The question of making more aid available through the UN to under-developed countries,
which has been under discussion in UN forums for at least eight years, will very soon reach a
decisive stage at the current meeting of the General Assembly. The question has come to an
issue in the form of two competing resolutions: one calls for the establishment of a special UN
fund for economic development (SUNFED); the other, put forward by the United States, calls for
the expansion of existing UN Technical Assistance Programme and the setting-up of a special
For eight years a diminishing group of countries, including Canada, the US and the UK, have
been able to prevent the issue being joined by temporizing, delaying, and diverting the pressure
by procedural devices. This is no longer possible. Almost all of the UN membership, including
the US, now favour the establishment of some type] of UN fund.
The nature of the resolutions now before the Assembly and their backing means that if
they both go forward independently, they could both secure broad support in the General
Assembly. This would not be in the interest of the United Nations, which now requires that it be
given a positive and clear cut role in assistance to economic development. Nor would this be in
Canada's interest. Canada would inevitably be pressed to support one or other or both of two UN
programmes; neither would be entirely to our liking and yet neither could be ignored. Both these
proposals cannot be voted down one at least will go forward. The developments in the last
session of ECOSOC, which completely isolated Canada, the UK and the US on the SUNFED
issue, make it clear that we cannot expect to defeat the SUNFED resolution by simply making a
However, the US proposal offers some possibility of manoeuvre. It has some attractions for
the under-developed countries. Although it is not entirely to our liking, it might be modified in
such a way that it could be used to contain the pressure for SUNFED. At the same time it could
be made more acceptable to us. This Memorandum, after briefly reviewing the nature and history
of the two proposals, goes on to recommend a course of action based on the assumption that
Canada's interest requires that our Delegation intervene in the current debate.
The under-developed countries, with some support from the U.S.S.R., have been pressing for
the establishment of a SUNFED since 1948. It is generally recognized that such a Fund, to be
effective, would have to be of the order of $250million. This would be made up of voluntary
contributions by member governments; it would be used to assist underdeveloped countries by
grants or low-interest loans for development projects which might not otherwise be financed. In
1953 the UN adopted a declaration put forward by the US that when there is a measure of
internationally-supervised disarmament, a portion of the money thus saved should be used to
establish such a UN fund.
Canada accepted this SUNFED idea in principle and voted for the 1953 resolution. However,
more recently it has taken the position in the General Assembly that a decision to establish such
a Fund should depend on two conditions being met: one, that there be suitable administrative
arrangements; and two, that there be sufficient financial support to make the fund practicable,
i.e., that there will be financial support from the US and the UK.
Neither of these conditions have been met. The current SUNFED proposal involves
unfortunate administrative features, although the SUNFED countries have modified their views
over the years in an attempt to meet our objections. Further, the US and UK continue to oppose
SUNFED on the ground that it must await a measure of world-wide internationally supervised
disarmament. In NATO the US has recently argued that the current SUNFED proposals conflict
with western objectives in the under-developed countries, particularly in the Middle East,
because they would create new opportunities for Soviet economic penetration.
The position of the USSR has been equivocal; it has supported the establishment of SUNFED
without, at least until recently, offering a large and useable contribution. A Soviet contribution in
the form of industrial goods and machinery has been mentioned. However, it has been reported
that the USSR may announce a contribution of one million roubles ($25million at the formal
rate of exchange but much less in real terms) when the SUNFED resolution is debated in the
In view of US and UK opposition and the reluctance of any other countries to offer
substantial contributions, the underdeveloped countries had been willing until last summer's
Session of ECOSOC to accept procedural resolutions for further study of this question which
were designed to prevent any decision being reached. In July of this year, however, the under-developed
countries in ECOSOC, supported and led by the Netherlands and France, decided to
force the issue to a decision. A resolution was passed by ECOSOC calling for the early
establishment of SUNFED. Only Canada, the US and the UK voted against this resolution.
The SUNFED proposal is now embodied in a draft resolution, which will come up shortly in
the Second Committee. It is sponsored by the Netherlands, India, and Mexico; they can count on
the support of a large number of other countries from Western Europe, Asia and Latin America.
The resolution calls for the establishment of a United Nations Economic Development Fund to
begin operations by January 1, 1960.
The U.S. Proposal
The United States Administration has now come to consider that some expansion of
economic assistance through the UN is necessary if the pressure for SUNFED is to be contained.
Congressional leaders now accept this view. As put forward by the US Delegations to the UN
and to NATO, as announced in Washington, and as contained in an aide-mémoire given to
officials by the United States Embassy last Friday, the US proposes that, beginning in 1959 (a)
the existing United Nations Technical Assistance programme should be expanded to $50million
from $31million, and that (b) the scope of this programme should be broadened through the
creation of a $50million special project fund to finance resources surveys, training centres,
industrial pilot projects and research projects. The operation of this fund would be fitted into the
existing machinery for administering the technical assistance programme; a preparatory
commission would be appointed to define, among other things, the changes which it would be
necessary to make in this machinery to ensure the effective use of the fund. The total effect of
the US proposal would ultimately involve an increase in UN technical assistance expenditures of
$69million. The US is willing to provide $15million of this increase, and possibly somewhat
more in the initial year (1959).
American officials principally concerned with formulating the US counter proposal have
emphasized to Mr.Dulles that they do not regard it as a permanent substitute for a SUNFED.
But they do believe that if their proposal receives significant support from countries such as
Canada and the countries of Western Europe, the pressure for the immediate creation of some
sort of SUNFED might be deferred for several years. Further, they believe that an expansion and
broadening of the UN programme would in itself be a useful and constructive move.
Evaluation of US Proposal
In its present form the US proposal has two weaknesses. In the first place, it is questionable
whether the existing machinery for administering the technical assistance programme could be
satisfactorily modified to ensure effective use of the special project fund. Eight international
organizations participate in the programme; the co-ordination of their activities through the
Technical Assistance Board poses some very difficult problems. In the second place, the US
proposal is not now formulated in terms which would be likely to induce under-developed
countries to forego the benefits they hope to receive by pressing at this session for immediate
establishment of SUNFED. At the same time it should be recognized that the US proposal
represents a very significant step forward: for the first time the US is offering to finance capital
projects through the UN. The Administration has persuaded Congressional leaders that to do any
less would involve significant damage to US interests. The US will, however, continue to oppose
The US proposal does contain three features which make it attractive to the under-developed
countries. It contains elements of the SUNFED proposal insofar as it involves the financing of
some types of capital projects as distinct from the established technical assistance (training)
programmes. Second, it involves United States participation in the financing on a grant basis of
certain types of capital projects in under-developed countries through the United Nations. This is
an objective which these countries have been striving to reach for some years; many of them are
beginning to realize that they are unlikely to reach this objective if they continue to press for
SUNFED now . Third, it calls for a sizeable expansion in the Technical Assistance Programme,
and gives to this programme, which the under-developed countries strongly support, a fresh
The Canadian Interest
It is possible that the US proposal could be presented to the under-developed countries in a
fashion that might enable them to eventually abandon the SUNFED proposal permanently.
Tactically, what is required is to present the US proposal in a way that would enable pro-SUNFED
countries to proceed without loss of face in the UN. This would involve pointing out
to them what will become obvious fairly soon in any event that the need for capital aid is
being recognized by the establishment of a special project fund, and that the experience gained
from the operation of this fund will be invaluable in deciding the future of capital aid in the UN.
The Canadian Delegation could, by pointing out the implications of the US proposal, do much to
divert pressure away from SUNFED. If the Canadian Government were willing to authorize the
Delegation to take initiatives in this direction, it should be recognized that these initiatives would
involve on our part a moral commitment to give financial support to any sound and realistic plan,
which might result if our initiatives are acceptable.
As mentioned above, it is doubtful that the existing technical assistance machinery can be
effectively adapted to administer a special project fund. However, the World Bank has
demonstrated that, of all multilateral agencies, it can administer economic aid most vigorously
and effectively. Its management has the confidence of the US and its machinery could, if
necessary, be expanded to administer capital aid programmes financed by the UN. From
informal conversations it is believed that the Bank would be willing to consider proposals to
manage a project fund; senior Bank officials support the view that more aid channelled through
the UN and on a grant basis is needed. Further, if the USSR wished to participate in a fund
managed by the Bank, it would have to do so on terms and conditions which we accept and
which would limit the possibility of Soviet penetration. While the Delegation should refer to
management by the Bank as one possibility, it would not be desirable to give too much
prominence to the case for management by the Bank. A definitive proposal in the General
Assembly at this stage would merely encourage Soviet and satellite opposition and also the
opposition of some under-developed countries which have criticized the Bank for its rigorous
lending policies. Our main objective would be reached if the terms of reference of the
preparatory commission which would be set up by the Assembly were wide enough to allow it to
examine various alternative methods of administering the project fund. However, the Delegation
would seek informal agreement from a broadly representative group of delegations (including
the US and other potential contributors) that they will, in the Preparatory Commission, support a
recommendation (toECOSOC and the Thirteenth General Assembly) to establish a special
project fund managed by the Bank.
It should be noted that the US propose that it would double its present contribution to the
technical assistance programme, thus raising the US contribution to $31million, if the total sum
which all countries would make available could be raised from the present $31million to about
$100million. The Canadian contribution to the existing Technical Assistance Programme now
runs at $2million a year. Because the response of other countries to the US proposal is still not
clear, it is difficult to envisage what an appropriate Canadian contribution might be. If the US
contribution is to be doubled and the programme expanded from $31million to $100million, (as
now proposed) all other contributors, taken as a group, would have to raise their contribution in
1959-1960 from $151/2million to $62million and to $69million in 1960-1961.
The Delegation has suggested that there might be some advantages in having a Canadian
contribution in part tied to the purchase of Canadian capital goods, engineering services, etc.
even though past experience shows that inconvertible contributions reduce the effectiveness of
multilateral aid programmes and cause administrative difficulties. However, this question should
not be decided now; it should be considered later in the light of the detailed proposals to be
worked out by the preparatory commission. To make any decision now would unnecessarily
restrict the freedom of manoeuvre of the Delegation.
If the Delegation is not authorized to take an initiative along the lines indicated above, a
possible alternative is to continue either opposing or abstaining on SUNFED and to abstain on
the US resolution. This would mean that perforce Canada would be silent in a debate of major
importance. There will be inevitable pressures which will call for a decision as to whether or not
Canada will play a part in a new UN operation. This decision would have to be taken only after
the current proposals had been considerably advanced, when it might be impossible to have
Canadian views on organizational and financial arrangements taken into account. In addition to
these reasons there are even more substantial political reasons for not postponing a decision on
The demand for the establishment of a UN Fund has now secured the support of virtually all
UN countries except the English-speaking members of the Commonwealth and the US. The
proposal to establish a SUNFED has brought together into one camp our friends in Asia, our
friends in Europe, and the Soviet countries. They have formed a working alliance to fight
through an issue in which many feel a deep sense of conviction. Of course there are among the
SUNFED group some delegations (e.g. Pakistan) who are not perhaps as thoroughly convinced
of the merits of their case as others, but if the issue comes to a vote, the resolution will
undoubtedly be accepted by an overwhelming majority. Canada will then be faced with the
establishment in the near future of a new UN agency which neither we nor our closest friends
support and in which neither we nor our friends will have a voice. New opportunities for Soviet
mischief-making would be created. Thus we would soon find ourselves faced with having to
consider whether or not we should make a financial contribution to this new agency in order to
have some share in making its decisions.
It is therefore desirable to present and seek support for a more acceptable proposal. The
chances of success for a compromise proposal are not clear. They turn on the willingness of the
SUNFED countries and of the US to have their resolutions referred to the same preparatory
commission. It is clear that proposals must be put forward which some of the SUNFED
countries, such as the Netherlands, France, and possibly Pakistan, are prepared to support and for
which they are prepared to use their influence with other pro-SUNFED countries. The
Netherlands and France now find themselves in the uncomfortable position of siding with the
Soviet on this issue, and may welcome an initiative which would enable them to re-align
themselves with their major allies in the West. This sort of consideration may help the US to
accept the necessary changes in their proposal.
- In the light of these considerations I recommend52 that the Canadian Delegation to the UN
be instructed as follows:
The Delegation should present the Canadian view on the US proposal, as outlined in
paragraphs 12 to 17 above, to friendly delegations; the Delegation is to indicate to them that
Canada would be prepared to give sympathetic consideration to making an appropriate
contribution in 1959-1960 to a multilateral aid programme similar to the one envisaged in the US
proposal, provided that two conditions are met:
that the SUNFED resolution is withdrawn, or if it is not withdrawn that it will be referred
to the same preparatory commission as will be considering the US proposal, and that it is
understood among major friendly contributors that in the commission it will be merged with
the US proposal; and
that the terms of such a preparatory commission are broad enough to include examination
of the possibility of having the proposed capital aid fund managed by the World Bank.
Subsequently, if in the judgment of the Delegation there is a reasonable measure of
agreement that these conditions will be met, then the Delegation may indicate during the course
of debate that if a sound and realistic plan emerges which commands broad support in the UN,
the Canadian Government will give sympathetic consideration to asking Parliament to make a
reasonable financial contribution. In the debate the Delegation should suggest that the
preparatory commission to be set up should be authorized to examine the possibility of the
proposed capital aid fund being managed by the World Bank and should seek membership for
Canada on such a commission.
When and if such a preparatory commission is established, and if Canada is a member, the
Canadian Delegation should seek to ensure that the report of the preparatory commission
recommends that suitable arrangements be worked out with the World Bank to manage the
capital aid programme.
If in the judgment of the Delegation the conditions are not met, then when the SUNFED and
US resolutions come to a vote it should seek instructions from Ministers concerned as to how it
should cast its vote.
52 Approuvé par le Cabinet le 29 novembre 1957.
Approved by Cabinet on November 29, 1957.