FOREIGN ECONOMIC AND COMMERCIAL POLICY


  "(a) The Fund is vitally concerned with European payments
problems and should participate in the present discussions at both the
technical and policy levels.
  "(b) The Fund should be consulted by the members before adop-
tion of the plans now under discussion.
  "(c) If it is found necessary or desirable to set up a regional
monetary organization, the Fund can provide such an organization,"
  He will also need guidance as to the position he should take in any
discussion in the Fund on the ECA proposal.

NAC Files, Lot 60D137, Box 362
   Minutes of Meeting No. 146 of the National Advisory Council,
                   Washington, January 19,1950

SECRET
  [Here follow list of persons present (29) and prior discussion.
Secretary of the Treasury Snyder was in the chair. The Assistant
Secretary of State for Economic Affairs (Thorp) and his Special
Assistant, Mr. Leroy D. Stinebower, were present for the Department
of State. Mr. Frank A. Southard, Jr., was present as United States
Executive Director on the International Monetary Fund.]
  Mr. Southard added that we were dealing with a proposal for a
permanent institution1I and that it must be considered whether, both
in terms of the Fund and of other broad United States objectives,
the possible gains from the proposed institution would adequately
offset the risks involved for us. His own view was that it was im-
possible to evaluate the clearing union proposal as a forerunner of
a genuine union until the European countries were prepared to state
that union was their objective and that in their view this device for
monetary union was an element in a total program for union. The
proposal had to be evaluated in terms of ultimate objectives rather
than primarily as a transitional device. Mr. Southard continued that
the plan provided as the incentive for maintaining the proper em-
phasis on dollar trade what seemed to be primarily a gold standard
device, namely, dependence on movement in gold balances. He thought
this was a very feeble reed to offer as the main resource to prevent
the creation of a strengthened soft currency area which might per-
manently discriminate against dollar trade. The inclusion in the union
of sterling area countries, many of which were foods and raw materials
producing countries, increased the risk rather than decreased it.
  Mr. Southard continued that United States sponsorship of this
device ran the risk of misleading the rest of the world into believing
  i.e., the proposed European Payments Union.


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