Foreign Relations of the United States, 1951, Asia and the Pacific, Volume VI, Part 2

611.44/7–3051

Department of State Policy Statement for New Zealand

secret

[Washington,] July 30, 1951.

New Zealand

a. objectives

The fundamental objectives of United States policy toward New Zealand are:

1. To maintain and strengthen the close ties of friendship which exist between New Zealand and the United States;

2. To encourage New Zealand, as an independent member of the British Commonwealth of Nations, to collaborate closely with the United States on matters of common concern, particularly in the Pacific;

3. To strengthen New Zealand, in association with Australia, as a friendly military power in the Southwest Pacific;

4. To encourage the economic development of New Zealand and the growth of her foreign trade in accordance with the principles of GATT.²

b. policies

In the consideration of US policies with respect to New Zealand some general discussion regarding basic New Zealand foreign policy attitudes and internal political problems may be helpful. New Zealand is the most loyal of all the Dominions in its relations with the United Kingdom, which is its principal market and supplier of manufactured goods. The impact of the war on New Zealand thinking, while not diminishing the loyalty of New Zealand to the mother country, nevertheless has brought an awareness of the strategic dependence of New Zealand upon the United States for defense in the Pacific and of the importance of maintaining close and friendly relations with the United States. Increasing Communist pressures in Asia, and particularly the attack on South Korea, have resulted in a more general awareness in New Zealand of the nature of the Soviet threat.

The foreign policy of New Zealand is directed in the first instance toward the maintenance of peace and security in the area in which New Zealand is located. The most important guiding principle, however, in New Zealand’s international relations is the maintenance and strengthening of Commonwealth ties. Because most New Zealanders still think in terms of the “Empire” their loyalty to the Commonwealth means loyalty primarily to the United Kingdom. Although the Labor Government tended to give priority to United Nations obligations, there is surprisingly great unanimity in foreign policy, with the various differences being those of degree rather than of kind. Mr. Holland, the present Prime Minister, specifically stated on taking office that he would continue Mr. Fraser’s³ foreign policy.

After fourteen years of rule, the Labor Party was defeated by Mr. Holland’s National Party in the December 1949 elections. The election displayed few real differences in party platforms and none in foreign affairs. Both parties were committed to the social legislation which had already been passed and which is by this time part of the fabric of New Zealand life. Labor relations constitute the major political problem in New Zealand, where the trade union movement is exceedingly strong and solidly entrenched. The National Government, however, is not politically dependent on trade union support, as was the Labor Government, and consequently has been able to take a somewhat stronger and more independent line in dealing with the the problem.

Both the Labor Party and the National Party are strongly anti-Communist and opposed to Communist influence in the Labor unions. No steps have been taken, however, to outlaw the Communist party or to deal with it by legislative action. It is small in numbers and has no parliamentary representation. Its principal strength comes from the fact that it controls key positions in several labor unions and thus exercises an influence out of proportion to its numerical strength. During early 1951 a strike of the Communist-led Waterside Workers tied up New Zealand ports. The Government reacted to this politically-inspired strike by de-registering the union and working ships with the armed forces.⁴ It is by action of this character that the Government apparently will endeavor to reduce the influence of Communist leaders in the trade unions rather than by such legislative action as that taken by the Australian government. Apart from its strength in the trade unions, the Communist party draws some indirect support for party propaganda lines from left-wing intellectuals who, without being sympathetic to Communism or the U.S.S.R., are critical of American Far Eastern policies and particularly of those relating to Communist China.

The main plank in the platform of the National Party in the 1949 election was the promise to “make the pound go further.” There is a realization that the pressure of outside events makes fulfillment of this promise presently impossible. Despite this fact there appears to be a general belief that the general election in September of this year will return the present government to office.

New Zealand has played a role out of proportion to its size in international organizations and conferences. It is generally respected for its record of strong support for democratic ideals and insistence on principle rather than expediency as a guide in determining its position on questions arising in the United Nations.

Almost immediately upon the invasion of South Korea, New Zealand prepared to fulfill its obligations to the United Nations. Several frigates of the Royal New Zealand Navy were placed at the disposal of the United Nations force. A volunteer artillery regiment was recruited, trained and sent to Korea. Two contingents of replacements have already been added to the initial contribution. However, in response to a request made in February 1951 that the Korean ground force contribution be doubled, the New Zealand Government replied that that large an additional contingent could be formed only by including instructor personnel needed to build up forces required to meet its Commonwealth commitments in the Middle East. The additional contribution, therefore, could only approximate fifty per cent of the forces already in Korea. In the nonmilitary field, however, New Zealand relief agencies have contributed substantially to alleviate the suffering of the civilian population.

The New Zealand UN delegation has always maintained close relations with the US delegation and has been cooperative with it. The New Zealand delegation, it should be noted, is influenced to a considerable degree on controversial issues by the position of the United Kingdom delegation. New Zealand has taken an active interest in trusteeship matters and has been one of the most liberal of the administering authorities on the Trusteeship Council, its position closely paralleling that of the United States. New Zealand was most cooperative with regard to the special mission of the Trusteeship Council to Western Samoa in response to a petition for self-government addressed to the Council by the Samoans. The recommendations of the Mission were accepted by New Zealand and in large part incorporated in legislation passed by Parliament.

We have found the New Zealand delegation to be most helpful and cooperative in the ECOSOC and in the Specialized Agencies. In UNESCO the New Zealand delegation has played an outstanding role. Outside the United Nations New Zealand has taken an active and constructive interest in the South Pacific Commission.

With reference to our policies toward Japan, New Zealand has shared with Australia dissatisfaction with relations between the Far Eastern Commission and SCAP and was critical of many of General MacArthur’s decisions. At the same time there are important differences in the attitudes of the two Dominions toward the problem of Japan. New Zealand as a predominantly agricultural country is not opposed to a revival of Japan’s industrial economy as such but insists on adequate security safeguards. New Zealand’s unfavorable reaction to our proposals concerning Japanese participation in international relations ha advance of a peace treaty was prompted by the belief that a treaty containing security safeguards should precede Japanese participation in international relations of a political character.

In obtaining New Zealand support for the type of Japanese peace treaty which we now consider necessary for practical reasons and in view of the present world situation, it was essential that we give proper consideration to the very real fears in New Zealand of a resurgent Japan. It became apparent that such support would be dependent upon the United States providing New Zealand with some formal security guaranty. In view of that fact Mr. Dulles visited Australia and New Zealand in early 1951 to discuss the treaty and the possibility of concluding a Pacific security arrangement.⁵ The announcement by the President on April 18, 1951 that we were proceeding with negotiations with Australia and New Zealand for such an arrangement was well received in New Zealand. When the draft Tripartite Security Treaty was published on July 12, 1951 there was a further favorable reaction in New Zealand.⁶ The link between this project and the Japanese Peace Treaty in the minds of the New Zealand public was evidenced by the generally favorable reception accorded the Japanese Peace Treaty when its terms were announced on July 11.

New Zealand has taken certain measures to increase its own contribution to the security of the free world. A National Service Law was enacted late in 1949, and the first trainees went into camps in the latter part of 1950. The need for military personnel to work the docks during the prolonged Waterside Workers strike brought the program to a temporary standstill, but trainees will soon again be entering the camps. The aim is to prepare a trained reserve of men capable of being mobilized into an augmented division to be sent to the Middle East within seventy days of the outbreak of general hostilities in accord with Commonwealth defense plans. However, despite the Government’s willingness to prepare, shortages of material and trained manpower limit the probability of completing the minimum program within the expected period short of the pressures of war itself. Although New Zealand has been found eligible for procurement assistance under the Mutual Defense Assistance Act⁷ and will be able to purchase equipment in the United States after submitting the required assurances, most of New Zealand’s needs must be met by the UK to conform with existing standardization procedures. New Zealand attempts to meet the shortage of trained military technicians by “borrowing” from the UK, but great difficulty has been encountered in building up an adequate pool of New Zealanders in time of peace to meet these needs.

There are seven Pacific Islands now administered by New Zealand to which the United States has historic claims that have not been renounced: Atafu, Nakunono and Fakaofu, in the Tokelau or Union group; and in the Cook group, Penryhn, Manahiki, Danger (Pakapuka) and Rakahanga. Although the United States’ claims to these islands were stated in a note to the British Embassy on August 16, 1939,⁸ we have not raised the question directly with the New Zealand Government. We should, however, avoid actions which might weaken the claims to sovereignty which we asserted in our note to the British Embassy.

New Zealand claims a large section of Antarctica known as the Ross Sea Dependency, and was authorized by a British Order in Council of July 30, 1923, to administer the area, particularly for the regulation of whaling. Although New Zealand’s Antarctic activities are nominal it is interested in the area for strategic projects as weather forecasting and the study of cosmic rays. New Zealand indicated in reply to our proposals in 1949 on internationalization of the Antarctic that it might favor international administration in close relation with the United Nations.

New Zealand’s external trade and financial policies are largely determined by three factors: (1) its membership in, and loyal cooperation with, the sterling area; (2) its traditional trade pattern, involving a surplus with the United Kingdom and a deficit with the United States; and (3) its semi-socialistic economic philosophy.

This combination of factors explains New Zealand’s discriminatory restrictions on dollar area imports, its willingness to accumulate sterling, and its tendency to favor state-trading practices and long-term bulk sales contracts. The New Zealand and United Kingdom economies are complementary and mutually dependent. New Zealand voluntarily channels its exportable surplus of meat and 90 per cent of its dairy products to the United Kingdom, accepting considerably less than world prices, and in return fills the greater part of its needs for manufactured goods in the United Kingdom at relatively high prices. Generally speaking, New Zealand’s present foreign economic policies are at variance with the principles of multilateral trade and exchange which the United States is endeavoring to promote. We have acquiesced in these policies since the end of the war, even though they have involved discrimination against the United States, because of the acute imbalance which prevailed until recently in the trade between the sterling and dollar areas. With the great improvement that has occurred in New Zealand’s dollar position since devaluation, and especially since the outbreak of the war in Korea, there now exists much less justification for New Zealand’s restrictive and discriminatory policies. If New Zealand’s dollar position continues good, or improves further, we should use every appropriate occasion to attempt to obtain a progressive relaxation of discrimination against United States exports.

Although New Zealand by an act of Parliament has adhered to the provisional protocol of GATT and by an Order in Council has made effective, as of July 26, 1948, the tariff rates and provisions of the Agreement, it has not shown the same interest in joining the IMF or the IBRD. The failure of New Zealand to sign a special exchange agreement with the Contracting Parties to the GATT, in lieu of membership in the IMF, has been an issue at two GATT sessions. The United States is not in sympathy with New Zealand’s position, alone among GATT members, of insisting on independence in the exchange field while enjoying the advantages of GATT membership. The United States should continue to encourage New Zealand to take steps to join the IMF and IBRD, although there are no indications of willingness on the part of New Zealand to reconsider its position on membership in these organizations.⁹

The present New Zealand Government has manifested in many ways its pre-election program of freeing the economy of as many controls as possible, encouraging private enterprise and striving to place State commercial enterprises on a paying basis. Price rises of imported and domestic goods, however, necessitated a revision of its policy of reducing or removing subsidies. Subsidies remain on wheat, flour, milk, butter and eggs, the carriage and importation of fertilizers and the transport of timber and overtime in the timber industry. In December, 1950 the subsidy on greasy wool was reintroduced, and one-third of the wool-growers’ income was frozen with the general approval of those concerned. Certain commodities, including foodstuffs, clothing and raw materials remain subject to price controls and there are indications that the Government may be obliged to reimpose controls of items previously freed. While the Government has extended the list of goods exempt from import licensing control when imported from soft currency areas, the policy remains substantially unchanged regarding imports from hard currency countries.

Since August 1950, the United States has engaged in negotiations with New Zealand (and other important wool producers and consumers) to solve internationally the current world wool situation in which supply has fallen substantially behind the increased demand. Three international meetings have been held on this question over the last year, the first in London in September and October 1950, the second in Melbourne in November 1950, and the third in Washington as a part of the International Materials Conference since April 1951. The United States proposal for international wool allocations as a solution to the world wool shortage was resisted successfully by the Commonwealth wool producing countries at the London conference and a Commonwealth counter-proposal, a wool preemption system, was discussed inconclusively at the Melbourne conference. Another United States proposal for international wool allocations has been made at the International Materials Conference and is now being considered by producing and consuming countries.

In all three meetings New Zealand has followed the position of Australia, even going so far as to state on occasions that if Australia agreed to international wool allocations, New Zealand would also, and that the reverse would also be true.

Because of the importance which wool plays in the New Zealand economy, the wool problem takes on significant political aspects. Despite New Zealand’s cooperation with the United States on most other important issues, the wool problem is one on which New Zealand has shown little cooperation over the last year.

The Government announced in July 1950 that it was offering the State-owned National Airways Corporation for sale, as it wished to withdraw from commercial air transport. Subsequently it was stated that the Government was prepared to accept alternative proposals on this sale, including joint ownership with the Government or sale of certain feeder services.

The United States and New Zealand have a bilateral air agreement¹⁰ permitting a U.S. carrier to operate from the U.S. to Auckland. We are interested in altering the existing bilateral so as to permit the route of the U.S. carrier now terminating in Auckland to be extended to Sydney, Australia, with traffic and stopover rights. Negotiations carried on in Wellington in June 1951, indicated that the New Zealand Government was unwilling to allow more than transit rights. The fundamental principle in New Zealand’s aviation policy is that experience during the last war proved that a reliable, New Zealand-controlled trans-Tasman carrier must be maintained for communication with Australia, that this is even more important than direct air service with the United States, and that traffic diverted to any outside carrier would make the maintenance of the national carrier much more difficult and costly. We have maintained that the requested alteration is similar to arrangements contained in many aviation agreements, that it would enable more economical operation at a time when the security interests of both countries depend in large measure on quick and reliable communications, that the diversion, subject to the protective provisions, would be less costly to the existing carrier than New Zealand anticipates, and that the New Zealand chosen carrier, BCPA, enjoys very similar rights with respect to the Honolulu–San Francisco–Vancouver run under the existing agreement.¹¹

We are interested in the economic development of New Zealand through such private capital sources as may be available and willing to invest in sound development projects and through such technical assistance as this Government can render under the Point IV program. We would also be prepared to support a New Zealand application for a loan for justifiable economic projects from the Export-Import Bank and, when New Zealand becomes a member, from the International Bank for Reconstruction and Development.

c. relations with other states

New Zealand and Australia are bound by strong ties of friendship and mutual interests. Their common outlook on Pacific problems was formalized in the Australia–New Zealand Agreement of 1944, which provided for joint consultation on policy questions. Cooperation between the two countries is continuous, as demonstrated by joint naval maneuvers, trade discussion, and a comprehensive reciprocal agreement on social security. Both countries take an active part in the South Pacific Commission and FEC. Both recognize their strategic dependence on the United States as the dominant Pacific power and their economic dependence on the United Kingdom as the chief market for their agricultural produce and their chief source of manufactured goods. Both have been advocates of the Pacific defense arrangement.

Both Australia and New Zealand are faced with similar problems concerned with adjusting their policies to the rising nationalism of the East. Despite the fact that both restrict Oriental immigration, there is a distinct difference in attitude on the racial question in the two countries. New Zealand has a more liberal and enlightened attitude toward race relations, as exemplified by the manner in which the Maori minority is being handled, and it has not hesitated to voice criticism of South African racial policies.

In international affairs New Zealand often follows British or Australian leadership; but it should not be forgotten that New Zealand is an independent country which appreciates being approached directly and that it occasionally resents the aggressive assertion of leadership by Australia.¹²

New Zealand has favored a more centralized Commonwealth, particularly some means of promoting closer agreement within the Commonwealth on foreign affairs and defense. It did not welcome the formula by which India was permitted to remain within the Commonwealth although becoming a republic. New Zealand’s attitude toward these matters has been largely conditioned by its traditional loyalty to the concepts of crown and empire. It is probable, however, that New Zealand now recognizes that because of the opposite views of other Commonwealth members a more centralized Commonwealth is impossible to achieve under present circumstances. New Zealand is a firm believer in the efficacy of the various Commonwealth meetings which have been held since the war as a means of achieving a greater measure of understanding between the members of the Commonwealth.

New Zealand and the USSR exchanged diplomatic representatives during World War II, but for some time the New Zealand diplomatic post at Moscow has been unfilled. The reason for this is both a desire on the part of the present Government to economize in its overseas representation and a recognition of the fact that New Zealand’s relations with the USSR, outside of UN, are of so little importance. The only trade between the two countries of any consequence is in wool. During 1949 wool exports to the USSR amounted to only approximately 2 per cent of total New Zealand wool exports. During the first nine months of 1950 there were no direct wool exports from New Zealand to the USSR, but shipments were made to Czechoslovakia and Poland. In virtually all issues before the UN in which we have been at variance with the USSR, New Zealand has been a strong supporter of the US position.

d. policy evaluation

Our relations with New Zealand have always been most friendly and there has been very little discord in our relations, either political or economic. To the extent that we continue our present close cooperation with the United Kingdom we can be assured of a generally sympathetic attitude on the part of the New Zealand Government and public opinion. On the other hand New Zealand support for US policies, particularly in the Far East, can be of great value in obtaining support within the Commonwealth for our objectives and policies.

There continues to be some fear in New Zealand that in building up Japan we are paying insufficient attention to the security considerations which are paramount in New Zealand’s attitude toward the reconstruction of Japan. These fears would be allayed in large measure by the proposed Pacific security arrangement. New Zealand support for the Japanese peace treaty we believe necessary in the light of present circumstances would also have some bearing on United Kingdom and Australian attitudes toward this question.

New Zealand and the United States share a common western European tradition, the heritage of the English common law and a like distaste for arbitrary power and violent change. The national interests of our two countries in safeguarding and preserving the principles of democratic government are fundamentally the same. This means that in any issue involving a matter of principle New Zealand’s reactions are apt to parallel those of the US. New Zealand can be of assistance to us in UN affairs and in Far Eastern problems generally. Where we can anticipate the emergence of a major issue, or where we wish to obtain New Zealand’s support for a project, greater use should be made of direct conversations here or in Wellington. The machinery for consultations which is provided in Pacific security arrangement should contribute to a greater measure of understanding and support for our policies.

Our information program faces a generally sympathetic public opinion in New Zealand and our approach should therefore be positive and open.¹³ The signing of the Fulbright Agreement with New Zealand on September 14, 1948, made available a fund totalling $3,200,000 for educational exchanges. New Zealand is keenly interested in this program which offers an excellent long-term medium for furthering US–New Zealand understanding through the interchange of information and skills. Information activities and exchange of persons with New Zealand can make a useful contribution to our efforts to achieve an increasing measure of support for our policies and objectives as they relate specifically to New Zealand and in the larger context of our international relations.

2. In despatch 161, from Wellington, September 20, the Embassy in New Zealand stated in part:

   “It is suggested that this additional ‘Objective’ be added: ‘To encourage New Zealand to collaborate with the United States on questions arising in the United Nations or its Specialized Agencies.’ Work along such lines is one of the major activities of this Embassy.

   “The fourth ‘objective’ might be appropriately omitted if, at the time of revision of the Statement, the United States is placing restrictions on the importation of New Zealand products, as it may be presently about to do under the Defense Production Act.” (611.44/9–2051)

   For text of the General Agreement on Tariffs and Trade, with annexes and schedules, and protocol of provisional application, see Department of State Treaties and Other International Acts Series (TIAS) No. 1700, or 61 Stat. pts. 5 & 6.

3. Former Prime Minister Peter Fraser.

4. In despatch 161 the Embassy stated:

   “It is suggested that the duration of the 1951 waterfront strike, about five months, be stated, and also that mention be made of the fact that many other unions, such as those of the seamen, freezing workers and miners, struck in sympathy with the watersiders. It was this solidarity among the militant unions which turned the port strike into a national industrial crisis.

   “It is also suggested that the term ‘politically-inspired’ as applied to the strike he omitted. As the phrase stands now the implication is that the inspiration of the strike was solely political, which is not true. There were economic factors as well, and a good measure of plain, unvarnished greed.” (611.44/9–2051)

5. For documentation regarding these negotiations, see pp. 132 ff, and pp. 777 ff.

6. In despatch 161 the Embassy stated:

   “It is suggested that a few sentences along the following lines be added to the discussion of the New Zealand reaction to the Tripartite Security Treaty: ‘Nevertheless, New Zealand officials are concerned with the ability of the country to meet its obligations under the Security Treaty in the eyes of the United States. In the event of a world conflict New Zealand has undertaken to commit all of its available ground forces to Commonwealth defense in the Middle East, and would have no forces which could be deployed in the Pacific area. New Zealand hopes that the United States will construe its contribution to global defense in the Middle Eastern sector as fulfilling its obligations under the Security Treaty.’” (611.44/9–2051)

7. On June 8, or shortly thereafter. (Memorandum (with attachments) by Thomas D. Cabot, Director of International Security Affairs, June 8, not printed: 744.5–MAP/6–851.)

   For text of the Mutual Defense Assistance Act approved October 6, 1949, see 63Stat.714.

8. For text, see Foreign Relations, 1939, vol. ii, pp. 317–318.

9. In despatch 161 the Embassy stated:

   “It is true that the natural interdependence of the United Kingdom and New Zealand has set the traditional trade pattern and it is also true that New Zealand’s policy has tended to favor United Kingdom manufacturers. But the Embassy doubts that there is a conscious policy of discrimination against American goods at the present time. It has only been within the past year or so that New Zealand has had a favorable balance of trade with the United States. Considerable caution therefore was necessary in the programming of dollar imports. New Zealand is a member of the sterling area dollar pool as a matter of convenience as much as sentiment. Until lately, New Zealand drawing from the dollar pool to meet her dollar deficits has exceeded her contributions to it. The Government is not sure enough yet of the future of its dollar exports to be sure that New Zealand may not have to draw on the pool again. Another thing is apparent. The Government is increasing its licenses for dollar imports as the country’s dollar balances improve. There is still caution but the Embassy believes that New Zealand is not unwilling to trade with the United States when she has the where-withall to do so. All this combined with a growing sentiment in the country that New Zealand is selling cheap to United Kingdom and buying dear may alter some of the traditional attitudes toward overseas trade. When exports to the United States form a dependable pattern, New Zealand’s attitude toward GATT and membership in IMF and IBRD may soften up a little of their own accord.

   “Another favorable factor in the present situation is that the business community generally favors closer trade relations with the United States. This group supports the National Party and its influence with the Government may be reflected to a greater degree from now on. While the United States may properly endeavor to obtain a fair share of the New Zealand market, it should not resort to aggressive action to do so. The circumstances of events foreshadow a better day anyhow, and no action should be taken which would offend the deep loyalty which New Zealand feels toward the United Kingdom. It should be noted as well that the New Zealand Communist Party assiduously plugs the line that the sole reason for United States objections to Imperial preference is to bring about the economic collapse and consequent enslavement of the United Kingdom by driving British goods from the Commonwealth markets.” (611.44/9–2051)

10. For text of the air transport agreement signed at Washington, December 3, 1946, see TIAS No. 1573 or 61 Stat. (pt. 2) 2453.

11. In despatch 161 the Embassy commented:

    “In the discussion of the disagreement concerning civil aviation rights it is believed that some mention should be made of the following point, which New Zealand officials stressed heavily during the discussion in June, 1951: if the United States carrier were granted traffic rights, the same rights would have to be granted to Canadian, Australian, Netherlands, French and other carriers which had also applied for those rights; and that even if it might be possible to devise protective provisions that would permit the New Zealand carrier to survive the competition of one foreign carrier, it would be out of the question to protect it against the competition of a number of foreign carriers.” (611.44/9–2051)

12. In despatch 161 the Embassy stated with regard to this section:

    “It is believed that mention should be made of New Zealand’s most striking and far-reaching divergence from United Kingdom foreign policy: its failure to recognize the Chinese Communist regime.” (611.44/9–2051)

13. In despatch 161 the Embassy stated:

    “It is suggested that the first sentence of this paragraph be expanded into the following:

    ‘Our information program faces a generally sympathetic public opinion in New Zealand, subject of course to the distractions provided by a body of commonly-held misconceptions of the American scene (arising chiefly from motion pictures and inadequate press reports); by the influences occasionally exerted outside of their own circles by Communist, left-wing intellectual and certain labor minorities; and by the more general concern regarding United States Far Eastern policies already mentioned. Information program approaches should be positive and open. Obvious attempts at propagandistc persuasion will be resented, and resisted. The New Zealand audience is highly sophisticated; name-calling techniques or graphic presentations which may appeal to somewhat primitive societies are apt to have a boomerang effect; on the other hand, it is receptive to factual evidence and logical reasoning.’” (611.44/9–2051)