Canberra, 10 March 1952
Japan and the Colombo Plan
1. In considering the possibility that certain Asian countries may suggest Japanese participation in the Colombo Plan the following factors appear relevant:
A. Japan s position as the foremost industrial Asian country
i.) Whether or not Japan participates in the Colombo Plan as a donor or recipient the fact that she has a large contribution to make to the economic development of South East Asia is of great importance. Tokyo, in their Despatch No.3/1952,3 drew attention to the United States policy of making every dollar supplied to Japan in the form of aid funds do ‘double duty’. By building up Japan, Japan can then assist South East Asian countries by providing them with the capital equipment and goods necessary for their development. Efforts are being made to kill two birds with one stone by assisting Japanese companies to negotiate long-term agreements with mining companies of South East Asia. Japanese companies provide the machinery, rolling stock, etc., necessary for the modernisation of plant and equipment in return for long-term supplies at reduced rates of the and mining companies’ products. A recent United States mission which investigated the area found that the most hopeful signs had appeared in the Philippines, Malaya and in Portuguese Goa. In this way Japan will play an active part in the area and it will rebound to her benefit.
ii.) Japan’s place in the future development of South East Asia reflects the various nationalist aspirations of the countries in the area. To resist their suggestion that Japan should participate in the Colombo Plan would possibly be taken as an affront to Asian nationalism. However, feeling on this subject might be allayed a little by emphasising the part which Japan can play as outlined in i above.
B. Long and short-term considerations vis-à-vis Australian political scene
i.) Short-term : It is true that the inclusion of Japan in the Colombo Plan would bring the rejoinder that Japan might first meet claims of reparations. This argument is likely to remain ‘hot’ for some time but it is probable that with the lapse of a year or so the force of it will be less.
ii.) Long-term : In support of the argument that Japan should participate there is the point that this will be a further method of binding Japan to the democratic camp and still further enable her to resent the blandishments of communism. This would seem to a logical step to the line taken throughout the Peace Treaty negotiations. Admittedly there is no guarantee that this will be so but it is possibly a well-calculated risk.
U.S. thinking on the problem of whether or not to clamp down still further on trade with Communist China is now reportedly leading to a ‘tough’ approach at least on official levels (Tel.2464 from Washington). The reaction on Japan’s trading will automatically be to drive Japan into trade relations with the South East Asia area. Presumably, any action we might take which makes the position of Japan easier in this regard will have U.S. blessing.
Conclusion
A definite rejection at this time of the suggestion that Japan should participate in the Colombo Plan may well be unwise from the long-term point-of-view of our relations with East Asian countries as well as the United States. At the same time domestic political considerations are not propitious for a decision which would lead to Australian aid finding its way, however devious the route, to Japan. On the face of it a scheme whereby the issue can be shelved for the immediate future with an assurance of consideration when the time is more favourable might commend itself.
Attachment
COLOMBO PLAN — JAPANESE PARTICIPATION
1. Japan could hardly be asked to come in before the French. (Indeed, question of French participation should be revived in private discussion at this meeting.)
2. What reason is there to suppose Japan is prepared to give foreign aid (and that U.S. would agree to cover the enlarged deficit in b.p.).
2A.If Japan had surplus capacity, there are just claims for reparations before India, Pakistan or Ceylon should benefit from Japanese aid.
3. Knowing differing attitudes among Commonwealth, C.R.O. should have consulted us privately and not in a general meeting. We may now have to explain ourselves to others.
4. It may be that our attitude should be that the move is ‘premature’ rather than inconceivable. In time, the Australian public may recognise that Japanese techniques and surplus production will be much needed in Asia (as Japan will need S.E. Asian raw materials). I f we oppose, Asian governments may well ask whether Australia is able to compensate for loss of benefits potentially available from Japan. The answer is ‘No’ in the long run. In the short run (a year ?) we could use 2 above as grounds for our opposition (assuming that real opposition lies in doubts of Australian people).
[NAA: A1838, 3103/9/3/3]
1 W.B. Pritchett, Second Secretary, Pacific Section, Department of External Affairs.
2 R.L. Harry, Acting Assistant Secretary, Geographic Regions Division, Department of External Affairs.
3 The dispatch outlined the United States economic policy towards Japan: ‘The United States can, in addition to building up Japan, assist the countries of South-East Asia in resisting Communism by assisting Japan to provide South-East Asian countries with capital equipment and goods necessary for their own development and rehabilitation. United States policy in Japan now seems to have three facets. Firstly, Japan’s economy is being rehabilitated in order to keep it within the Western camp. Secondly, the Japanese industrial production so built up is being used to relieve the burden on United States industry by producing goods for the United Nations effort in Korea and, thirdly, Japan’s heavy industries are being used to produce goods for South-East Asian development and also to develop raw material resources in that area’. For the full dispatch see NAA: A4231, 1952/Tokyo.
4 20 February. The cablegram reported on discussions between Australian representatives and Allison from the State Department on United States policy towards China. According to the cablegram, Allison explained that ‘broadly speaking there were two approaches to the China problem namely the ‘kid glove’ British approach which would encourage trade and relations with China in the hope of winning her from Moscow and the ‘tough’ approach which he himself was inclined to favour. This approach would initially force the Chinese to be more dependent economically and otherwise on the U.S.S R. Ultimately, however, the Chinese would find that Moscow could not meet China’s economic needs and would make unacceptable demands on China’s independence and as a result China would eventually break away’. The Ambassador then asked Allison that Australia be consulted if the United States contemplated changing its China policy.