291 Truelove to Eggleston

Letter [CANBERRA], 3 February 1948

Mr. Dexter has asked me to write to you about Mr. Packer's scheme for controlling the Japanese economy. [1]

Both Mr. Cumes and myself have considered this plan as outlined in the attached extract from the A.C.J.S. [2] Minutes and Mr.

Packer's letter to Mr. Smyth, and we both feel the objections to it are numerous.

Although the proposals are vague, they appear to involve considerable detailed administration which would probably be difficult if not impossible to carry out except with a large staff. You will recall that at the Commonwealth Conference, it was generally agreed that the controls on Japan's economy should be limited to a few selected controls over a limited number of key industries.

The fact that the Australian Government is committed in I.T.O., I,M.F. [3] and elsewhere to a policy of multilateralism and non- discrimination and is reverting to the private conduct of international trade, appears to me to strike at the very roots of the Packer plan. Quite apart from the bargaining and haggling which would be involved, it would mean that the allocation of supplying quotas for the permitted imports into Japan would be entirely contrary to this policy. It would appear to introduce an element of great rigidity in international trade and, I should think, would not be at all acceptable to the United States.

It is true that if Japan is free to buy wherever she wishes, there will be a tendency for the yen bloc to re-emerge, but I think we shall have to rely on the work of ECAFF [4], the International Bank, I.M.F., I.T.O., reparations and the provisions regarding nondiscrimination which we are able to write into the treaty to offset this tendency by developing, diversifying and strengthening other Asian economies. This would, of course supplement the attempts which will obviously be made by newly-emerged Asian States to avoid any economic domination by Japan or other would-be imperialist powers.

Mr. Packer also mentions guarantees of imports for Japan. Under a multilateral trading regime, it would appear impossible to guarantee goods would be available at an and certainly impossible to guarantee they could be had at any given price. Countries may ration exports in short supply in the interests of home consumers or allocate exports among importing countries by means other than the price mechanism.

However, I shall not attempt to enumerate the objections to the Packer Plan here, but would suggest that as it appears irreconcilable with the policy of multilateralism, the Commonwealth Conference attitude towards control over Japan's industries, it is perhaps not worth while exploring it further.

I shall be looking forward to seeing you again it and when the A.C.J.S. meets here.

1 Gerald Packer, member of the Advisory Committee on the Japanese Settlement, had submitted to the Committee a proposal for the economic control of Japan by means of controlling sixteen vital raw materials.

2 Advisory Committee on the Japanese Settlement.

3 Respectively, the International Trade Organization and the International Monetary Fund.

4 Economic commission for Asia and the Far East.

[AA:A1838/275, 731/4/1, i]