Foreign Relations of the United States, 1950, East Asia and the Pacific, Volume VI

743.13/8–750

Report Prepared by the Department of State¹

top secret

[Washington, undated.]

Summary

Our Embassy at Canberra was informed on July 4, 1950 that following a visit to London Prime Minister Menzies wished to visit Washington for the purpose of discussing a number of matters with the President and officials of this Government. The Prime Minister indicated that he had in mind questions of Pacific and world defense and economic matters related to the Australian development and immigration program.² The question of Mr. Menzies’ visit was referred to the President and, upon receipt of his approval, our Embassy at Canberra was instructed to inform the Australian Government that we would welcome the Prime Minister’s visit.³

Prime Minister Menzies arrived in New York on July 27 and proceeded to Washington on the same day. He left Washington on August 3, 1950 for New York, where he remained until August 7 and then left for Ottawa.

During his visit to Washington Prime Minister Menzies was entertained at luncheon by the President, at which time he was awarded the Legion of Merit.⁴ He was also given a dinner by the Secretary at Prospect House.⁵ Other entertainment accorded him during his visit, addresses which he delivered and other activities in which he participated are listed in the program of his visit immediately following.⁶

In addition to his calls on the President and the Secretary, Mr. Menzies called on Secretary Johnson, Secretary Snyder, and Mr. Averell Harriman.⁷ Memoranda of the conversations between the Prime Minister and the President and the Prime Minister and the Secretary are attached.⁸ There are also included with this paper, memoranda of conversations between officers of the Department and members of the Prime Minister’s party.⁹ No memoranda of the conversations with Secretary Johnson, Secretary Snyder and Mr. Harriman are available.

When the Prime Minister called on the President on July 28 he raised only two matters, Australia’s plan to send ground forces to Korea and Australia’s need for dollar financing to carry out a five year development and immigration program. In discussing the decision to send ground forces to Korea, the Prime Minister mentioned the larger problem of strengthening Australia’s defense forces. He observed that in the event of a general war Australian troops might be needed in the Near East and the Far East beyond areas where service is now permissible. In his remarks on Australia’s development and immigration program, Mr. Menzies stated that $250 million would be required over a 5 year period for the development of basic industries, improvement of transport, provision of housing and for irrigation projects. In other conversations with members of the Prime Minister’s party the figure $350 million was also used, but it was explained that Mr. Menzies considered $250 million as the minimum amount required if the program were to be carried out.

As regards the source of this dollar financing, the Prime Minister stated in his conversations with the President and with the Secretary that the British had suggested he make his request to the International Bank. While agreeing that this was probably the best source in view of the nature of the Australian program, Mr. Menzies expressed doubt that the Bank would be able to act promptly enough to meet the urgency of the situation. He pointed out that the flow of immigrants to Australia had already reached a rate of 200,000 per annum and that his Government wished to maintain this rate over a period of ten years.

A working party was organized from the various interested Departments of the Government to meet with Prime Minister Menzies’ staff for the purpose of receiving and analyzing information on Australia’s needs. The first meeting of this working party with the Australian representatives took place on July 28 in Mr. Thorp’s office. There was a further meeting of the same group on July 31. The Prime Minister and his party were obviously favorably impressed by the expeditious manner in which the Department organized these discussions and proceeded to consideration of the Australian problem.

Prior to Mr. Menzies’ arrival, the Department had determined that he should be advised to take up the question of dollar financing in the first instance with the International Bank rather than with the Export-Import Bank. This position was agreed to by the Export-Import Bank and the Treasury Department.

On August 2 Prime Minister Menzies saw Mr. Black, President of the International Bank, and outlined the Australian need for $250 million in dollar financing over the next five years. He stated that assurances as regards at least $100 million of this amount were needed immediately and asked whether the Bank would be able to give him an answer prior to his departure from the United States. Mr. Black told the Prime Minister that on the assumption that the Australian delegation then in Washington could provide an economic justification for the program and an analysis of its effect on the Australian economy and could satisfy the Bank on the repayment prospects, the Bank would be prepared to give priority to a study of the proposals with a view to negotiating a loan to cover certain immediate dollar needs.

On August 8 the United States Executive Director of the International Bank requested NAC consideration of a proposal by the management of the Bank that a loan of from $50 million to $70 million be made to Australia to finance some costs of the Australian development program. On August 11 [14?] the NAC advised the United States Executive Director that it approved his consideration in the Board of Directors of loans up to $100 million with terms of 20 or 25 years at an interest rate not to exceed 4¼ percent.¹⁰

The President of the Bank informed the Executive Directors on August 10 that he proposed to inform the Australian Government that, (1) the Bank is willing, in principle, to participate over the next five years in the financing of the Australian development program; (2) the Bank is prepared to enter into negotiations at once for an initial loan of $100 million with repayment on the basis of a maximum life of 20 or 25 years; and (3) that the Bank is prepared to send representatives to Australia in the fall of 1950 to examine the Australian development plans in more detail to determine the extent to which Bank participation in the full five year program is justified. The President stated that if negotiations with Australian representatives could be concluded in time, he proposed to submit recommendations and a draft of a definitive loan agreement to the Directors on August 22, 1950.¹¹

appraisal of the visit

Prime Minister Menzies, contrary to original expectations, did not bring up during his visit to Washington any matters other than Australian participation in the Korean operations and the question of a dollar loan. It is probably that he confined his discussions to these two matters because of his desire to concentrate on the loan question and because the Minister of External Affairs, Mr. Percy Spender, may wish to cover the broad range of political problems in which the United States and Australia are interested during his forthcoming visit to the United States.

There can be no question that the visit of the Prime Minister was an outstanding success and that it has contributed to closer and more cooperative relations between Australia and the United States. We can expect to benefit from this attitude in our relations with Australia in the UN, in obtaining understanding and a greater measure of support than in the past for our Far Eastern policies in general and particularly as they relate to Japan, and in obtaining such agreements as an FCED Treaty and Double Taxation Conventions.

1. The source text is accompanied by a cover sheet entitled “Visit to the United States of the Right Honorable Robert G. Menzies Prime Minister of Australia July 27–August 7, 1950.” There is no indication of the offices responsible for the preparation of the report. The summary section of the report printed here consists of five typewritten pages in the source text. The remainder of the report consisted of 23 pages of attachments identified in the section printed here.
2. See telegram 6, July 5, from Canberra, p. 197.
3. See telegram 7, July 12, to Canberra, p. 199.
4. Prime Minister Menzies lunched with President Truman on July 28.
5. Secretary of State Acheson’s dinner for Menzies was held on July 31.
6. The program of the Menzies’ visit is not printed. Regarding Menzies’ address to the National Press Club on July 31 and his addresses to the Senate and the House of Representatives on August 1, see footnote 3, to telegram 19, August 3, to Canberra, supra.
7. According to the program of the Menzies’ visit, the Prime Minister had an appointment with W. Averell Harriman, Special Assistant to President Truman, on the morning of July 29, and he had appointments with Secretary of Defense Louis Johnson and Secretary of the Treasury John W. Snyder on the morning of July 31. No records have been found of those meetings.
8. President Truman, with Secretary of State Acheson, conferred with Prime Minister Menzies at the White House for approximately 1 hour on the afternoon of July 28. For the Secretary of State’s memorandum of that part of the discussion devoted to economic development in Australia, see p. 204. A separate memorandum of conversation (the original of which is filed under 795.00/7–2850 and a copy of which is included as an attachment to the source text) dealing with the discussion of the sending of Australian troops to Korea is not printed. For the Secretary of State’s memorandum of his conversation with Menzies on July 31, see p. 205. During and after a dinner at the Australian Embassy on the evening of July 28, Secretary of State Acheson, together with Presidential Special Assistant Harriman, Ambassador at Large Philip C. Jessup, and John Foster Dulles, Special Assistant to the Secretary of State, discussed a number of topics with Prime Minister Menzies and Australian Ambassador Norman J. O. Makin. For Dulles’ memorandum of that portion of the conversation devoted to a Japanese peace treaty (a copy of which was attached to the source text), see p. 1261. Jessup’s memorandum of that portion of the conversation given over to various efforts to achieve peace in Korea (a copy of which was also attached to the source text) is not printed.
9. Assistant Secretary of State Willard L. Thorp, officers of the Department of State, and representatives of the Departments of Commerce and the Treasury met with members of the Menzies’ party on July 28. Two further meetings were held on July 31. The memoranda of conversation covering those meetings, attached to the source text, are not printed.
10. The National Advisory Council on International Monetary and Financial Problems, composed of the Secretary of the Treasury (Chairman), the Secretary of State, the Secretary of Commerce, the Chairman of the Board of Governors of the Federal Reserve System, the Chairman of the Board of Directors of the Export-Import Bank of Washington, and the Administrator of the Economic Cooperation Administration, coordinated the policies and operations of the representatives of the United States on the International Monetary Fund and the International Bank for Reconstruction and Development. In National Advisory Council Document No. 1029, August 14, 1950, the National Advisory Council Staff Committee favorably reviewed the proposed International Bank loan to Australia. At its meeting on August 14, the National Advisory Council, without discussion, made the decision described here. Documentation of the National Advisory Council is preserved in Lot file 71A6682.
11. The text of the communication from Eugene R. Black, President of the International Bank for Reconstruction and Development, to Executive Directors of the Bank, summarized here, is included as an attachment to the source text, not printed. On August 22, following 7 days of negotiations, the International Bank and the Australian Government concluded in Washington a $100 million loan agreement for the purchase of imported capital equipment. The loan was for a term of 25 years and carried an interest rate of 4½ percent. For official descriptions of the loan, see Supplement to International Bank for Reconstruction and Development, Fifth Annual Report, 1949–50 and International Bank for Reconstruction and Development, Sixth Annual Report, 1950–1951, pp. 25–26.