maladjusted, they may become destructive.
The United Nations believe that this adjustment can only be made along the lines of freedom and that autarchic methods not only destroy human values but paralyse all forms of beneficial development. For the democratic Powers victory is thus essential.
But even if victory is won, many of the disturbing factors will remain and the peace must contain some constructive means for remedying this instability.
It might be thought that new powers and new sources of wealth should be a benefit and not factors of instability and war. But the fact is that political sovereignty is exercised in states of very unequal size, resources and power and the impact of new developments affects them very differently; while each considerable change in industrial methods or economic development tends to vary the relative strengths of nations. Thus, there is a constant need for adjustment in a world of separate sovereign states.
This inequality between nations is important for it has a tendency to put the small state within the power of the larger state and in an unco-ordinated international system, the small states are too often crushed or brought within the orbit of others. Moreover, if the larger state can dominate the smaller state, its power against others will be increased and it can pursue this dialectic of power until it becomes supreme. It was the appreciation of these facts that led to the theory of the balance of power, the object of which was that no state should be able to outweigh the others and establish supremacy.
Up to the present century, the history of Europe has revealed a constant struggle for supremacy countered by attempts to create a balance. When these attempts have failed, war followed. In such a constant struggle there is always a temptation for a state to aim at supremacy so as to solve all the problems of international rivalry in its own favour once and for all. The issue is seen as a dilemma, world power or downfall. This is the dilemma which the Axis Powers see before them.
It will be seen that although militarist Powers talk much about military virtues such as courage, they usually go to war against small states and rarely tackle one their own size. Germany first crushed Austria, Czechoslovakia and Poland and only went against Russia because she thought the Russians were weak. As a state follows a military philosophy, it develops this dialectic and uses the inequalities of states as strategic factors on its road to supreme power. In a jungle world, the strategic significance of these inequalities is. inescapable. Geographical factors, differences in size, in economic resources, in industrial potential, lack of self-sufficiency, vulnerability to attack by sea or land or air may all be exploited by the Powers which have the advantage. The whole policy of military states is to prepare by armaments and other weapons to bring these advantages to account at the expense of weaker states.
A realistic approach to a peace settlement, therefore, must take as its starting point these strategic factors for unless we know what they are we shall be unable to formulate the organisation necessary to transcend them and enable all states, large and small, to make their appropriate contributions to a civilised world order.
From the above considerations, we may conclude that the tasks involved in a peace settlement are four-fold. The peace must bring about a satisfactory termination of the war, repair war's devastation, devise measures for preventing the weaker states from being crushed and set up a stable world order.
A complete treatment of all these phases of the peace would take me far beyond the limits of a despatch. The various elements are so interrelated, however, that it is necessary to treat the subject as a whole; but even if the treatment took the form of a sketch leaving details to be filled in after further study, the despatch would exceed the usual dimensions. I am convinced, for example, that few people in Australia fully appreciate the strategical factors of the Pacific area and as I regard this approach as of the first importance, some review is essential.
In order to present my views in a reasonable compass, I have, therefore, summarised in this despatch my views on the strategic situation and the conditions of a constructive peace and have presented the more detailed reasoning in two Annexes  as follows:-
Annex 'A' The Conditions of a Constructive Peace in the Pacific.
Annex 'B' The Strategical Survey on which 'A' is based.
The outstanding fact in the strategy of the Pacific is the superiority of Japan over all other Pacific states in all the resources available for a struggle for power. The situation may be analysed as follows:-
(a) Japan has a commanding geographical position in relation to the parts adjacent to her. Britain has never occupied so strong a position in relation to the continent of Europe.
(b) Japan's political institutions are more stable than those of any other Asiatic Power.
(c) The military organisation of Japan is immensely superior to that of any other Asiatic Power.
(d) Japan has built up a well-organised industrial system and her industrial potential is far greater than that of any other Pacific people.
(e) This economic superiority of Japan is not inherent. Other Powers surpass her in resources but these resources are undeveloped and the conditions necessary to develop them are not present.
(f) Japan is vulnerable because her indigenous resources are weak and she has built up her position on an import and export economy which could be interrupted if an effective blockade were established.
(g) If Japan can consolidate the conquests she has made since the Pacific War started, she could entirely remedy her inherent weakness and form a self-sufficient autarchic bloc. Australia would be powerless against such an Empire.
(h) Of the members of the United Nations group who have frontiers on the Pacific, Russia exercises a considerable weight in the Pacific balance of power but has been preoccupied by internal difficulties and dangers on her Western front and Japan has had little difficulty in masking her; the United States and the British Dominions are too remote from the centres of gravity in the Pacific to exercise their weight without the most intensive preparations, which some of them were not, at first, willing to make. With the loss of Singapore, the Philippines and Burma, they have no bases from which to attack Japan.
(i) The stability of the Pacific depended for half a century on the willingness of certain Western Powers-Britain, the United States and the Netherlands-to defend very rich possessions they held for the purposes of trade in the Pacific. Japan for years hesitated to attack them but the provisions for defence made by the United States in the Philippines, and the Netherlands in the East Indian Empire, were perfunctory and though Britain had gone to great expense, her bases were not adequately manned and fell quickly to Japan.
From this analysis it can, I think, be concluded that the superiority of Japan, though marked at present, is based on weak and temporary foundations and that it can be remedied by her defeat. Military victory alone will not, however, compensate for the superiority she at present possesses. The economic resources of the other Pacific peoples must be built up by a process of development such as I set out in the later sections of this despatch and, in the meantime, by an organisation which will protect the weaker peoples. The greatest danger is that the hold of the Japanese over their new possessions may be consolidated while the United Nations are finishing off the Germans.
The reconquest of these territories is a most difficult military problem. Moreover, it depends to some extent on the preference of the inhabitants for a return of the Western Powers. This preference cannot be assumed. There is no sign that the realities of this immediate situation have penetrated the inner circles of Whitehall and Washington.
THE CONDITIONS OF A CONSTRUCTIVE PEACE
Upon this basis the conditions of a constructive peace should be discussed. The provisions necessary in a peace treaty may profitably be considered under the following heads:-
(1) Measures necessary to end the war.
(2) Measures which would facilitate the settlement of international issues without war.
(3) Measures for securing economic stability and progress. The planning of a peaceful economic order.
(4) Measures to secure political stability and the development of appropriate political institutions.
(1) Measures Necessary to End the War (a) Technical military details. It will be necessary to terminate the struggle, disarm the defeated Powers, occupy their territories and take measures to prevent the struggle from being renewed.
These are technical matters which need not detain us. The suggestion that after having made these dispositions we should wait for some years so that the peace can be discussed in a dispassionate atmosphere is fraught with a great many dangers but it is useful as showing the need of the United Nations to agree beforehand on the principles of the peace they want.
(b) Surrender of the fruits of Japanese aggression in this war.
All conquests should, without question, be returned to China and the other Asiatic Powers from which they were taken. The Colonial Powers among the United Nations will have played such a part in the victory over the Axis that prima facie their claims to a return of their colonial territories should hardly be challenged.
But the following questions will have to be determined:-
(i) Whether conditions in the interests of the indigenous inhabitants will be attached to their tenure.
(ii) Whether there shall be any redistribution of territories in accordance with national power and strategic conditions.
These are discussed in Section (1) of Annex 'A'. If colonial powers are restored, it will, in my opinion, be essential to make the tenure conditional on a recognition of trusteeship for the indigenous inhabitants and of responsibility for raising their economic and political status.
(c) The old Japanese Empire. Manchuria and Formosa should be returned to China, Korea to the Koreans; the destination of the Japanese Mandate is more questionable and it may be necessary for the United States to assume responsibility.
(d) Reparations from Japan. The only form in which reparations can be paid is in kind, that is to say, in assets which can be transferred to recipient countries and made available in their economic systems. Payment of such reparations to China would probably exhaust Japanese capacity and the other nations should be prepared to abandon any claim if China is reasonable at the peace table.
(e) Punishment for atrocities. Though revenge after a war is of doubtful value as a constructive factor, it is difficult to find logical grounds for not punishing those found guilty of mass massacres and other atrocious crimes. If this is agreed on, a code should be drawn up defining the crimes to be punished, the principles of responsibility and methods of proof. Expert tribunals should be set up manned by judges from neutral nations.
(f) Rehabilitation and demobilisation. There is a likelihood of an iml mediate post-war chaos and preparations should be made to prevent a breakdown. These preparations should harmonise with the long term schemes of reconstruction considered later in Section (3).
(2) Measures to Facilitate the Settlement of International Issues without War Total war is destructive of everything of importance to civilisation and mere commonsense dictates that other means be found for determining international issues. The main difficulty seems to be that human institutions have always employed some degree of force and it is difficult to find a means of using and controlling it while the source of power is in the hands of separate states.
It is generally agreed, therefore, that some kind of international organisation is required to consider common problems, arrive at decisions and see that they are executed. Public discussion has centred on two alternatives:-
(a) Organic Union-a World State or Federation.
(b) A voluntary association on the lines of the League of Nations of 1919.
Whichever form is chosen, the principle of regionalism should be adopted and the organisation should be either on a global basis with branches or should consist of a series of independent regional bodies.
Public opinion is obviously not ripe for a World State or Federation and the consensus of opinion is that if it is desirable at all, the movement towards Organic Union should be evolutionary.
In the Pacific, the geographical conditions, the varieties of culture, of political and economic status, render it very unlikely that any mature state would commit its policy to the decision of a majority in such a Union. While a United States of Europe might be satisfactory for Western peoples, an organisation of the same type as the League of Nations must be chosen for the world as a whole;
the regional principle should be recognised by the establishment of a Pacific branch.
The League of Nations which was established in 1919 broke down because the question of its authority was never solved. This problem, therefore, must be the first consideration. The League was not intended to be a power organ; its authority was to be dependent on its character as a world forum and on the power to frame policies designed to reduce tension, such as the reduction of economic restrictions and the control of armaments. The sole exercise of force contemplated was the imposition of economic sanctions. There was no firm guarantee of military support.
It cannot be assumed that such a scheme was incapable of success.
The League was fatally weakened by abstentions and by the most acute economic crises. Economic sanctions undoubtedly proved a failure for if the nation against which they were invoked found them to be a menace, it would undoubtedly make them a cause for war; they were, therefore, not an effective substitute for war as against powerful nations.
This led to the theory that the League must command overwhelming power. The campaign 'to put teeth into the League' received considerable support in England but in fact led to defensive re- actions which were an important cause of the armaments race which led to the present war.
The fallacy of this view consists in the fact that the creation of power in these great concentrations is fraught with the utmost danger. Power is only of value if it can be controlled; it is like a fire-a good servant but a bad master. It is difficult to control and the history of Democracy is the story of safeguards against power. If the League or a World State were given the power advocated by Viscount Cecil and Mr. Lionel Curtis , it would possess the most dangerous concentration ever seen and this great mass of power would be available to any group which was victorious in a political struggle within the international body.
The other horn of the dilemma is that if power is not to belong to the international authority but merely to be guaranteed to it by the members as in the League of 1919, it is difficult to use it effectively because it is only available after the event and its use cannot be planned beforehand. Thus, nations cannot be brought to trust in the League and will not relax their own preparations.
Some measure of solution of this impasse would be found if we could discover some method of controlling armaments which would prevent the possession by any nation of sufficient force of its own to make the control of armaments on these lines effective.
This is based on the principle that the force available to an international body can be used effectively only if it is limited or controlled in a pre-arranged scheme.
One essential requirement, therefore, is that the armaments of the members shall be controlled by the League. The armaments permissible to the members should be limited according to the minimum requirements of their own local defence and this should be worked out by the experts advising the peace conference. This essential task will be part of the peace arrangements for other reasons; the forces of the victorious Powers occupying the defeated nations will have to be proportionate and the arrangements so made may be made the basis of a scheme of permanent armaments control.
For the purpose of enforcing armaments control, the League Covenant must make the approval of the scheme of control a fundamental provision of the Covenant and infringement of this provision must be made a cause for action against the guilty party, which all members guarantee to support. For the purpose of policing these guarantees, there should be an armaments commission constantly watching and a specialised force responsible to the League which will plan the steps by which the armaments control will be maintained.
It will have the functions of:-
(a) Inspecting all existing armaments.
(b) Controlling armament manufacture.
(c) Manning important strategical points which could be used as bases for military action.
(d) Leading the forces at the disposal of the League if it is necessary to prevent an infringement of the scheme.
It is suggested that in this way the power behind the League would be adequate to prevent any state from hostile action because the force available to the League would be prepared and the forces that might be against it would be limited. It is an improved form of collective security because the guarantees are specific.
Until these principles are settled, it is not useful to discuss the details of the League Covenant. These should be framed after a careful study of the working of the old League.
(3) Measures necessary for securing Economic Stability and Progress. The Planning of a Peaceful Economic Order Some economic organisation of the Pacific is necessary not merely to redeem the brave promises of the Atlantic Charter but to preserve the stability of the area. The presence of its rich but undeveloped spaces and the weaknesses of civilised but ill- equipped and poverty-stricken masses will give Japan complete dominance over what is euphemistically called her 'co-prosperity sphere', unless it is stabilised economically and politically.
The elements of such reconstruction exist. The Pacific is one of the richest areas in the world. Its raw materials are in constant demand but are scattered indiscriminately in different political jurisdictions and that forgotten raw material, the manpower of large and capable populations, can produce immense wealth if it can secure industrial materials and markets; the surplus capital of the Western Powers has not been fully employed for the last generation, with resulting economic depressions.
The problem of combining such elements so that their values can be fully realised is one that up to the present has not been solved.
But modern economists have shown that some of the old inhibitions are fallacious and claim that it is possible, by proper economic policy, to bring about full employment. The fundamental fact is that production functions as purl chasing power and if this is so within well developed economies, it seems reasonable to suggest that if production on a large scale can be induced in areas hitherto undeveloped, purchasing power can be increased generally, can stimulate industry and stabilise economic conditions throughout the world.
One of the obstacles to the effective combination of these factors is that production is at present organised by communities within their own political boundaries. This is inevitable and, within limitations, the most effective method. It has, however, serious disadvantages in international affairs for it is possible for one state to monopolise resources which it cannot use and pursue an exclusive policy at the expense of others. If such a state is inspired by military ideals it may exploit its own resources and the deficiencies of others to increase its power. In these circumstances, production is limited, the full benefit of what production there is, is not felt and, even in the most successful state, living standards are lower.
The full advantages of industrial advance cannot be reaped unless resources can move freely to where they are needed by producers and consumers. The only way to achieve this without sacrificing the political independence of the various Pacific states is a planned policy of development with a view to improving the economic status of all the Pacific countries. Completely undeveloped countries like parts of the Philippines, the Netherlands East Indies and parts of the Pacific Islands would be started on a course of primary equipment; more developed countries like Java, China, Malaya, Burma and India would be encouraged in industrialisation; markets for all would be secured, internally, because developmental expenditure and increased production would cause a rise in the standard of living, and, externally, by a lowering of tariffs and other economic restrictions. The countries supplying the capital would find a market for their capital goods and, as purchasing power increased, they would obtain a market for consumer goods. Development would proceed in the stages set out in Section (3) of Annex 'A'.
This exceedingly simplified statement is not intended to conceal the many difficulties of adjustment which exist; these are considered in Section (3) of Annex 'A'. Attention here will be directed only to several of the problems involved.
(a) The scheme cannot succeed unless there is an assurance of raw materials to the labour which must work on them and a greater freedom of access to markets than now exists. It would be impossible to break down at once the huge structure which has grown around existing tariffs nor would it be necessary. The scheme would get to work slowly and the initial expenditure of capital will probably have a pump priming effect. Many of the existing duties are unnecessary and have no protective incidence.
Some general principles may be laid down on the following lines:-
Countries in the stage of primary development should have no tariffs.
Countries which are developing industry and a balanced economy must protect the new industries.
Countries with a mature economy should adopt Free Trade. By a mature economy is meant one in which the equipment of primary and secondary industry is completed, in which there is capital to invest and which needs foreign markets.
This, of course, makes the scheme depend to an extent on the co- operation of the United States.
(b) The scheme depends on the wide dissemination of the increased prosperity of the developed countries. If the benefits of industrialisation are reaped solely by the capitalist or landlord, the increased purchasing power on which they depend will not operate fully.
(c) The plan, if successful, will relieve the population problem of the crowded countries of Asia because their living standards will be raised and the impulse to migrate will be diminished. On the other hand, more population will be required in some of the undeveloped areas. Australia cannot take full advantage of the plan unless she secures a larger population of a type which can raise her industrial capacity.
Organisation required: For the functions set out in this section, the interl national authority must set up the following organs:-
1. A Developmental Commission to fill in the details of the plan and supervise its execution.
2. A scientific department to handle the various economic and social problems involved.
3. A Tariff Adjustment Commission.
4. An International Development Bank through which the money can be invested and the projects financed.
(4) Measures to Secure Political Stability and the Development of Appropriate Political Institutions A great deal of the Pacific is occupied by savage tribes and large sections of it by semi-civilised peoples who have never been able to maintain their independence. If these are left to themselves, they will be counters in a struggle for power or bases for strategic moves. It is essential, therefore, that some means shall be adopted in the peace treaty for the political control of these territories with a view to enabling them ultimately to stand on their own feet.
Suggestions divide themselves into two classes: some form of direct government by the League and a Mandatory system. Experience of successful international government is practically non- existent, the reasons being summed up in the fact that responsibility in an international body is dispersed and is subject to all its internal exigencies. The Mandatory system has the Virtue that one individual state is responsible for the successful government of the subject territory under conditions laid down and the new League can continue the system which was formerly pursued with success in bringing this responsibility home to the Mandatory Power.
I would strongly urge the adoption of the Mandatory system and its application to all dependent territories. If this were adopted, the following questions would have to be determined:-
(a) What are the areas which should be held on Mandate terms? I would advocate that all colonies and dependent territories should be so held.
(b) What nations should be selected as Mandatories? These should be determined by the peace conference or the League.
(c) What is the nature of the authority or tenure of the Mandate Power? The League should be sovereign. Mandates abandoned should revert to the League which should have power to revise terms and order amalgamations and sub-divisions.
(d) What conditions should be imposed? Terms similar to those in 'B' Class Mandates  with variations for particular Mandates together with the following additional terms:-
'(i) An obligation on the Mandatory Power to become rel sponsible for the economic development of the territory as planned by the development commission of the international authority and provide or arrange for some finance for that purpose.
(ii) An obligation to train the natives for higher civic duties and economic activities with a view to ultimate self-government.
(iii) The Mandate conditions should be subject to revision by the international authority on the recommendation of the Mandates Commission and after hearing representations of the Mandatory Power.
(e) What form of control should be established? Control should be by the League through a Mandates Commission which would have power of inspection.
I make no apology for the length of this despatch and the two Annexes because I am convinced that the subject must be viewed as a whole. There is no one panacea which will solve the whole question of peace. It will not be sufficient to draw up a just treaty or to provide machinery for the peaceful settlement of international issues. These will be of little value if acute economic maladjustments remain or if no provision is made to secure political stability.
If it is suggested that I have raised questions which are speculative, I would answer that these speculations are involved in the promises which are made every day in the speeches of political leaders. Every one of my proposals is an attempt to give a definite form to, and suggest modes of realising, one or other of these slogans.
It is, in my opinion, imperative to go to a peace conference with ideas covering all the main subjects likely to be raised and a clear view of the policy which Australia needs to make her safe.
It would be optimistic to expect that all these views will be substantially realised. A peace conference is not a happy occasion. It is a forum in which interests clash and all sorts of claims are made. Few people emerge from it with their hopes fulfilled or their faith unshaken. But those will succeed who have the clearest view and are the best prepared.
The planning of a satisfactory peace is going to be more difficult than fighting the war for the circumstances require large constructive measures, more considerable than we have ever had to face before. One might quail before the magnitude and complexity of this task if there were any other way of achieving stability.
Success will not be realised unless vested and sectional interests are checked and unless such measures as are here suggested receive the support of the 'common man' for whose benefit, indeed, they are designed. 
F. W. EGGLESTON