Minute from Frank Biggar to Frederick H. Boland (London)
enclosing a speech by Frank Aiken on the future of the European Payments Union
(305/57/268)

You will be aware that one of the principal items on the Agenda of the Meeting of the OEEC Council at Ministerial level on the 6th and 7th June, was the long-term future of the European Payments Union. I enclose, for your information, in this connection a copy of the statement made to the Meeting by the Minister on this subject, together with an extract from the Report of the Ambassador at Paris on the Debate generally.

Enclosure

DELEGATE FOR IRELAND (Mr. Aiken): Mr. Chairman, yesterday a number of our colleagues here adverted to the point you have touched on this morning, that really behind this immediate difficulty of some very high creditors in this restricted group of countries, there is the fundamental problem of how we are going to cure the whole situation. I do not think anybody, when the European Payments Union started, thought it could live permanently on a restricted basis – restricted to 16 or 17 countries. If we are to have a true Payments Union the area comprising that Union must be sufficiently large and must comprise countries with complementary trade, in order that it should continue in a permanent way.

We have a saying in Ireland that a bird cannot fly on one wing, and this European Payments Union has been trying to fly on one wing for the last two or three years. I think it redounds to the credit of our experts and others, and of you yourself, Mr. Chairman, that with the help of a feather or two from the American eagle, it has been able to survive so far.

I think we should recognise that we cannot continue to ask the American people for charity, and the American Government – whatever Government is there – cannot ask the Congress of the US to continue to give dollars by way of charity to European countries. We must get some system with which America and Canada and the other fundamental creditor countries are associated so that their monies are automatically available to buy their goods if they are in surplus.

Let me illustrate it this way. If the US and Canada were associated with the European Payments Union, and if they continue to be creditor countries they would build up in our account a volume of dollars which would be there to be spent without having to ask Parliament for them. In the same way, if the Bretton Woods Agreement were amended so that the same type of penalty as is put on creditor nations here or some other penalty were put on the creditor you would have again the possibility of dollars being made available to the rest of the world to buy American goods, without the American Congress being asked for aid.

We all realise – I think there is no necessity to emphasise it – that the American people and the American Government, in the post-war world, have approached the dollar problem in a very generous way. I would now urge them to approach it in a technically correct spirit, and to realise that if world trade is going to continue at a high level, then each country has to put into the pool of foreign exchange as much as she takes out, and that if the US – I am citing the US because it is a great creditor country at the present time – takes back into its system the dollars that are at present in the world and does not put an equivalent amount of dollars into the world pool by purchases, loans or gifts, then world trade must sink.

We have a particular case here at the moment and I do not want to get into it in very great detail. I do not know, from the point of view of the interests of Europe, whether it is a good or a bad thing that Belgium has this very high credit at the moment. I know that Belgium is exporting certain goods that are of great interest to the rest of the world. One thing, however, that is well illustrated by our present difficulty of the very high surplus of Belgium is that if a country is in surplus, a large surplus, it withdraws the means of payment from other countries. Again I want to say that I am passing no judgment at all on the present Belgian situation; my country has been very much facilitated by the fact that the Belgians were prepared to export steel, cement and other things which we need in our country for construction work. Nevertheless the technical financial problem remains that there are no Belgian francs left to pay Belgium for her goods. If we could get all the countries of the Western world with their complementary trade associated in a broader field, I would then recommend that we have rules which would compel countries in surplus to spend or to lend that surplus within each accounting period.

I think it would be foolish for us to contemplate carrying on the European Payments Union on a restricted basis for many more years, unless we have the intention of making the countries of the EPU completely autarkic – that they trade among themselves and go to all sorts of lengths to substitute goods which have hitherto been imported from outside the European Union. To accept such an objective would be at variance with the stated objectives of this Organisation, that is to expand international trade and in that way to try to get goods cheaper and improve the standard of living.

I would hope, Mr. Chairman, that in the next six months our experts here, or those who have contact with the US authorities would discuss this situation with them and urge on them that the strength of the Western world depends upon our getting, through goodwill and agreement, a system of balance of payments that behind the Iron Curtain would be imposed at the point of the gun.

If we can get the US and others to see this problem as it is, a technical financial problem, and get them to agree to rules that would keep world trade flowing at a high level, then the countries of Europe and the Western world will be able to develop their economies and develop them in peace and brotherhood with other countries. We do not want to see repeated here in another context in the future, perhaps, all the difficulties that have been created within this rather small group of the world.

I think it is only due to the fact that we have had a very highly qualified group in charge of the EPU – men who were experts and who were free from national prejudice of any kind – and to your guidance, Mr. Chairman, that we have been able to keep the EPU going so far. It is remarkable that this first attempt at getting a real payments agreement between countries of the Western world has been so successful in such times as we have had. Never, I think, in the history of the world, have there been such disturbing movements in prices and trade between countries as in the last two years, but with goodwill and on the basis of the EPU constitution, we have kept afloat so far on a very narrow basis. I trust that in the next six months, we shall be able, in consultation with our American colleagues, to get a real Payments Union for the whole of the Western world. It is important, I think, that this should be done within the next six months. The American President will be installed in February. For a month or two he will have the ‘honeymoon period’, as it is called, when his policies will be more easily put into effect than at a later date, and I trust that this honeymoon period will produce something good for the world.