21 Full Cabinet Submission by Evatt

Agendum 594 [CANBERRA], 18 January 1944

MOST SECRET

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

1 See cablegram D1168 of 24 December 1943. On file AA: A989, 44/735/55/3/1.

2 Not published.

3 See Documents on Australian Foreign Policy 1937-49, vol. VI, Document 54, note 5, and Document 104.

4 see ibid., Document 215 5 See ibid., Documents 219 and 283.

6 See ibid., Document 241.

7 See ibid., Document 289, note 1, and Document 328, note 2. See also cablegram D1168 on the file cited in note 1.

8 See cablegram 1418 of 10 December 1943 from the Legation in Washington. On file AA: A989, 43/735/58/i.

9 See cablegram 17 of 6 January from the Legation in Washington, on the file cited in note 1.

10 Not published. For three of the Australian proposed undertakings mentioned in the Attachment, see Documents on Australian Foreign Policy 1937-49, vol. VI, Document 273.

11 Australia and other Empire countries relinquished some preferential tariff arrangements made at the Imperial Economic Conference, Ottawa, 1932.

12 See Documents on Australian Foreign Policy 1937-49, vol. VI, Document 342.

13 United Nations Relief and Rehabilitation Administration Agreement.

14 See Documents on Australian Foreign Policy 1937-49, vol. VI, Documents 304 and 325.

15 Full Cabinet considered Evatt's submission on 24 January and approved recommendations 13(a)-(d)- With regard to 13(d) Cabinet decided that the Subcommittee on International Economic Collaboration would comprise the Ministers for External Affairs, the Army, Trade and Customs, Commerce and Agriculture, War Organisation of Industry, and Information, and the Treasurer. It was also decided that no commitment on matters of major policy would be entered into without the approval of Cabinet. See AA:

A2703, vol. 2.

[AA:A2700, VOL. 8]