710 Conference W–PW/1–2945
Mr. Merwin L. Bohan, a Technical Officer of the Delegation, to Mr. John McClintock, Special Assistant to the Assistant Secretary of State ( Rockefeller )
Dear John: The Ambassador, Wayne Taylor, Bonsal, Sanders and I have had several discussions relating to the economic phases of the forthcoming conference. An area of agreement has been reached and we hope that it will serve to accelerate a decision in Washington.
We propose that Item III, Consideration of the Economic and Social Problems of the Americas, be broken down into three sections as follows: Wartime, transition, and post-war. Our thoughts with respect to these three sections are summarized below:
A. Wartime Problems: Resolutions reaffirming the need for continued Hemisphere cooperation in the winning of the war; amending Resolution V of the Rio Conference relating to problems arising from the liberation of certain countries and the conquest of others; endorsing Bretton Woods Resolution VI, United Nations Declaration of January 5, 1943 and Gold Policy Statements of February 22, 1944; recommending removal of wartime controls as rapidly as conditions permit; reaffirming previous resolutions regarding the maintenance of the internal economies of the American countries.
B. Transition Problems: It is in this field, and this field only, where we feel that thinking in Washington has not crystallized. Yet it is this section of the agenda upon which the success or failure of the Conference, both politically and economically, depends. If the United States cannot meet the relatively simple problems presented by economic readjustment in the Western Hemisphere, its leadership in world affairs will prove to be more dangerous than helpful. The Conference will not only be a test of the sincerity of the United States with respect to the inter-American system, but a test of the ability of the United States to assume practical and constructive leadership. Latin America, as well as the world at large, is fully cognizant of our penchant for preaching and proselyting, and only by dynamic, clear and realistic thinking can we uncross the fingers of our neighbors to the south and those everywhere who look to us for economic salvation.
Hence, it is vital that we be prepared to attend the Conference with a practical and constructive program. I can assure you that no one here, most especially the Ambassador, is proposing a preferential inter-American trade bloc. Rather, our idea is that the countries of this hemisphere should be welded into a unified force to be applied [Page 69] in world councils to the realization, and not merely the affirmation, of liberal trade policies.
If each country is left to its own devices, the very force of circumstances will give birth to new compensation agreements and other measures to hamper trade. It is not enough to say that the world conferences of the future will settle all these problems. Those conferences, we hope, will attain every success. However, the United States right now, while waiting for the rosy future, has the opportunity to show that its ideas are worthy of world acceptance. If the Western Hemisphere can demonstrate that, through cooperative effort, the economic problems of the transition period can be faced, the voice of the Hemisphere in world affairs will not be the weak voice of theory but the strong voice of experience.
The problems of the transition period as these affect Latin America are difficult but not particularly complex. Basically, ways and means must be found to keep some twenty commodities moving in world trade in sufficient volume and price to prevent economic depression. Collective effort must be restricted to specific objectives. Thus, collective responsibility ends when Brazil is assured of a reasonable market at reasonable prices for its coffee, cotton, meats, hides, and corn. Hothouse, war induced industries—such as rubber—are the responsibility of Brazil alone except as the need for orderly liquidation of purchase contracts may be a moral or legal commitment of another country.
Do you agree that immediate study should be given to each commodity appearing in the list attached to my letter of January 27?39 We think that as a result of such studies, you will find that the problem can be reduced to a point where a successful program can be evolved. Our tentative commodity conclusions are presented in an enclosure,39 but please consider them only as an indication of the lines the studies should take. The majority of the statements are based on assumptions rather than on facts, and we realize that many of the former may be erroneous.
Once your studies are finished, and assuming that our general conclusions are sound, consideration can then be given to methods for implementing the program. Several ideas in this regard were given in my letter of January 27.
You understand, of course, that we are not proposing that the United States sign any agreements at the Conference. We only urge that we have a constructive program to present to the Conference and be prepared to approve a resolution along the following general lines:
- Describing the principal problems to be faced in the transition period;
- Defining collective as distinguished from individual responsibility;
- International commodity arrangements in those cases where such undertakings are necessary to promote the expansion of an orderly world economy;
- Effective representation of both consumers and producers in arriving at such arrangements;
- Equality of opportunity for all exporting nations to share in the import trade of liberated and conquered areas. (Wayne Taylor does not agree. He questions the desirability of considering this point at the Conference. However, while the Department may favor a more general statement, it must be remembered that Latin America cannot prosper in peace times without an equitable share of the European market, and any program would be meaningless without assurances in this regard);
- Immediate creation of machinery to finance trade with the areas mentioned in (c) above. (Wayne Taylor asks that his “violent opposition” be noted to the phraseology employed. He favors the International Fund and the International Bank. On this there is unanimity. However, the majority opinion—whatever Commerce and Treasury may think—is that financing will be imperative and, unless the Fund and the Bank are in operation when the need arises, emergency measures are essential. See also page 5 of my letter of January 27, 1945.);
- Orderly liquidation of Government procurement programs;
- Credit facilities for sound development of projects designed to cushion effects of transition period;
- Immediate bilateral or multilateral consultation among the interested American governments to determine the precise steps necessary to assure adequate production levels during the period of transition after the war.
It will be noted that no mention is made of inventories. It is believed that American policy should be determined in this respect but that any commitments should result from the implementation of paragraph (g). We are opposed to the suggestion contained in the memorandum of January 26, 1945,40 “Inter-American Trade Arrangements”, to the effect that the United States lend financial assistance to Latin American governments to stockpile selected products. If proper international or inter-American financial machinery can be created, there would not appear to be any particular problems with respect to foodstuffs and agricultural raw materials (except, perhaps, cotton and wool). The need for stockpiling primarily concerns metals. Metals should be stockpiled, if this is ncessary, through acquisition by the United States. Even the taxpayers could not object to this policy as we would be adding to our national wealth assets which we will [Page 71] eventually need both in peace and war. Loans for stockpiling by other countries are unsound on several counts. If not repaid, the United States sustains a financial loss without any compensating assets; if repaid, the exchange drain may and probably will affect demand for American exports. Furthermore, only the United States has sufficient eventual need and sufficient immediate financial resources safely to embark on a minerals stockpiling program.
C. Post-War Problems: The Department is well prepared in this field. The recommendations on trade policy submitted by Subcommittee V to the Inter-American Financial and Economic Advisory Committee41 constitute a handbook of the philosophy of the Department in the field of trade policy. As many of the traditional resolutions on trade barriers and liberal trade practices as desired can be introduced by merely referring to this excellent compilation. Although fully sharing the views expressed in the report, we would suggest that, at the forthcoming Conference, the Department consider the advisability of a shift in emphasis. There has been a tendency in recent years to preach against the evils of trade obstacles rather than to attack the causes of those evils themselves. The agreements for the establishment of the International Monetary Fund and the International Bank are the first evidence of the direct approach suggested. We should stop making a religion of the trade policy and campaign for the correction of the conditions which cause the imposition of trade barriers. We would suggest a resolution containing the following recommendations: Reaffirmation of liberal trade policies; need for a world conference to correct present abuses; urging immediate action with respect to the International Monetary Fund and the International Bank; and the desirability of continued study and action to remove the causes which lead to the imposition of restrictions.
In addition to this resolution, we recommend others covering facilities for capital assistance for the purpose of promoting the development of sound economies; recognizing the need for diversification and industrialization in all the American republics; and a general resolution along the lines of the one drafted by you in your memorandum of January 11, 1945.41
The foregoing should provide a well rounded, constructive and practical program.