It seems to me that the various regional economic groups which either are in being or have been proposed are, basically, strategic concepts. This is sufficiently clear in the case of the North Atlantic Alliance. But it is also true, I think, of the pattern formed by the European Recovery Programme and the Organization for European Economic Cooperation. Exactly four weeks before Mr. Marshall spoke at Harvard on the 5th of June, 1947, Mr. Acheson, who was then his Under-Secretary of State, spoke at Cleveland, Mississippi. Mr. Acheson's speech was an analysis of the worldwide shortage of United States dollars. But although posing the problem very sharply and clearly, he had no solution to offer, and indeed it would have been possible to suggest a considerable number of ways of handling the problem which he had analyzed so brilliantly. In point of fact, however, it was decided in the State Department in the course of the following four weeks to tackle the dollar problem by pouring goods and credits into Western Europe. The reason why this method of dealing with the worldwide dollar shortage was adopted instead of any other was, essentially, I think that the United States administration wished to make Western Europe a firm bastion against the Soviet Union. To take another illustration of what seems to me a principle of wide application, the proposal for a Franco-Italian customs union was made by France primarily in order to prevent Italy from ever again becoming so dependent on trade with Germany that a military alliance between the two countries would be highly probable.

2. As strategic expedients, these regional groupings may be useful and even necessary. They are certainly inadequate. This is true even of the largest regional grouping which has been developed so far, i.e., the North Atlantic Alliance. While the Alliance was being formed, and while the attention of policy makers in Washington and elsewhere was focused on the North Atlantic Treaty, the Communists were overrunning China behind our backs. The formation of the Alliance was, of course, a step of great value and importance in checking Soviet aggression. But there is every likelihood that the cold war may last a very long time. In the long run, the solidification of a homogenous group of countries covering even so large an area as is now spanned by the North Atlantic Treaty will not provide an adequate security guarantee for western civilization. In these matters, it is sometimes wise to commune with the ghost of Halford Mackinder. An alliance against the Soviet Union from which the whole of the Eurasian land mass, with the exception of its febrile western tip, was excluded would in the long run be sufficient insurance against Soviet domination. There is the further consideration that the conflict is not merely one between nations and areas but between cultures; and any alliance which is not formed in such a way as to invite sympathy and support from individuals throughout the world, will prove inadequate to the stresses of the ideological conflict,

3. The moral is that all of these regional groupings, including the North Atlantic Alliance itself, must be devised as open-ended contracts. What does that mean in practical terms in the case of the North Atlantic Alliance- It means, I think, that every effort must be made to preserve and strengthen the filaments which now bind countries in the Middle and Far East to members of the alliance. On the economic side, it seems to me that this conclusion points to the necessity either of preserving the sterling area or else finding some substitute set of arrangements which would confer the same advantages on the west as the sterling area confers at present. There were no doubt tangled motives behind India's decision to remain within the Commonwealth. But not the least of them was the determination to convert its sterling balances in London into capital goods for Indian development. The sterling balances, Indian leaders realized, were merely marks in ledgers in a distant capital. If they were to be realized in the form of goods, friendly relations would have to be maintained with the ledger keeper. There can be no doubt, of course, that the strain imposed on the United Kingdom's economy by the sterling balances is intolerable and must be lightened. But this should be done without destroying the economic links which now bind India to the west.

4. The maintenance of the sterling area, or rather the maintenance of some perhaps altered but similar system which would keep India and other eastern countries within the economic orbit of the west, is not a policy which is likely to appeal strongly either to Americans or Canadians. The sterling area has often been defended in the United Kingdom with extravagant and inadmissible arguments, and some of the motives behind the attachment of the British to it are not likely to be congenial to us. Nevertheless, the political arguments in favour of dealing with it cautiously, as I have suggested, are strong. S. Do not commercial considerations point in very much the same direction- The American proposals for "integration" of Western Europe are perplexing and contradictory. The Administration's policy in the last few weeks has reminded me rather of an inexpert man's attempts to sharpen a knife. With one stroke of the steel he puts an edge on the blade, with the next he takes it off. Since Mr. Roffman spoke to the Council of OEEC on the 31st of October, the edge has been taken off his remarks with a vengeance. From remarks at his press conference after he returned from Washington and from indications which have been given to the British both by Mr. Harriman and other ECA officials, it now appears that, insofar as the Americans have a clear idea of what they want in Western Europe, it is merely a multilateral area of countries trading freely among themselves without quantitative restrictions or exchange controls. Such an island of multilateralism is very much what exists already in the sterling area. This area, like Western Europe, must by every means possible be prevented from becoming unnecessarily closed and restrictive. But to encourage regional groupings which would impair its value still further would be mistaken. What is needed is a delicate operation conducted by the United States and the United Kingdom principally, by which the complicated organism of the sterling area could be made to function more wholesomely.

6. If the analysis contained in the preceding paragraphs is accurate, it would seem that the attempt to equip the North Atlantic Treaty with economic machinery is premature. There can be little doubt that the delicate operation of which I have spoken can best be performed in the hushed atmosphere of the tripartite discussions. The surgeons should not be unnecessarily disturbed while they are putting in the sutures. When this operation has been successfully completed, it will be time enough to consider what forms of economic cooperation could best be conducted under the provisions of the North Atlantic Treaty. For, as matters stand at present, it would be almost as difficult for the United Kingdom to participate fully in economic cooperation under the Treaty as it is now for the United Kingdom to throw in its lot wholeheartedly with that of continental Europe. The problems of the sterling area would still remain and would be made, if anything, less tractable by the economic consolidation of the North Atlantic regional group cutting across the maritime and worldwide ties which hold the sterling area together.

D.V. LEPAN