Foreign Relations of the United States, 1955–1957, East Asian Security; Cambodia; Laos, Volume XXI

165. National Security Council Report¹

NSC 5713/2

Washington, August 23, 1957.

NOTE BY THE EXECUTIVE SECRETARY TO THE NATIONAL SECURITY COUNCIL ON LONG-RANGE U.S. POLICY INTERESTS IN AUSTRALIA AND NEW ZEALAND

REFERENCES

• A. NSC 5713; Annex to NSC 5713
• B. NSC Action No. 1725
• C. NSC 5713/1
• D. Memo for NSC from Executive Secretary, same subject, dated August 20, 1957
• E. NSC Action No. 1779²

The National Security Council, the Secretary of the Treasury, and the Director, Bureau of the Budget, at the 335th Council meeting on August 22, 1957, adopted the statement of policy on the subject contained in NSC 5713/1, subject to the amendments thereto which are set forth in NSC Action No. 1779–b.

The President has this date approved the statement of policy in NSC 5713/1, as amended and adopted by the Council and enclosed herewith as NSC 5713/2; directs its implementation by all appropriate Executive departments and agencies of the U.S. Government; and designates the Operations Coordinating Board as the coordinating agency.

James S. Lay, Jr.³

[Here follows a table of contents.]

[Enclosure]

STATEMENT OF LONG-RANGE U.S. POLICY INTERESTS IN AUSTRALIA AND NEW ZEALAND

General Considerations

Introductory

1. In the Pacific area, Australia (population 9–1/2 million) and New Zealand (population 2 million) occupy a unique position. They have and are likely to continue to have stable governments, firmly based on traditional, democratic institutions, developed civic consciousness, and a meaningful sense of external interest. The ferment of forces at work in Asia is not present in either country.

2. Since World War II, Australia and New Zealand have undergone an important reassessment of their attitudes and policy. Although still loyal members of the British Commonwealth, their earlier dependence on the United Kingdom has shifted toward acknowledgment that their ultimate security is inextricably linked with the United States. Their previous overseas commitments in support of the British in the Middle East were replaced in 1955 by formal military commitments in Malaya. As Pacific powers, Australia and New Zealand have begun to reappraise their interests in terms of the United States and Asia. The actions which they have already taken in consequence of their altered conception of their interests have produced a fundamental transformation in their national strategic outlook, despite some anti-American sentiment among intellectual, left-wing labor, and commercial circles.

Relationships of Australia and New Zealand with the United States

3. ANZUS. Australia and New Zealand are closely allied with the United States in two collective security organizations, ANZUS and SEATO. In the more intimate of these relationships, ANZUS, the United Kingdom is not represented. The ANZUS Council meetings have provided a consultative forum of major political value. ANZUS military planning has served as a strategic core for the development of SEATO military planning. ANZUS planning facilities may be more appropriate for some problems; for example, certain phases of the problem posed by the possibility of Communist subversion of all or part of Indonesia.

4. SEATO. Australia and New Zealand are active and close partners in SEATO; participate fully in planning and executing joint military exercises; and, almost without exception, support U.S. positions in SEATO Council meetings and in those of its specialized agencies.

5. Military Equipment. Australia is revising its defense program to provide for increasing use of U.S. equipment. New Zealand has indicated an intent to take similar measures. Each country maintains Joint Service Staffs in Washington to maintain liaison with the Department of Defense and to manage their purchases of military equipment. The United States has concluded agreements with Australia in 1951,⁴ and with New Zealand in 1952,⁵ under Mutual Security legislation for the sale of military equipment, materials, and services. Australia, whose present defense establishment and potential is significantly greater than New Zealand’s, has purchased about $30 million worth to date. The United States is currently considering the sale of military transport aircraft value at $37 million on terms involving a 6-year credit repayable in dollars. New Zealand has purchased under $100,000 worth.

6. U.S. Private Investment. U.S. private investment in Australia has risen from a total of $200 million in 1950 to about $600 million in 1956, and involves several hundred U.S. firms. U.S. investment in New Zealand has also significantly increased in recent years and is estimated at about $45 million.

7. Other Arrangements with the United States. The United States now has in effect with Australia and New Zealand a series of other agreements in such specialized fields as atomic energy, civil aviation, taxation, and exchange of persons.

Relationships of Australia and New Zealand with Asia

8. SEATO. As noted above, both countries participate actively in SEATO, although they regard the ANZUS treaty as fundamental to the protection of their national security.

9. Colombo Plan. Both countries have begun to take a significant part in helping free Asian countries to develop along lines compatible with Free World interests. Their major instrument for this has been, and is, the Colombo Plan. In the five-year period ending June 30, 1956, Australia committed $72 million in grant aid under the Colombo Plan to Asian members of the Plan. Actual expenditure during this period was approximately $38 million, of which $33 million was in capital equipment and the remainder in technical assistance and training. During the same period, New Zealand appropriated $15 million in grants to the Colombo Plan countries and spent approximately $9 million, of which $8 million was in capital equipment and the remainder in technical assistance and training.

10. Diplomatic and Trade Relationships. In the past few years both countries have increased their diplomatic and trade representation in free Asia, although each is still critically short of personnel, especially those qualified as Asian specialists.

11. Japan. Both countries are making efforts to improve their relations with Japan, long considered the traditional enemy. The Prime Ministers of Australia and New Zealand have for the first time officially visited Japan. In July 1957, Australia concluded a trade agreement with Japan providing for de facto most-favored-nation treatment.

12. Communist China. Both countries support the U.S. position regarding non-recognition, exclusion from the UN and its ancillary bodies and, up to the present, the maintenance of special restrictions on strategic trade. However, the opposition labor parties in both countries and appreciable public sentiment are opposed to these policies. In view of traditional Commonwealth ties and U.K. policy, the official Australian and New Zealand position indicates the importance both attach to concerting their policy with U.S. policy in Asia.

13. Indonesia. Good relations between Australia and Indonesia, for which Australia strives with considerable success, are handicapped by Australia’s firm support of the Dutch as opposed to the Indonesian position on West New Guinea.⁶

14. Malaya. Both countries, especially Australia, are taking a special, sympathetic interest in Malaya’s imminent achievement of independent status within the Commonwealth. The military detachments already on assignment there are expected to remain on the basis of Malayan invitation and may even be augmented. In addition, Australia is helping to train newly-appointed Malayan officials as well as furnishing Australian technical personnel (for example, probably a governor of the Central Bank) upon Malayan invitation.

Australian-New Zealand Interest in Antarctica

15. Additionally, Australia and New Zealand maintain a lively interest in nearby Antarctica. While the eventual geopolitical value of Antarctica is not clear, Australia and New Zealand, because of propinquity and announced claims, will play an important role in the solution of Antarctic problems. The U.S. “Deep Freeze” operation is based on New Zealand. U.S. efforts to achieve satisfactory Antarctic arrangements will depend, in the first instance, on understandings with Australia and New Zealand.

Factors Limiting U.S. Ability to Strengthen Australian-New Zealand Capabilities

16. The extent to which U.S. policy can build on the favorable circumstances summarized above to strengthen Australian and New Zealand capabilities is restricted both by the multiplicity of U.S. responsibilities and by Australian and New Zealand limitations. Some of these limitations are within the capacity of Australia and New Zealand to overcome through their own efforts; others could be overcome only with outside assistance. The more important limiting factors may be summarized as follows:

a. Despite the fact that the quality of the fighting men of Australia and New Zealand is high, and the missions which they can undertake could be important for local operations in Southeast Asian areas, the forces which these countries can maintain and equip will remain small in size. Each country spends about 4% of its national income on defense. Total Australian active forces are about 60,000; New Zealand about 15,000.

b. New Zealand has no significant industrial potential. In Australia, the local demand for important capital goods already exceeds local production capacity. Any rapid or substantial increase in Australian production would require an increase in both the supply and the efficiency of labor. However, Australia is capable of meeting many of its own requirements in manufactured goods, and its industry is likely to continue to grow. In both Australia and New Zealand high labor and capital costs, power shortages, and transportation difficulties are limiting factors. The balance of payments position in both, particularly in relation to the dollar area, is such that loans and import restrictions have periodically been resorted to.

c. The possibilities of expanding U.S. trade with Australia and New Zealand are not great. Both countries consider that our surplus disposal programs are a continuing threat to their own traditional world markets for such commodities as wheat and dairy products. In addition, any moves by the United States directed toward the protection of its own wool-growing industry is the subject of great concern to these allies. Australia, in addition, is seriously concerned over our recent action in seeking to protect our own producers of lead and zinc from foreign competition. Lead and zinc have been significant dollar earners for Australia.

d. While relatively free from the taint of “colonialism”, both Australia and New Zealand maintain highly selective white immigration policies and have dependent territories and trusteeship responsibilities in the Pacific area, both of which tend to restrict their influence in racially-conscious Asia.

Long-Range Potentialities

17. Even with these limitations, Australia and New Zealand have long-range potentialities for strengthening the Free World in the Pacific area:

a. If present Free World Lines in Asia hold:

(1) The political maturity and administrative abilities of Australia and New Zealand should, over time, permit them to assume a more active role in strengthening the capacity of the new states of the Far East to defend their independence and to consolidate their non-Communist institutions.

(2) Long term prospects are for an expansion of trade between Australia and New Zealand on the one hand and Asian countries on the other. Australia, like Japan, is a potential supplier of finished products, and may be expected to play a part in supplying any developing markets for such goods in the area. Australia, particularly, possesses mineral resources (coal, iron ore, copper, lead, zinc and uranium) which make the country potentially a significant supplementary source of industrial and defense supply for free Asia. These resources have already been developed to the point that the proportion of the gross national product derived from manufacturing is as high in Australia as it is in the United States. The living standards of Australia and New Zealand are among the highest in the world.

(3) Even though the balance of payments still fluctuates materially with the international demand for wool, and the economy experiences recurrent periods of fairly serious inflationary pressures, the Australian economy has been continuing to grow at a relatively rapid rate. With the completion of the Snowy Mountain hydroelectric and irrigation project (comparable in scope to TVA), Australia will be able to expand its agricultural output, and the additional electrical power will aid the expansion of industry.

(4) The climate for foreign investment is relatively good. In recent years about 10% of total investment in Australia had been financed by foreign capital. Part of this foreign capital (over $300 million) has been supplied by the IBRD, but most of it has come from private investors in the United Kingdom and the United States. The further realization of the Australian potential in the Far East might be considerably facilitated, however, if labor policies were significantly changed and productivity were significantly increased. Changes in trade policy, particularly with respect to Japan, would also be beneficial. The recently concluded trade agreement with Japan promises to be helpful in this regard.

b. Australia and New Zealand may, over the long run, represent fall-back positions against political contingencies which might make the use of present Free World positions in the Pacific, including Japan, less feasible, or compel the conduct of limited military operations against Southeast Asian areas from other offshore locations. Both countries possess useful military potentials; and, in the event other areas in the Far East were denied, the combination of their limited vulnerability and their proximity to insecure areas in Southeast Asia could greatly increase their strategic value.

c. Whether, over the longer run of a quarter century, the isolated location of both countries and the uninhabited land mass of the Australian hinterland will have greater strategic significance, can only be speculative.

Objectives

18. An Australia and a New Zealand with sufficient political, military, and economic capabilities to assist in strengthening free Asian states and in carrying out Free World responsibilities in the Far East.

19. Preservation of Australia and New Zealand as secure rear areas which could provide alternative facilities for the conduct of Free World security operations in the Western Pacific–Indian Ocean areas.

Major Policy Guidance

20. Political.

a. As the capacity and influence of our European Allies in the Far East diminishes, it is in the interest of the United States that Australia and New Zealand, as strong-points of political stability and Free World orientation in the Far East, continue and extend their developing interest and activities in that area.

b. Seek to strengthen the capacity of Australia and New Zealand to assume a greater share of Free World responsibilities in Southeast Asia and to enhance their prestige in that area. To this end, continue close cooperation, consultation, and coordinated action with Australia and New Zealand, bearing in mind the importance and utility of their Commonwealth ties.

c. Recognize that the role of Australia and New Zealand in promoting Free World interests in Asia is limited and probably not susceptible to rapid increase.

21. Economic.

a. Encourage Australia and New Zealand to maintain a favorable climate for private capital investment and to rely primarily on private enterprise to sustain their economic growth.

b. Encourage Australia and New Zealand to continue to contribute to the economic development of free Asia by providing economic and technical aid, either bilaterally or through appropriate multilateral mechanisms such as the Colombo Plan.

c. Keep U.S. trade restrictions on commodities of special interest to Australia and New Zealand (such as wool, dairy products, zinc and lead) to the minimum practicable, having due regard to national security and total national advantage.

d. In carrying out programs involving disposal of U.S. agricultural surpluses abroad, avoid, to the maximum extent practicable, detracting from the ability of Australia and New Zealand to market their own exportable products.

22. Military.

a. Continue to participate with Australia and New Zealand in ANZUS and SEATO operational exercises and military planning, including planning for the availability of Australian and New Zealand facilities in limited hostilities in the Far East.

b. Continue and extend, as appropriate, present arrangements for the purchase and maintenance by these countries of U.S. equipment for their own forces.

c. Be prepared to consider any further proposals by Australia and New Zealand for the progressive standardization of their military equipment on U.S. models.

Note

No Financial Appendix is included with the above statement of policy because, with the following exceptions, no expenditures are currently anticipated:

a. A 6-year credit up to $32.5 million repayable in dollars for the purchase of military transport aircraft by Australia.

b. Small amounts for information, education and exchange programs.

1. Source: Department of State, S/S–NSC Files: Lot 63 D 351, NSC 5713 Series. Secret.
2. See footnote 9, supra.
3. Printed from a copy that bears this typed signature.
4. For text of the Mutual Defense Assistance Agreement effected by an exchange of notes dated February 1 and February 20, 1951, at Washington, see 2 UST 644.
5. For text of the Mutual Defense Assistance Agreement effected by an exchange of notes dated June 19, 1952, at Washington, see 3 UST (pt. 3) 4408.
6. “While for the present maintaining neutrality in the New Guinea dispute in our relations with other governments explore within the U.S. Government solutions to this problem compatible with over-all U.S. objectives, for possible discussion with other interested governments.” (Paragraph 19, NSC 5518) [Footnote in the source text. For text of NSC 5518, “U.S. Policy on Indonesia,” May 3, 1955, see vol. XXII, p. 153.]