Cablegram 293 WASHINGTON, 15 March 1946, 9.38 p.m.
SECRET
1. At the membership Committee [1], 12th March, it was decided that countries represented at Bretton Woods could join the fund on the original conditions within a period of six months from this date.
2. I have seen no reason to modify my views as given to the Government just before leaving Australia.
3. At some time if we do not join within the further time allowed, we could join thereafter only on terms and conditions agreed by the fund. These may be less advantageous than the original conditions.
4. On the vital question of quantitative import restrictions to safeguard the balance of payments there is no doubt here that the United States intends to seek conditions and procedures that would apply to the way in which restrictions would be imposed as well as to supplying criteria to determine whether balance of payments difficulties exist.
5. These conditions are unlikely to be onerous and may not extend beyond prevention of discrimination.
6. On the other hand, if they were not satisfactory and Australia at any time were refused exchange depreciation by fund to correct balance of payments difficulties, the only solution would be through inflation. [2] 7. The possibility of the fund being too inflexible in its attitude to exchange depreciation or seeking to discipline members faced by balance of payments difficulties cannot be disregarded.
8. Final judgment on fund not possible until we know more about United States loan to United Kingdom, sterling balances, United States lending and employment policies and International Trade Organisation.
9. We could join within the next six months with intention of resigning later if these developments are unsatisfactory.
10. I do not like this course and it must be remembered that International Trade Organisation may make resignation impracticable.
11. On the other hand, if we do not join the fund, it seems likely we shall be excluded from the International Trade Organisation.
12. While I do not urge this as a serious objection, the Government should not ignore the possibility of loss. Unless the fund and the bank are well managed, the fund may accumulate weak or worthless currencies and the bank may acquire frozen loans. It is partly to prevent this that the fund wants power to discipline members.
13. The fund and bank are cumbersome instruments and good management will not be easy.
14. A proposal now under discussion as to whether the twelve Executive Directors, paid by the fund, should be full time or part time employees needs consideration. With the fund constituted as it is, former may be unavoidable. This may make the management confused and seems too extravagant. [3]
15. Revenue may not be as great as expected. Because of heavy charges and other obligations borrowing from the fund may not be great except by countries with weak currencies.
16. While it may help to secure good management, from other points of view, I find disturbing the practice which seems to be developing of vital decisions being made at informal meetings by a few large nations with little freedom left to formal meetings to make amendments.
17. Because of overriding political considerations or other complications, the Government may decide to join the fund in the near future. In that case, I would suggest that the Government seek whatever assurances it can get, particularly on the vital question of quantitative import restrictions to safeguard balance of payments. [4]
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1 At the International Monetary Fund meeting in Savannah. See Document 115, note 2.
2 Presumably the last word of this paragraph should have read ‘deflation’.
3 On 20 March Melville reported decisions that both Fund and Bank were to have managing directors (each receiving US$30 000 per annum), twelve executive directors (US$17 000) and twelve alternates (US$11 500), all salaries to be net of taxation. An individual serving both institutions would draw only one salary, but this was not expected to be usual and most appointees were expected to serve full time. The number of executives and the scale of salaries had been opposed by the United Kingdom, but despite apparent support from several members no others voted against the proposals.
4 The period for acceptance on original conditions was later extended until 31 December.
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[AA:A1067, ER46/12/2, i]