Reference: Your despatch No. 340 of April 7, 1954.?

The question of Japanese association with the Colombo Plan has been in the minds of Canadian officials and the thoughtful review presented in your despatch has proven most useful.

2. When the question of an observer status for Japan was informally broached prior to the meeting of the Consultative Committee last September, the reaction amongst the delegates to that conference took three forms. Some of the Asian delegations, Indonesia in particular, were concerned that if Japan were admitted a precedent would be created that might make the admission of other countries likely. The possibility that France and the Netherlands might ask to be considered for membership apparently influenced the Asian members. (Moreover, it would create considerable difficulty for Canada if either Communist or Nationalist China were to seek membership on the basis of Japanese participation in the Plan). The Australian (and to some extent the New Zealand) delegation appeared to be very much opposed to the idea of Japan's membership and indicated that they would formally oppose the motion if it were put to the meeting. The third general reaction was that of the United Kingdom (and also, generally speaking, of Canada) that if the Asian countries wished Japan to become a member the request should be considered sympathetically. Japan was undoubtedly aware of these attitudes and as a result the question of her membership was never formally raised.

3. It is doubtful whether it would be advisable for Canada at this time to take the initiative in sponsoring Japan's membership in the Colombo Plan. As you point out in your despatch, cogent arguments can be made for sympathetic consideration of Japan's economic problems. Japan's admission to the Colombo Plan can be viewed from two aspects - as a potential recipient or provider of capital and technical assistance. I am not sure that your suggestion put forward in paragraph 8 that Japan might participate as a receiving nation is in line with the policy that Japan has been following over the last few years. As we understand it, Japan has consistently emphasized that in South and South-East Asia she is capable of providing technical assistance gratuitously and capital goods at a competitive price. This thinking was recently reiterated by Mr. Onta, the Japanese representative at the Tenth Session of the Economic Commission for Asia and the Far East. It is doubtful if Japan would properly qualify for aid under the original concepts of the Colombo Plan, which related to under-developed countries in South and South-East Asia. I should think that some of the "sound projects" in Japan which require capital might be the type of proposal which would interest the International Bank or some other agency interested in projects which are of a clear commercial nature. In terms of technical assistance, it is useful to remember that training and other facilities are open to the Japanese under the various United Nations programmes.

4. When you speak of her need to trade, we believe that you have hit upon the real reason for any Japanese desire to join the Plan. It is our view that trade considerations bulk large in Japanese interests in the Plan. It seems likely that she would wish to provide technical assistance and capital goods to countries in the Colombo Plan area and hopes that at least the latter might be financed out of funds made available for off-shore purchasing by other contributing countries. There is no assurance that formal membership in the Plan could be expected to further these objectives to any appreciable extent. Without belonging to the Plan, the Japanese are already providing technical assistance and are supplying some equipment at the United States' expense (as are Belgium, Italy and several other non-member countries). The Japanese are not at a disadvantage with the other countries in the area since most of the information exchanged at the Consultative Committee is eventually made public in the Progress Report.

5. It is unlikely that the attitudes of the other members of the Colombo Plan toward Japanese participation have changed substantially since last year's meeting in New Delhi. Under these circumstances it would hardly be appropriate for us as host government to offer encouragement to the Japanese concerning their participation. If you agree, perhaps this line might be adopted if the Japanese authorities should formally approach you. You might indicate that the matter would have to be referred to Ottawa for instructions and that in all probability, in our position as host government, we would have to refer any Japanese application to the other member governments for their comments. When these had been received it would no doubt be clear to us whether or not it would be appropriate to extend an invitation to the Japanese to attend the Ottawa meeting.

6. You have advanced the suggestion that Colombo Plan capital assistance to approved projects in Japan would set an example to the United States and you hint that you have some doubts about both the purposes and efficacy of United States economic aid to Japan. We are inclined to think that we in Canada should be particularly careful about impugning the objectives of United States international policies and aid programmes lest we add to the great amount of misunderstanding that exists abroad on this subject. When one reviews United States economic aid policy toward Japan over the past eight and a half years and considers the broad generosity of the American approach one cannot but feel that it has been generally helpful. We think this broad motivation still basically underlies the United States approach and that individual current programmes should be viewed against this background.

7. We have no desire to close the door on the question of Japanese participation in the Colombo Plan and we agree that we should not be unduly influenced by the prejudices of other countries. There is an impressing awareness in Canada, to which you have made an important contribution, of the economic problems which face Japan. We have not been unsympathetic in our approach to these problems; for example, our attitude at GATT should assure the Japanese that we are not unmindful of their needs. Nevertheless, for the moment it is not clear that Japan's participation in the Colombo Plan could be reconciled with the basic aspirations of the Plan. It would appear inadvisable for Canada to underwrite any proposal which might result in a weakening of our ties with the other free countries of South-Eastern Asia which we have worked so carefully to create through the medium of the Colombo Plan.

8. While it might not be advisable for us to assume any initiative at this moment, we would appreciate being kept informed of any further developments on this question.

R.M. MACDONNELL
for Secretary of State
for External Affairs