4805. CONFIDENTIAL IMMEDIATE
Your telegram 4671 of 28th September.1 Consultative Committee. Developmental programme.
I have read your telegram with interest, because for the first time it enables me to focus the problem as a whole and because it contains a concrete recommendation based upon certain specific assumptions. It is unfortunate that there has been so little time to consider the matter before sending you a reply. You will understand why, with the opening of Parliament this week, it has been quite impracticable to call together the Sub-Committee of Ministers, to place all the relevant facts before them, and to obtain other views. I have been compelled therefore to deal with the matter without having the benefit o f the advice o f my colleagues.
You will remember that when the Aid to Asia Plan was first discussed, you regarded it as a short-term programme covering Technical Assistance, emergency supplies and loans or credits. The total amount authorised for these for �132 Australian. Under this scheme the Australian contribution would have been made once and for all, with a fixed upper limit.
The Technical Assistance programme was agreed to at Sydney, and Australia is already committed to pay 35% of the total cost i.e. 35% of �83 sterling over a period o f three years. At Sydney, however, decisions on emergency supplies and short-term loans and credits were deferred, and it was decided to consider these matters again in London, together with a far more elaborate long-term programme viz., developmental plans for South and South East Asia over a six year period.
If the programme of short-term loans and credits were now being considered in London, you could assume that you had authority to indicate that Australia, subject to Governmental approval of the actual projects authorised, would be prepared now, as earlier, to make a contribution of the same order as stated in Sydney. I assume from your telegram, however, that the short-term programme has in effect merged into the long-term programme. If so, this poses new problems which require the most careful consideration. There is not only the question of the extent of an Australian contribution over a six year period; there is also the question whether the developmental programme as whole is one which should be undertaken unless and until other countries besides Australia, and particularly the United States, are prepared to make appropriate contributions.
On the assumption stated in your paragraph 4 that the United States Administration would wish United States to contribute annually �90 to �100 million pounds sterling, it seems to me that there is some substantial justification for British Commonwealth countries continuing to consider the developmental, long-term plan. If this assumption were mistaken�if the United States decided to contribute nothing or some very small sum, then I feel strongly that the long-term approach is impracticable and that it would be necessary to reconsider the desirability o f reverting to the short-term approach to the problem. I think this point should be made quite clear to the other Commonwealth Ministers, so as to ensure that they understand that it is impossible for the very few Commonwealth countries likely to contribute to the scheme to make a total contribution of such significance as to justify proceeding with a developmental plan of the size now contemplated in the absence of strong American support.
Assuming United States support of the order you mention, however, it is my view that Australia should make some contribution within her means to the developmental programme in spite of our extreme budgetary difficulties. In saying this, however, I must make it clear that it would be quite impracticable for this country to contribute �10 m. sterling in each of six years i.e. a total extend of �60 million sterling. Even if I myself thought otherwise, such a decision would require the closest Cabinet consideration and scrutiny. Frankly, I do not believe that Cabinet would have a different view from mine.
I agree entirely with the political objectives which the Consultative Committee has in mind. I agree with the view that, if American support is to be attracted, the Commonwealth itself must make some real contribution. The extent of the contribution of each member of the Commonwealth must however be related to its capacity to undertake new obligations at this time and in the immediate future.
I have given careful thought to the size of the contribution Australia might reasonably make, and I have come to the conclusion that we could not possibly contemplate a contribution over the next six years beyond a total of �20 to �25 million sterling. I hesitate to mention even these figures, which should not be stated publicly, but I feel that for your own guidance in handling the matter at the London end, you will need to have some more or less specific figure in mind.
Moreover, I think that it would be impracticable, if not dangerous, for Australia to promise say �10 million stg. in the first year, and an average of only �2 m. to �3 m. sterling in the succeeding years. It will therefore be necessary for our first year's contribution to be reduced to a level which we may reasonably hope to be able to continue unless some emergency arises.
There are a number of technical points raised in your telegram which will be replied to separately. For instance, your suggestion about the International Bank appeals to me. The Bank's call upon Australia for its subscription of local currency is now being examined in the Treasury and I think it will receive sympathetic consideration. If we meet the call, a loan by the Bank from our currency would become feasible, though in the final count, the Bank itself must approve both the size, the conditions and the purpose of the loans. Subject to any action that might be taken through the bank, we would have to assume that the Australian contribution of �20 m. to �25 m. sterling as indicated above, would be in the form of monetary grants or of commodities such as flour, dried milk, wheat and a few types of manufactured goods which it might be possible to make available to the area concerned.
In short, while I endorse the political objectives of the developmental programme and feel that they should be pursued (provided always that the United States will in fact participate on a substantial scale) I think you will agree that the original contribution foreshadowed by Australia at Sydney was in effect limited in point of time and that it would be extraordinarily difficult for us to contemplate a contribution of �10 m. sterling in each of six successive years. In view of our heavy defence commitments, the growing size of the relief and rehabilitation problem in Korea, and the contribution we have already made to the Technical Assistance programme, I do not feel that we can really be expected to make a contribution to the developmental programme of a higher order than that which I have indicated above.
At any rate, this cable will give you a quick background of my own thinking on this matter.
[NAA: A9879, 2202/El part 1]