FOREIGN RELATIONS, 19 5 0, VOLUME I


that we favored a regional approach rather than an international
approach to the solution of problems. He pointed out that in other
parts of the world, including Latin American and Moslem countries,
there had been very specific proposals for clearing unions. These pro-
posals did not seem appropriate for those areas, and in the case of
the Latin American proposal the Council had taken an action express-
ing that view. However, it would not be too easy to say that a clearing
union proposal made sense in Europe and not in other parts of the
world. We might also find that if we contributed not only our talent
but also outr money to such a European clearing union it would be
difficult to explain why there should not be similar contributions to
clearing groups elsewhere in the world.
   Mr. Southard added that he thought that United States sponsorship
of the proposal would gravely weaken the agencies which were still
struggling with an international approach to the problem of converti-
bility. It would weaken our influence and therefore the agencies
themselves, including the Fund, GATT, and ITO.
  Mr. Southard continued that there had been three chapters in the
history of European relations with the Fund. In the first chapter the
Europeans had decided they did not want a Fund with much power.
We had spent most of our energy in the Fund trying to break down
that concept. The second stage was marked by the ERP decision,
where we removed the Fund for the duration of the, ERP from the
provision of dollar assistance. We had allowed the Europeans to
challenge us with being indifferent to European problems in that
regard. We were now in danger of having a third stage in which we
would help the Europeans to set up an institution which would make
it seem that the Fund would have no voice. Mr. Southard thought
there was no way of reconciling the ECA proposal with our obligations
to the Fund. We would participate in decisions to provide funds to
make the same kind of advances that the Fund was designed to make.
Although a superficial liaison for consultation and ratification could
be set up, this would be merely a face saving device, and would be no
more meaningful than had been the consultation on exchange rates in
the fall of 1949. He concluded that his opposition to this proposal and
the statement that there was no way of reconciling it with the Fund
did not mean that the United States would have to oppose any
possible arrangement by Europeans. There was no reason to believe
that with respect to other plans we might not work out appropriate
relations with the Fund and with other United States policy objectives.
  [Here follows other discussion of the proposed European Payments
Union.]
  Mr. Thorp said the State Department had a real concern in sup-
porting steps that look in the direction of closer working together


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