FOREIGN RELATIONS, 19 5 0, VOLUME I


organization designed to deal on a regional basis with the same type
of problems as the International Monetary Fund can be reconciled
with the position of primary sponsorship for and leadership in the
Fund which 'has been regarded as a cardinal principle of American
economic foreign policy. With respect to an institution analogous to
the clearing union which had been proposed for Latin America, the
National Advisory Council registered its opposition in the NAC
Action No. 226, March 18, 1948,4 for the reason among others of the
serious consequences to the International Monetary Fund which were
to be expected.
   To reconcile these difficulties, it has been suggested that the United
 States representative in the clearing union should abstain from active
 participation in matters concerning the Fund. A question may be
 raised, however, whether this suggestion would not in fact eliminate
 the United States from a substantial part and perhaps a majority of
 the important matters which would come before the clearing union.
 This might suggest the possibility of another alternative, namely,
 that the United States be represented by an observer rather than by
 a voting member.
   If European economic unification is a goal of United States policy,
 it is necessary to face these difficulties and see whether some modus
 ,ivendi can be reached between the position of the United States
 toward the management of the European clearing union and the
 position of this country in the global institutions to the support of
 which the United States is committed.
   [Here follows discussion of the scope, of the clearing union (section
 3) and of the question of the relation of the proposed clearing union
 to progress toward dollar viability (section 4).]
 5. Instructions to United States Executive Director of the Interna-
     tionac Monetary Fund.
   In due course the United States Executive Director5 will need
instructions on how to reply to the following points raised in a memo-
randum of January 12, 1950 from the Managing Director of the Fund
(see attachment A) 6

  Not printed.
  Frank A. Southard, Jr.
  Not printed. The position of the Managing Director of the Fund seemed to
be this: The establishment of a regional exchange organization should be
the
business of the International Monetary Fund, and, if such were deemed neces-
sary, the Fund itself should provide the machinery for such an organization.
Unnecessary conflicts of policy and action and wasteful duplication of time
and
personnel would be the inevitable result -of the establishment of a regional
organization. Accordingly, international monetary action would be hindered
rather than promoted.
  It was in this context that the Managing Director posed the questions enumer'
ated above.


818