332 Minutes of Interdepartmental Meeting

, CANBERRA, 13 April 1948

WESTERN UNION AND E.R.P.

Interdepartmental Study Group 10.30 a.m. Friday 9th April, 1948 Present: - External Affairs:Dr. Burton, Mr. Deschamps, Mr. Plimsoll, Mr. Cumes, Mr. Quinn.

Treasury: Mr. Wheeler, Mr. Woodrow.

Trade and Customs: Mr. Hicks.

Commerce & Agriculture: Mr. Moroney.

Post War Reconstruction: Mr. Foxcroft.

1. Reasons for Establishment of Study Group:

The meeting opened with an explanation by the Chairman (Dr. Burton) of the general reasons for the External Affairs proposal to set up a Study Group. In the ensuing discussion on Government policy as outlined in comments on Western Union[1] and the European Recovery Programme made in the Minister's speech of 8th April, reference was made to the duality of the problem in its political and economic aspects. It was clear, for example, that while it might in certain circumstances be desirable to support or not to support the Western Union proposal on political grounds, account had to be taken also of its possible economic impact on Australia and in particular any effect on Australian oversea trade which the setting up of a Western European Customs Union might entail.

2. Customs Union:

The possibility of the Australian Government being invited to join any Customs Union in which the United Kingdom may participate was next mentioned. The feeling of the meeting was that it was not yet fully clear to what degree Australian interests would be affected in the event of a Western European Customs Union being set up. There were in reality two questions involved:-

(a) The effect on Australia, particularly the effect on Australian preferences in the United Kingdom, of a European Customs Union.

(b) The possibility of Australia being invited to join a European Customs Union.

Mr. Moroney pointed out that the first question had already received both Departmental and Ministerial consideration, notably in connection with I.T.O.[2], but he had no knowledge of any suggestion that Australia should join such a Union. He agreed with Dr. Burton, however, that, if only for political reasons, such a development was possible.

3. Probable United Kingdom Attitude:

It was suggested that the United Kingdom would be unable, in view of the lead it had given in Western Union, to withdraw from any serious effort to set up a European Customs Union, and that, if necessary, an attempt would be made to reconcile European and British Commonwealth interests and to overcome any Australian opposition. The Chairman mentioned that he understood that United Kingdom commercial representatives in Australia were thinking along the lines of inducing Australia to join any Customs Union in which the United Kingdom participated.

4. Vagueness of Western Union Concept:

It was agreed that the Western Union concept, as so far formulated, was vague in its economic provisions, although its political purpose seemed more clearly defined.

5. E.R.P.:

As compared with Western Union, E.R.P. developments were considered more concrete and of more immediate importance. It was agreed that an assessment of their effect on Australia could be made, for example, in relation to the British Commonwealth Dollar Pool and any 'off-shore' purchases which might be made in Australia. The query was raised as to whether Western Hemisphere purchasing only was envisaged. The general impression was that restriction of procurement to the Western Hemisphere was contemplated although perhaps not made explicit in the relevant United States Act. In view of the enormous supplies required for the Programme, the possibility of eventual 'off-shore' purchases in Australia could not, however, be excluded.

6. Dollar Position:

With specific reference to the dollar problem[3] there was no United States dollar aid contemplated for sterling area countries outside the United Kingdom and therefore Australia must still draw on a limited dollar pool. Mr. Hicks suggested that, for this reason, dollar licensing for imports into Australia might have to be made more restrictive but Mr. Wheeler thought that there was unlikely to be any immediate need for tightening restrictions, although they would probably need to be maintained to their present extent.[4]

7. Dangers for Australian Markets:

It was pointed out by the Chairman and Mr. Moroney that careful account would have to be taken of any changes in the direction of trade brought about by Marshall Aid purchases and of the dangers to Australia of 'subsidised' trade competition. Moreover, there was the question of availability of goods for 'off-shore' purchases and the effect on internal markets of such purchases.

8. Fluidity of the Situation:

There was general concurrence in the view that as the situation is changing rapidly, future developments are difficult to foresee and up to date background information should be ready in case it is necessary to make a governmental decision on Australian policy at short notice.

9. Possible Proposals at Geneva and Paris:

The Chairman mentioned the possibility that Australian proposals might be put forward at the Economic and Social Council and at the United Nations Assembly with a view to bringing about economic co-operation on a wide European basis as a means of closing the rift between East and West.

10. Collection of Information:

It was agreed that most of the work necessary for obtaining the background information required was of a specialised character and could best be done by the Departments concerned. The main purpose of the Study Group would be to facilitate the exchange of information among its members and to make sure that there is adequate preparation for the implementation of any policy decision made by the Government.

11. Separate Machinery Necessary:

It was agreed after discussion that the specialised machinery already existing for the consideration of I.T.O. questions[5] would not be suitable for the present purposes.

12. Procedure:

It was agreed that meetings would be held from time to time and that such documents as were available would be circulated as a basis for research and subsequent discussion. A factual survey of the development of Western Union and the E.R.P. prepared in the Department of External Affairs was distributed.

[1] On the proposed Western Union, see Document 312.

[2] International Trade Organisation.

[3] On the dollar problem, see Volume 14, Document 17.

[4] Documents on Australia's management of the dollar shortage are published in Volume 14 under 'Sterling balances'.

[5] That is, the Cabinet Sub-Committee on Trade and Employment.

[AA : A1838, 81/3]