Your 79. [1]

Your concern that fundamental importance of trade question in
relation to Interim position of Republic and ultimate just
settlement should not be overlooked by United States will be
impressed upon State Department; also necessity for continuance of
Committee and cessation of formation of new states.

2. As regards raising of trade issue in Security Council I feel
that as member of Good Offices Committee I cannot do this and also
that it is inadvisable for Australian representative to do so for
following reasons.

(a) Control of Trade (and of Foreign Exchange accruing therefrom)
involves question of sovereignty. Dutch sovereignty has not only
never been questioned by Security Council but has been explicitly
admitted by Republic in accepting the Renville political
principles [2] which Committee has sponsored. Thus to raise trade
question will be to challenge Dutch on ground where their position
is strongest. (Same applies to Foreign representation).

(b) Any public questioning of Dutch sovereignty would seem to
court out-of-hand rejection by Dutch of further United Nations
connection with Indonesian situation. No member of Committee could
reconcile this with endorsement of Renville principles.

(c) Trade difficulty is envisaged in political principles as
matter for adjustment by negotiations under auspices of Committee
of Good Offices. To bring it before Security Council would in
effect be to seek direction from Council. This would imply
Committee is incompetent to achieve adequate solution. Such
implication could only weaken Committee's position whereas my
considered opinion is that chief hope of just settlement is to
strengthen Committee. See my UN.106 paragraph 4 sub-paragraph 1.

[3]

(d) Security Council could quite properly decide trade is not its
concern in absence of threat to peace arising directly from trade
question.

3. While I fully realise fundamental importance of trade issue, I
may say that from tactical viewpoint far from wishing to raise it
in Security Council, I consider it would be best handled by
Committee who have given the question immediate priority.

Indeed I have been apprehensive Dutch themselves would raise it in
Security Council with object of inferring from sovereignty
complete powers over trade in whole Indonesian area. Indonesian
representatives yesterday raised question with us and seeing full
cognisance of its fundamental importance expressed view that it
would be better for trade questions to be handled by Committee and
not in Security Council. Of course if it is raised we will deal
with it fully.

4. I must point out also that Australian and American views on
trade question are divergent though not incompatible. Chief
concern of United States is clearly to bring economic resources of
Indies into non-Soviet world economy with least possible delay.

What happens to Republican aspirations in this process is to
U.S.A. a secondary consideration, although they would prefer at
present to assist Republic party case particularly because of
Graham's influence. On the other hand your view, with which I am
in complete accord, is that preservation of Republic as effective
political entity has priority. Solution seems to me to be American
pressure on Dutch to implement political principles. If properly
implemented Republic as state in U.S. of Indonesia retains
political identity and due share in country of trade.

5. As to immediate position Republic would be best advised in my
view to enter provisional Government provided-
(a) Provisional Government has real powers (including trade).

(b) Republic has adequate representation, and
(c) Dutch undertake not exercise sovereign powers arbitrarily but
in spirit of partnership.

6. I must make it clear that the points in paragraph 4 of my
UN.106 are a summary of my impressions and not of a concrete
proposition from the U.S.A. See in this connection paragraph 5 of
same telegram.

7. My own position as member of Committee is clear to me and as
regards trade question is stated above but I do not feel I should
make specific suggestion to Forsyth as to his action in Security
Council (in accordance with your 65 to Washington [4]) unless you
send specific views on this to me or specific instructions to him.

Please understand that I at all times welcome your views and of
course it would be entirely proper and fully acceptable to me if
distinct instructions were sent for Forsyth. He and I have been in
the closest possible consultation throughout.

8. As regards your paragraph 5, I feel that key to just settlement
is a strengthened Committee backed by an American policy of
enforcing implementation of Renville principles and that formal
agreement between Committee and Dutch prior to Security Council
meeting is not practicable.

9. Please send reply to New York earliest possible.