Washington, 23 January 1950

CONFIDENTIAL

The resolution for Economic Assistance for South-East Asia which was approved by the Colombo Conference on 15th January² has, to the extent that its content has become known, received a generous and favourable press coverage. For example, the Washington 'Post' of 19th January referred to 'Emergent policies which the United States could help to develop and shape into partnership relation,' and referred to the proposed Canberra Working Committee as 'an activity which is most welcome'. Official comment to date has, however, been confined to the remarks made by the Hon. George C. McGhee, Assistant Secretary of State for Near Eastern, South Asian and African Affairs. The comments of Mr. McGhee were made in the course of a speech to the North Carolina Press Association on 19th January. The text of the relevant portion of his speech is annexed.³

We have not as yet sought the informal reactions of the State Department, However, the State Department officer in charge of the Australian desk has informally indicated that, according to his understanding, the Department was extremely pleased with the contents of the report received on this subject from the United States Ambassador in Ceylon. The officer in question expressed the view that the Australian approach to the problem of aid to Southeast Asia was regarded as being highly commendable, particularly in its emphasis on economic assistance as the best method of containing Communism in that area. The Department was of the opinion that this emphasis is salutary in 'counterbalancing' the view that military assistance is the primary need. It was thought that the United Kingdom, with its colonial experience, might have tended to place greater emphasis on this requirement, (cf. 'The Economist' of 14th January, 1950 p.I.)⁴ The officer also expressed the view that the prospect of the Commonwealth taking an increasing responsibility for the provision of economic assistance in the area was welcomed, although the United States would be anxious to play its part, particularly through the media of Technical Assistance, loans by the Export-Import Bank, support for loans by the International Bank and possibly some aid out of the President's $75 million fund for 'the China area'. He thought that if aid under all of these headings was forthcoming in the current year this might be as much as the countries of South-East Asia could effectively use in their present economic and administrative condition.

Some further views on this subject were expressed at the meeting of Commonwealth Heads of Missions on 20th January. Mr. Sen,⁵ Indian Minister, while indicating approval of the Colombo Conference proposals for aid to Southeast Asia, expressed considerable disappointment in the Secretary of State's⁶ speech to the National Press Club on 12th January in that is was very largely a negative policy for Southeast Asia.

Technical Assistance, Mr. Sen thought, would 'barely scratch the surface'. Sir Oliver Franks,⁷ commenting on Mr. Sen's statement, said that while he had been optimistic six months ago that a United States Asian policy would appear in the first half of 1950 and that it would include substantial aid to South and Southeast Asia, he now felt that this could not be anticipated this year. He considered that there were a number of factors bringing about this result. The most important was the fact that this was an election year. The Administration, he considered, was devoting all its efforts not only to winning the election but also to winning it with a sufficient majority to make it independent of the unreliable elements in the Democratic Party, particularly the Dixiecrats.⁸ For this reason primary emphasis would be placed on domestic issues and extreme caution would be evidenced in the formulation of an Asian policy. The possibility of increased foreign aid this year for South and Southeast Asia was, therefore, unlikely. This was rendered more probable by the strength of the move for economy and against deficit financing. While the deficit and the amount sought for foreign aid were approximately equal, it was natural for those favouring economy to point to foreign aid as the most appropriate portion of the budget to suffer a reduction. Sir Oliver thought that if the election policy was successful, and this seemed likely, the prospect of substantial aid in 1951 to the area in question would be greatly enhanced, (cf. 'The Economist' 7th January, 1950, p.22 for a similar view.)⁹

As it is understood from your telegram No. 15 of 13th January, 1950,¹⁰ that a formal approach to the United States to participate in the scheme for aid to Southeast Asia is envisaged, it is thought that Sir Oliver's views, with which we agree, will be significant. It may well happen that a formal approach to the United States on this subject in the year 1950 might produce disappointing results. Furthermore, it is thought that the warmth of reception is in part a result of the fact that it is a proposal for active aid to Southeast Asia and not merely an appeal to the United States. Consideration may, therefore, be desirable as to the timing of the approach to the United States.

[NAA: A1838, 87/1/3/3 part 2]

1 Norman Makin, Australian Ambassador to the United States.

2 See Document 19.

3 McGhee had said, inter alia, that the United States applauded the decision to provide aid to South-East Asia and that it was 'ready to adapt [its] own efforts in furtherance of this endeavour'.

4 Not published.

5 Binay Ranjan Sen, Indian Minister to the United States and Mexico.

6 Dean Acheson.

7 Sir Oliver Franks, UK Ambassador to the United States.

8 The Dixiecrats were a group of Democrats from the South who in 1948 had split from the Democratic National party over civil rights issues.

9 Not published.

10 Document 20.