mittees dealing with the technical items on the agenda concerning the employment of young persons in underground mines of all kinds, the employment of women with family responsibilities, the role of cooperatives in the economic and social development of developing countries and agrarian reform. The Selection Committee met almost daily to schedule and guide the work of the Conference. The budget for 1966 with an assessment of $20,337,871 was approved, as was the scale of contributions for 1966. A move to revise the scale of contributions to conform more closely to the United Nations scale was rejected but will remain a matter for the future. The Conference also examined a report on the way in which Member countries had applied ILO Conventions and Recommendations and the findings of the Committee of Experts dealing with two Conventions and two Recommendations on maternity protection. Objections to the credentials of a number of delegations or individual members of delegations were acted upon by the Conference. Thus, it rejected objections to the appointment of Workers' delegates or advisers from the following countries: (Congo (B), France, Greece, Israel, Libya, Malagasy Republic, Morocco, Panama, Portugal, Somalia, Spain, Uganda and Uruguay; the Government and Workers' delegates of Viet-Nam; and objections concerning the Chinese delegation. The Committee declined to recognize any claim for representation of the Dominican Republic. While the possibility of some difficulty arising in connection with the decision of the Credentials Committee in the Portugal and Dominican Republic cases was anticipated, these reports, which were unanimous, were presented and adopted without discussion. The Resolutions Committee was able to complete six of the eight Resolutions that had been submitted prior to the opening of the Conference. Operating under the new procedure, used for the first time in 1964, the Committee selected by secret ballot the first five Resolutions to be considered and their order of priority. A Working Party then assigned priorities to the remaining three Resolutions which were highly political in character. Four of the first five dealt with tech nical matters and the fifth with the social consequences of disarmament. This action indicates that when given a free choice the Committee as a whole attached greater importance to the substantive aspects of its work than to purely political questions. During consideration by the Conference of the Resolutions Committee work, the USSR Government delegate attacked the procedure of the Committee as "undemocratic". This attack was quickly answered by Mr. Weaver who emphasized the fact that the secret ballot is the most democratic form of exercising democracy that the world has been able to devise. The Conference adopted all of the Resolutions approved by the Committee. 59 The Resolutions Committee recommended 6 resolutions, adopted by the General Conference of the ILO, June 23, 1965: (1) concerning Paid Educational Leave; (2) concerning the Conditions of Employment of Domestic Workers; (3) concerning Vocational Rehabilitation of Disabled Persons; (4) concerning the Industrial Activities of the International Labour Organization; (5) concerning the Carrying Out by the International Labour Organization of the Social and Economic Consequences of Disarmament; and (6) Condemning the Government of Portugal on the Grounds of the Forced Labour Policy Practiced by the Said Government in Territories under Its Administration; the last resolution was adopted by a vote of 214 (including the U.S. worker delegate) to 11 (including the U.S. Government delegate), with 79 abstentions (including the U.S. employer delegate). Texts in International Labour Conference, Forty-ninth Session, Geneva, 1965: Record of Proceedings (Geneva, ILO, 1965), pp. 693; 693-694; 694-695; 695-696; 696; and 697, respectively. eo Ibid., pp. 720-725. 61 Ibid., pp. 726-729. 62 Ibid., pp. 730-735. 63 Ibid., pp. 736-741; the U.S. Government and worker delegates supported the adoption of the four instruments on young persons in underground work, mentioned above, and the U.S. employer delegate abstained. Adopted unanimously; text ibid., pp. 712-719. nature of things. This is true of the monetary relations which have been practised in the world since the ordeals undergone by Europe made it lose its equilibrium. I refer is this not clear?-to the system which appeared following the first World War and which was established after the second. We know that, starting with the Genoa Conference in 1922, this system had given two currencies, the pound and the dollar, the privilege of being held automatically as gold equivalents for all foreign payments, while the others were not. Later on, since the pound had been devalued in 1931 and the dollar in 1933, this extraordinary advantage could have seemed to be compromised. But America surmounted its great crisis. After that, the Second World War ruined the currencies in Europe by unleashing inflation there. As nearly all the world gold reserves were then held by the United States which, as the world supplier, had been able to maintain the value of its own currency, it could seem natural for other States to include dollars or gold without distinction in their exchange reserves and for foreign balances of payments to be settled by transfers of American credits or currencies as well as gold. All the more so because America experienced no difficulty in settling its debts in gold if it was asked to do so. This international monetary system, this "gold exchange standard," has consequently been accepted in practice since that time. convert all their dollar holdings into gold. This means that the custom of ascribing a superior value to the dollar as an international currency no longer rests on its initial foundation-I mean America's possession of the largest share of the world's gold. But, in addition, the fact that many States in principle accept dollars on the same basis as gold so as to offset, if need be, the deficits in their favor in the American balance of payments, leads the United States to indebt itself abroad at no cost. Indeed, what it owes abroad, it pays for, at least partially, with dollars which it alone can issue, instead of paying entirely with gold, which has a real value, which must be earned to be possessed, and which cannot be transferred to others without risks and sacrifice. This unilateral facility which is granted to America is serving to cloud the idea that the dollar is an impartial and international medium of exchange, when it is a means of credit belonging to one State. Obviously, this situation has other consequences, particularly the fact that the United States-since it is not required, at least entirely, to settle its payments deficits in gold according to the former rule which required States to take the measures, sometimes severe ones, necessary to correct their imbalances-suffered a deficit each year. Not because its total commercial exchanges were unfavorable, quite the contrary. Its exports of goods always exceed its imports. But this is also the case for dollars, for which outflows always exceed inflows. In other words, capital was created in America, by means of what must be called inflation, which in the form of dollar loans granted to States or to individuals, is exported outside. As, even in the United States, the increase in fiduciary currency which results as a side effect makes investments at home less profitable, there is a growing tendency in the United States to invest abroad. The result for certain countries is a sort of expropriation of some of their business firms. Assuredly, such a practice has greatly facilitated, and further encourages to some extent, the manifold and substantial aid that the United States furnishes to numerous countries for their development, and from which we ourselves once benefited in large measure. But cir cumstances are such today that it is possible to wonder how far the difficulties would go if the States which hold dollars sooner or later reached the point where they wanted to convert them into gold. Even if such a widespread movement would never occur, the fact is that there is to a certain extent a fundamental imbalance. 60 For all these reasons, France recommends that the system be changed; we know that she did so, notably during the monetary conference in Tokyo. Given the worldwide upset that a crisis occurring in this domain would probably cause, we have, indeed, every reason to hope that in time the means for avoiding it will be taken. Therefore, we consider that international exchanges must be established, as was the case before the great worldwide disasters, on an unquestionable monetary basis which does not bear the mark of any individual country. What basis? Actually, it is difficult to envision in this regard any other criterion, any other standard than gold. Yes, gold, which does not change in nature, which can be made either into bars, ingots or coins, which has no nationality, which is considered, in all places and at all times, the immutable and fiduciary value par excellence. Furthermore, despite all that it was possible to imagine, say, write or do in the midst of major events, it is a fact that even today no currency has any value except by direct or indirect relation to gold, real or supposed. Doubtless, no one would think of dictating to any country how to manage its domestic affairs. But the supreme law, the golden rule-and indeed it is pertinent to say it—that must be enforced and honored again in international economic relations, is the duty to balance, from one monetary area to another, by effective inflows and outflows of gold, the balance of payments resulting from their exchanges. Certainly, the termination of the gold exchange standard without rude jolts, the reinstitution of the gold standard, the supplementary and transitional measures which could be indispensable, particularly 09 See American Foreign Policy: Current Documents, 1964, pp. 264–268. for organizing international credit on this new basis, will have to be deliberately concerted among the States, especially those whose economic and financial capability gives them special responsibilities. Moreover, the frameworks already exist in which such studies and negotiations would normally be carried out. The International Monetary Fund, set up to guarantee, as much as it is possible, currency solidarity, would offer all States an appropriate meeting ground once it was no longer a matter of perpetuating the gold exchange standard, but of replacing it. The Group of Ten, which includes, alongside the United States and Great Britain, on the one hand France, Germany, Italy, the Netherlands and Belgium, and on the other Japan, Sweden and Canada, would prepare the necessary proposals. Lastly, it would be up to the six States, which seem to be on the way toward achieving a European Economic Community, to formulate between them and to advocate outside the solid system which common sense recommends and which is in keeping with the reappearing power of our old continent. financing the huge increase of world trade that has marked the 20th century. Studies of possible ways to improve the world monetary system have been underway for the past 18 months in the International Monetary Fund and in the Group of Ten countries making up the GAB [General Arrangements To Borrow]." The new French proposal will presumably be introduced in these forums, where a number of other proposals have been under study for some time. However, a move toward the restoration of the so-called gold standard, with all its rigidities and sharp deflationary consequences, would be quite contrary to the mainstream of thinking among the governments participating in these studies. World in the last two decades. An expansion of the Fund's resources is now needed if it is to continue to contribute effectively to Free World growth in the future. The United States has given its firm support to the Fund since its creation in the Bretton Woods Agreements of 1945. This support must continue. I recommend to the Congress that the quota of the United States in the International Monetary Fund be increased by twenty-five percent along with the similar or greater increases proposed for other members. The increases proposed for all members will raise Fund quotas by about $5 billion and bring total quotas to $21 billion. This expansion is vital to the United States. It will: -promote the orderly and stable growth of Free World trade and payments in which we so importantly participate; -maintain the strength and central position of the Fund in the evolution of the international monetary system; -help finance the temporary swings in balance of payments associated with the growing volume of international transactions; -support the expansion of bilateral credit facilities which have contributed to the development of the international monetary system; and -provide to the Fund other major currencies to meet drawings that have mainly been financed by dollars in the past, and thus strengthen the present payments system. Demands on the Fund's resources have steadily risen as the volume of world trade and financial transactions has grown. In the past five years drawings on the Fund have averaged over $1 billion per year; during the period 1955-1959, the annual average was $440 million. This increased use of the Fund reflects both the great expansion of current international transactions since 1959 and the increasingly large international movement of capital since the return to convertibility of See A Decade of American Foreign Policy: Basic Documents, 1941-1949, pp. 273-304. the major European currencies. Increased use of the Fund has been especially marked among the large industrial countries. Since 1962 Canada, Italy, Japan, the United Kingdom and the United States have either drawn on Fund resources or entered into standby arrangements or both. A significant change in the holdings of the Fund has also occurred. For many years the U.S. dollar was the only currency extensively drawn by other member nations. But because of our balance of payments deficits, the Fund has increasingly provided other currencies to drawing members. As a result its holdings of major currencies other than dollars and sterling have declined by over $1 billion since 1959. The proposed quota increase will substantially enlarge the Fund's holdings of these currencies. Moreover, the Fund's credit facilities have been directly useful to the United States. Prior to 1958, the United States attained a large creditor position because of the extensive lending of dollars by the Fund. From 1958 to 1963 reversal of our earlier Fund creditor position financed over $1 billion of our payments deficit; and since 1963, we have made net drawings of $260 million of the Fund's resources for this same purpose. I am transmitting legislation which would authorize the United States Governor of the Fund to agree to an increase of $1,035 million in the United States quota, bringing our total quota to $5,160 million. Three-fourths of the increase, or $776 million, will be obligated in dollars but will be expended only as needed by the Fund. The remaining $259 million will be payable in gold. In return for this gold payment, the United States will receive a substantially equivalent reserve asset in the form of a virtually automatic drawing right on the Fund. Arrangements have been made both to minimize the amount of gold sales by the United States to other Fund members for their gold subscription payments, and to mitigate the impact of any purchases that may occur. The National Advisory Council on International Monetary and Finan |