Washington, 15 December 1950
Points about Colombo Plan of Interest to Australia
The following appear to me personally to be aspects of the Colombo Plan which might be discussed wherever the opportunity arises with the Americans. On some of these matters there is no definite Australian policy decision and directions from the Minister will be needed from time to time as American reactions take a firmer shape.
U.S. FINANCE
It was agreed in London that in all public discussion (and in the report itself) an effort should be made to avoid the idea that there is a financial ‘gap’, in a Commonwealth plan requiring to be filled by the United States.
Nevertheless the fact of the matter is that there is such a gap and, unless it is filled the plan could not be implemented without drastic modification.
U.S. PARTICIPATION
On the principle of taking one step at a time, it would seem to be wise to follow up energetically the United States offer to participate in a Consultative Committee for further exploratory purposes even without any prior commitment by the United States to finance a programme. This would serve the following immediate political purposes:
(a) Getting a convenient form of machinery in which there can be U.S. – Commonwealth consultations on the economic problems of South and South-East Asia;
(b) Getting the Asian countries and the economically powerful Western countries to sit down together to work out mutually acceptable economic relations which have such important political implications.
(c) The arrangement would undoubtedly exert some pressure on the U.S. subsequently to make a favourable contribution (a factor which no doubt prompted one of the questions this morning).1
PARTICIPATION OF OTHER GOVERNMENTS
Australia takes the view that Indonesia, Burma, Thailand and the Indo-Chinese states should be included in the consultations as soon as practicable. We raised the question of the participation of the Philippines but did not press it after the U.K. suggested we obtain the reactions of the United States. Apparently this reaction is favourable. I would suggest however, that the Embassy not express a firm attitude on a point until there has been further deliberation in Canberra.
The Minister has expressed the view to other Commonwealth countries and to the Americans that the French and Dutch should be invited to participate bearing in mind potentialities as contributors. The Americans expressed some doubts on political grounds and I would suggest the Embassy take an open position on this matter until a firm decision has been made by the Minister.
OPERATIONAL FUNCTIONS OF MACHINERY
Machinery can therefore be considered as available for political purposes and for technical consultation. What the Americans seem to be primarily interested in, however, is whether this machinery would have any ‘executive’ or operational function. I do not think that we would press the view that machinery should be powers of decision on allocation of aid etc. although we are not in a position to decide finally on this at the moment. At least, however, machinery would be used to review the programmes of economic assistance programmes and hear the point of view of Asian countries. It would be of great political value to the Asian Governments themselves.
This could no doubt be reconciled with U.S. insistence on bilateral arrangements and unilateral decisions as to the size and direction of aid. It would at least avoid some of the disadvantages of normal U.S. attitudes. I shall suggest to the Department that we elaborate further the Asian political objectives in this connection.
DISADVANTAGES OF CURRENT U.S. PROGRAMMES
U.S. much prefers a broad approach because it enables them to supervise specifically what is done with their aid. It does however, normally carry the implication that any supplies which are sent to implement these projects will necessarily be American supplies. This tied assistance does preclude the rest of the world from selling the goods to the developing country and earning dollars for them. There is also the implication of large local American missions which probably do no good politically since they make programmes the sense of dependence of the Asian country upon the economically powerful U.S.
PROBLEM OF SUPERVISION
There is a real problem of supervision of aid provided and this no doubt expresses the interest of U.S. officials in the question of screening:
(a) A broad approach makes screening easier: Each project can be looked at on its technical and economic merits without too much disturbance to political relations.
(b) The programme assistance by way of finance given to the recipient government to make up a deficiency in its balance of payment means that supervision of the use of this aid would call into question the whole domestic taxation, rationing, and economic programme generally. It would immediately begin to play on political susceptibilities.
DISCUSSION OF INDIVIDUAL COUNTRY PROGRAMMES
It was agreed in London that the Commonwealth countries would not discuss publicly the development programmes of other countries and some discretion should perhaps be exercised in private discussions of the 4-nation economic programmes.
THE SIZE OF THE AUSTRALIAN CONTRIBUTION
This question is still before Cabinet. Clearly the sum will be small in relation to the total requirements. It might be appropriate to remind people that Australia herself is undertaking a major development programme of her own which in effect limits our capacities to assist in Southeast Asia.
Summary of policy objectives
1. Substantial participation by the U.S. in aid programme to all countries in the area— either direct or through relative instrumentalities like the International Bank or the Export–Import Bank. What are the prospects of U.S. finance?
2. Grants and loans on a non-tied basis, so that dollars provided by the U.S. can be spent on non-American supplies.
3. Joint machinery which includes Commonwealth, the U.S. and Asians. Machinery which was no more than consultative could be highly valuable. Machinery more like O.E.E.C. might not be practicable nor from the point of view of the Asian Government, desirable.
4. Avoidance of purely bilateral arrangements without consultative machinery since such arrangements would (in my personal opinion) give Australia little satisfaction – we could have difficulty ourselves in supervising the use of our aid, we would have no voice in the development of regional policy and there would be no opportunities for putting pressure on Asian countries to plan cooperation with Western countries.
[NAA: A5460, 301/5]
1 Presumably, this is a reference to a meeting between Australian officials and members of the State Department’s Bureau of Economic Affairs held in Washington on the morning of 15 December 1950.