FOREIGN ECONOMIC AND COMMERCIAL POLICY


with European countries. He would not defend the proposal as one
inevitably leading to or involving commitments to Europe's integra-
tion. He thought it did, however, constitute a move in that direction.
He would be inclined to put justification on the basis that there was a
real advantage to steps which break down the barriers within the
European area itself. He pointed out that this was a problem we had
faced in connection with Article IX of the Anglo-American Financial
Agreement. The question raised was whether we were not leading to
a soft currency area by allowing Britain to discriminate. He thought
that at that time we came to the conclusion that as long as the soft
currency area was being narrowed (and devaluation tended in this
direction) there was a real benefit in increasing competition within
that area and we would be prepared to support arrangements that
would tend to break down barriers within the area. The objective
would still be to break down all trade barriers. The State Depart-
ment saw no reason why the same logic could not be used in defending
this proposal, particularly on the basis of its being an immediate
device for meeting an immediate situation. He had not thought of the
union as necessarily being a permanent institution. He did not think
it was necessary to make that.decision now. The permanent institution
might be a federation in Europe. There were more small indications
of movements in that direction than previously. If one thought of
the union as a temporary arrangement carrying out operations parallel
to those the International Monetary Fund carries out, but is notdoing
for Europe at present, that kind of responsibility might well revert
to the Fund after 19,52 when ECA had withdrawn from Europe. He
said that no one wanted to take a position that would undercut or
destroy the Fund but he was not sure that necessarily followed from
the current proposal. He thought there could be limitations on time
or limitations on authority that would permit the Fund to feel the
union was something supporting its objectives rather than being a
competitive organization.
   [Here follows further and lengthy discussion of the question.]

NAC Files, Lot 60D137, Box 362
  Minutes of Meeting No. 147 of the National Advisory Council,
                  Washington, January 23, 1950

SECRET
  [Here follow list of persons present (26) and discussion of the
European Payments Union question.]
  Action. The following action was taken (Action No. 383):
  The National Advisory Council advises the Administrator for Eco-
nomic Cooperation that:
     496-362--77-53


821