ECOSOC No. 49. Following is text of a memorandum of March 25th of Arnold Smith, given to Mr. Riddell to take to Ottawa, Begins: At a night meeting of the Economic Committee on Monday, March 24th, the Soviet delegation formally proposed what they termed an amendment to a relatively routine Resolution regarding the Economic and Employment Commission's functions. This amendment reads as follows:

"The Commission in carrying out its functions should insure that technical and other assistance to under-developed countries be not used for the purpose of obtaining political and other advantages for countries which will be rendering such assistance."

2. This apparently plausible principle is obviously intended to be used, if adopted, as an important propaganda weapon against "Western Imperialism" in loans, etc., and specifically against the new Truman line in foreign economic policy.

3. Unless we hear from you to the contrary, we propose to oppose this amendment on the following grounds:

(a) Procedural: The principle is so important in substance that it should not properly be considered an amendment but a separate Resolution which should be discussed as an individual item on the agenda.

(b) In substance, because it is unsound both economically and politically. If any such principle had been recognized in the past Canada's economic development would have been impossible, for example. The principle, strictly interpreted, would rule out interest on loans. It would also rule out foreign loans inspired by the desire to increase the productivity and therefore the purchasing power of foreign countries which could be expected thereby to become more prosperous trading partners of the country making the loan. This principle would have made impossible the two billion dollars of foreign loans which Canada has made since the recent loan to the United Kingdom, Netherlands, France, etc., and would have made impossible the loan which Canada offered to the Soviet Union.

3. The principle behind the Soviet Resolution would also negate a basic principle of the Charter, in which we sincerely believe. This principle is that economic development and the raising of standards of living can contribute to the maintenance of peace and that all peace loving countries have a political interest in furthering such development.

4. We do not propose to dwell on the immediate political factors relevant to the suggested adoption of such a Resolution at the present time. We might say, however, that the suggested principle seems to us basically unsound as it implies that the economic policy of the United Nations must not be used to consolidate and promote international peace. This would be tantamount to implying that the only permissible method of preventing crime is the policeman. This theory has been discarded many decades ago by progressive thinkers and we believe that sociologists and social reform also have a useful role to play.

5. In summing up, we propose to say that if such a Resolution were adopted it would prove so unworkable in practice that it would probably be disregarded, with very undesirable effects on the prestige of the United Nations. Alternately, if such a new and far-reaching principle were adopted and observed, it would rule out assistance from those countries which can give it to those countries which could benefit from it. Where such assistance is of mutual benefit, politically and otherwise, it should not be outlawed.

6. (We believe that a defence along these lines, while avoiding any seriously controversial issues, should succeed in defeating the Resolution. Without an energetic defence the Resolution merely looks like innoxious and perhaps laudable provision against "exploitation", whatever that means, and may receive the unthinking support of several of the "underdeveloped countries").

7. As a second line of defence, if it becomes necessary, we might agree with the Soviet Resolution if the word "exclusively" is added before the words "political and other advantages." In general, we are on record as favouring multilateralism in commercial policy, etc., as opposed to the bilateral techniques developed by Dr. Schacht.⁵⁷ If the Soviet delegate wishes to propose that the Council should formally go on record with more appropriate words favouring multilateralism and condemning bilateral clearing agreements, etc., we would be very glad to consider the matter sympathetically. The drafting of an appropriate Resolution might, however, be complicated, as this is in effect the basic principle which has been occupying the preparatory Committee on Trade and Employment. Ends.

⁵⁷Hjalmar Schacht, ancien ministre sans portefeuille d'Allemagne; ancien president de la Reichsbank, Berlin.
Hjalmar Schacht, former Reichsminister of Germany (without portfolio); former President, Reichsbank, Berlin.