227 Review by Tange

, NEW YORK, [4 June 1948][1]

REVIEW OF INTERNATIONAL RECONSTRUCTION MEASURES The Growth of Discrimination The present stage of international reconstruction measures contains three elements which should cause concern to Australia and to all members of the United Nations - (a) the tension caused by discrimination against Eastern Europe in aid programmes;

(b) the retardation of Western European recovery by slower rate of recovery in Poland and South-east Europe;

(c) the abandonment of United Nations machinery and the placing in cold storage of the economic articles of the Charter, typified by the establishment of the Organization for European Economic Co-operation [OEEC][2] while the United Nations is discouraged from exercising the powers contained in the Charter. The fact of this denial is used in the Council and Commissions as an opportunity for the airing of grievances and for political manoeuvring between East and West over activities and policies which the United Nations has no part in formulating. There is thus a double embarrassment to the United Nations.

United Nations Activities in the Field of Relief Aid 2. The two forms of aid sponsored by the United Nations are Post-UNRRA relief (Resolution 48(I)) and UNICEF (57 (1)).[3]

3. The bilateral relief programmes sponsored by Resolution 48 (1) came to very little. It was adopted on U.S., U.K. and Australian insistence instead of an organization or U.N. committee which was proposed by Norway, Canada, the Europeans (other than the United Kingdom) and the late Mayor La Guardia while Director-General of UNRRA.

4. The U.S. contribution of 350 million dollars omitted Yugoslavia completely in the face of the recommendations of the Special Technical Committee, and was used predominantly for aid to Austria, Greece and Italy. Canada contributed 15 million dollars and miscellaneous small sums came from a handful of Europeans. Not until March 1948 did Australia announce a firm contribution of $4.5 m. and the basis of allocations, which is non-discriminatory. The United Nations Secretariat had been preparing to announce the winding-up of the programme. There is no reason to believe that any other country will contribute further for post-UNRRA relief unless some special effort is made.

5. The UNICEF is functioning as actively as the limited contributions permit. At the time of writing it has allocated 57 million dollars and in respect of food, clothing and footwear, the Eastern European countries (Albania, Bulgaria, Czechoslovakia, Finland, Hungary, Poland, Roumania and Yugoslavia) have received 51% of total allocations and 61% of the allocations of Europe. Allocations for medical projects follow a similar pattern.

6. The fund has so far avoided political discrimination. There is a problem with China and there may be a problem in distribution in Northern Greece. Moreover, some adjustment of allocations as between Eastern Europe and countries like Italy, may become necessary on the basis of relative needs and this will perhaps excite groundless charges of discrimination. But no contributing country has shown any evidence of a desire to use the Fund for purposes of discrimination. There are good hopes that it will complete its task in 1949 as the sole international relief agency which is consistently upholding the principles of non-discrimination 'equitable and efficient dispensation or distribution of all supplies or other assistance, on the basis of need without discrimination because of race, creed, nationality, status or political belief'.

7. But the UNICEF is only scratching the surface of the world's needs and its influence on economic conditions is negligible.

European Recovery Programme 8. About the same time as the U.S. announced its contribution under the post-UNRRA relief programme in early 1947, Secretary Marshall spoke (May 10) and the meeting was held in Paris to discuss a European relief programme. It is not necessary to recount the events, although an evaluation of the motives of the U.K. and France in this episode is necessary when considering what action Australia might take towards retrieving the situation which has developed since then.

Economic Commission for Europe 9. The Economic Commission for Europe was established as a body composed of all Europeans and the U.S., subservient to the Economic and Social Council and with the objective of planning cooperative recovery measures in Europe. It has certain limitations in its terms of reference designed to protect the sovereignty of its members. It has some useful technical achievements to its credit, but its future is problematical in the light of the separate action taken by the beneficiaries of ERP to establish their own organization for corporate economic action.

Failure of members of the United Nations to support non-discriminating measures and machinery 10. In searching for possible remedies for the present situation it is important to emphasise that it is not the U.S. alone which elected methods of providing relief aid which permit discrimination. During the Assembly discussion 1946 on post-UNRRA relief measures, only the Europeans and Canada urged the creation of an organization which would distribute relief on mandatory non-discriminating lines.

11. While the U.S. may be criticised for discrimination in its activities, most other countries freed themselves from this charge by providing no assistance at all. Indeed, at the time the Secretary-General reported to the 1947 Assembly on the progress of activities taken in terms of the 1946 General Assembly Resolution, 24 members of the United Nations had not even bothered to inform the Secretary-General that they were unable to afford assistance, and of those who did reply, only the U.S., Canada and Australia (after protracted delay) made any worth-while offer.

12. Similarly, the scale of contributions to the Children's Fund by countries other than the U.S., Australia and Canada and one or two others has been ungenerous, and desperate needs are unsatisfied.

13. If countries are unwilling to support the UNICEF, which provides both the machinery for non-discriminatory aid and an idealistic purpose, the question arises whether efforts to eliminate discrimination in current and future international aid programmes can mean anything more than advice to a single contributor - the U.S. - as to how it ought to exercise its own responsibility to the rest of the world - a responsibility which it is discharging to at least a large part of the world at an unquestionable sacrifice to itself.

14. The conclusion would appear to be that any Australian proposals in future must recognise that it is predominantly U.S. aid which is being disposed of. Neither Australia nor any other country is in a position to tell the U.S. how it should distribute aid which it voluntarily provides. At most it would seem that Australia could advocate some broad general principles and define the responsibilities which both donors and receivers should be prepared to accept, and to declare the willingness of Australia to live up to them.

15. The most promising line of approach to a solution possibly lies in the field of planning machinery, as distinct from the actual allocation of aid. The following are questions which could be profitably examined by the Department:

(a) to what extent does the U.S. ERP legislation (Public Law 472) permit U.N. machinery (that is, the Economic Commission for Europe) to meet the requirements of that law insofar as it refers at various points to a 'joint organization';

(b) to what extent are Europeans willing to use the Economic Commission for Europe. Western countries have a majority of voting strength assuming that the Scandinavians would generally support them, although abstention by the Scandinavians might leave issues in doubt. Australia ought to start discussions on this subject through our representatives in London, Paris, the Hague, Washington and New York.

The result of such enquiries might show the possibility of the ECE assuming some of the functions given to OEEC. The latter must necessarily work on the administrative aspects of ERP, such as the preparation of import and export programmes, the coordination of purchasing policies and the allocation among participants of commodities supplied by the U.S. Other, more general, aspects of the European economic situation might flow to ECE. There is no reason why investigation of customs unions upon which the Americans have fixed their minds should not proceed through ECE.

Possible role for Australia 16. There does not seem a sound basis for any independent action by Australia in the Economic and Social Council or Assembly until we have explored some of the questions referred to above.

17. It seems to me that we should not think in terms alone of speeches to be made to the Council or Assembly. The gulf is already so wide, the economic issues are so far beyond Australia's capacity to influence them one way or another, and the immediate interests are so predominantly European that our immediate objective ought to be to explore with a selection of other countries (suggested below) the evolution of a policy for those countries with whom Australia might attach its economic and political influence. We would have nothing to gain by jousting alone with the United States, and we would risk creating obligations which we could not fulfil.

18. How and when we declare our policy seems to me dependent on how far we can get these other countries to go with us. The lines of policy in which we should try to draw them together are three - ONE 19. To press in the Economic and Social Council for participation by all United Nations Members in measures of economic aid through the International Children's Emergency Fund.

20. If one could expect that any tangible results would follow, there would be a case for pressing also for all United Nations Members to participate in assistance by way of Post-UNRRA Relief. The objective of an appeal for aid through both United Nations' avenues would be to attempt to diminish the present flagrant discrimination, and to remove the implication that there is a collective purpose of discrimination when the bilateral actions of countries by way of loan and gift are added together. If Australia were joined by Canada, New Zealand, South Africa, Sweden, Switzerland and some Latin Americans, perceptible results might be hoped for. Any further development of Post-UNRRA Relief, through bilateral arrangements, would, in order to achieve its purpose, have to be based upon objective studies of relative needs and upon recommended allocations, and this would require the establishment of another technical committee by the United Nations to make such an up-to-date survey.

21. Nevertheless, the arguments against any attempt to develop bilateral relief appear overwhelming.

(a) There is no prospect that the United States would participate immediately; it is speculative whether it is worthwhile for other countries to go ahead without the United States in the hope that the political situation would permit the United States to participate at a later date.

(b) As a consequence of the United States having provided all its aid in such volume in Western Europe, maintenance of the principle of aid on the basis of relative needs would require all assistance from any other countries, assuming it were forthcoming, to be sent to Eastern Europe. It seems doubtful whether the political situation in any of these countries, including Australia, would permit the whole of their external aid to be sent to Eastern Europe.

(c) If there is no reason to expect other countries to make fresh bilateral relief-gifts, there is no point in advocating any new enquiry by the United Nations into relative relief needs; and, moreover, it would be inexpedient for Australia alone to argue for increased aid and, by implication, commit itself to contribute alone.

22. Accordingly, it seems that we should concentrate on the Children's Fund, and there is a possibility that we would receive a more favourable hearing. The allocations of the Fund are predominantly to Eastern Europe but nevertheless are international in scope and would not raise in such sharp outline the political difficulty of affording aid only to Eastern European countries. An important implication of our advocating further aid to the Children's Fund is that we would have to give more ourselves. We cannot speak loudly on the basis of 8 million dollars given for ICEF and Post-UNRRA Relief, the goods-equivalent of which are unlikely to reach their destinations until about two years after the two programmes were launched by the United Nations. Our various forms of aid to other countries, notably the United Kingdom, are not readily recognized because they are not easily identified and measured quantitatively.

TWO 23. To use our influence in the Economic and Social Council, and in private exchanges, to get the countries to Europe to use the ECE. It should not be difficult to demonstrate the unsatisfactory consequences if - (a) The OEEC and ECE work completely independently in all fields, and if the ECE is denied the opportunity of performing tasks which it can do quite adequately;

(b) The failure to get the co-operation of Eastern European countries as a preliminary to getting aid for them to raise their production capacity in the interests of the rest of the world.

24. We did vote against the Polish resolution in the 1947 Assembly which called upon countries to use the United Nations machinery. But in its context this resolution was an oblique attack on ERP, and there would be no inconsistency in our advocating the use of the United Nations machinery.

25. It is difficult to know what the attitude of the Eastern Europeans would be towards effective work by ECE in the economic problems of Europe. Their hostility to Western aid to Germany is a factor. At the time of writing, the records of the current discussion of the Economic Commission for Europe are not available, but Press Reports indicate a relatively co-operative attitude on the part of the Eastern Europeans other than the Soviet. The Americans are more hopeful of ECE since this meeting. But they are possibly more concerned with getting minimum results from ECE in order to forestall Congressional attempts to wipe out the Commission as redundant, than with efforts radically to develop its operations.

26. If we are at any time to declare our belief that European countries have a responsibility to use the ECE, and that failure to provide aid to Eastern Europe is having detrimental effects on the production of goods for world recovery, we should recognize that the Eastern Europeans, for their part, have a responsibility to co-operate. Participation by them in the benefits of foreign aid and in measures in economic organizations designed to provide for their requirements (see point THREE below) calls for acceptance of certain responsibilities. Responsibilities have been accepted by them, for example, the International Children's Emergency Fund and the Monetary Fund and Bank. (The nature of these obligations could usefully be elaborated.) If such countries are genuinely concerned to receive international assistance, and if their objections to current measures of assistance are based on genuine fears of improper motives or improper conditions, they should at least make clear what obligations they are prepared to accept. These obligations must include willingness to co-operate in mutually beneficial economic arrangements and willingness to give some guarantee that aid will be used for the effective promotion of production.

THREE 27. In the Economic and Social Council, and all other relevant agencies, to support all measures to accommodate the just requirements of Eastern and Western countries, and to promote beneficial trade - whether through (a) loans and positive aid (for example, the Fund and Bank); or (b) interpretation of rules in respect of currency policy (Fund), or trade policies (ITO). Our attitude towards American hostilities to Czech participation in GATT is an example.

28. A further aspect of Australian policy which ought to be looked into by the Department relates to disposition of our exports. It might be considered whether Australia, along with some other supplying countries, should indicate her willingness to relate her export policy not only to the claims of sentiment or of our traditional markets, but also the relevant needs of all countries.

29. In choosing the means by which we would attempt to give effect to the Australian view, I believe we should exert special pressure upon the United Kingdom. We should press the United Kingdom to make some effort to retrieve the present European situation and to use more effectively the machinery of the United Nations for the solution of problems for which the Charter was written. Australian aid is very largely confined to the United Kingdom. Our voice in the determination of European countries, such as those under discussion, would be greater were it not for this fact. Indeed our aid to the United Kingdom increasingly puts us in the position of being identified with those who discriminate, (for example, in the allocation of exports). Given these facts, and our legitimate concern with the recovery of Europe in general and with the maintenance of the United Nations, we are entitled to ask the United Kingdom to use its weight to correct the present draft. There is no evidence that we have worked on the United Kingdom to the extent that our co-operation with her justifies.

PROSPECTS 30. The prospects of any changes in the situation being brought about as the result of initiative by Australia or any other country are poor. The U.S. has set its course and will object to change, and objections backed by a sixteen billion dollar programme carry weight. We know the political motives of Congress in adopting ERP. Current Soviet objections and tactics are known. Whether they are a reaction to the motives of Congress, or more sinister in intent, or merely the result of the inherent incapacity of a communist state to go through the processes of joint planning and pooling of information, we do not know. UNRRA experience suggests that the latter explanation is not conclusive.

31. The countries in the best position to take the initiative are the Europeans. Of these, the U.K. is the obvious choice and Australia should tell her so. If the U.K. is subservient economically to the U.S., it is less so than any other powerful Western democracy.

32. Other countries which might be expected to take a similar view to Australia's are Canada, New Zealand, and the Scandinavians. No initiative seems likely to be forthcoming from any of them individually. So far as Australia is concerned, we are not a Member of the two European organizations where much of the practical action has to be taken. We do not count for much in economic issues of such magnitude. But after due reservation about the limited amount of international aid we have given, we are one of the few countries which is contributing strictly on the basis of non-discrimination towards the recovery of devastated countries, and we are in a sound position to endeavour to organize a concerted approach by the countries referred to.[4]

[1] The document is undated. It was forwarded to Burton by Heyward under cover of a letter of this date.

[2] The organisation was established in April 1948 by sixteen European countries to co-ordinate the distribution of American aid under the European Recovery Program.

[3] For Australian policy on, and contributions to aid following the cessation of the United Nations Relief and Rehabilitation Agency and the establishment of the ICEF, see Volume 12, Documents 74-6.

[4] Burton annotated the covering letter with a note to Shann and Plimsoll: 'Minister would be interested in some passages'.

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