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 [1] 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 [2] as
follows:-

Annex 'A' The Conditions of a Constructive Peace in the Pacific.

Annex 'B' The Strategical Survey on which 'A' is based.

STRATEGICAL SURVEY

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 [3], 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 [4] 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. [5]

F. W. EGGLESTON