Numbers appearing in square brackets (ex. ) within the transcript indicate the pagination in the original, hardcopy version of the oral history interview.
Opened April, 1989
Oral History Interview with
July 6, 1973
by Richard D. McKinzie
Topics discussed include the influence of Middle Eastern oil on U.S. policy toward that region; the General Agreement on Tariffs and Trade; U.S. trade agreements with China; the International Trade Organization; the Economic Commission for Asia and the Far East; U.S. trade relations with Japan; the economic reconstruction of Japan; the economic reconstruction of Korea; the Colombo plan; the standardization of trade statistics; U.S. aid programs in the Far East; regional conferences in the Far East, including the Bandung conference; the Southeast Asia Treaty organization; exports of U.S. films; U.S. private investment in foreign countries; and the Lend-lease program.
Names mentioned include John D. Condliffe, General Douglas Mac Arthur, John Foster Dulles, J. Arthur Rank, Stuart Rice, Dean Rusk, and Harry S. Truman.
MCKINZIE: Professor Gay, why did you choose Government service? You did prepare for an academic career at the University of Michigan and the University of Illinois.
GAY: My interest in international economics goes back quite far. I was aided and abetted by the fact that at the University of Michigan I did most of my work under Prof. John B. Condliffe, the great English -- New Zealand to be exact -- economist, who used to write the annual World Economic Surveys for the United Nations. He was a great scholar and friend. He stimulated an already incipient interest in international economic affairs. Consequently, throughout my graduate study I aimed toward concentrating in this field, and I located in the East
near Washington, with this in mind. This strategy worked at least to the extent of soon obtaining a position in the State Department during a very interesting period. It started in 1943 just before Bretton Woods, the creation of the World Bank, the Monetary Fund, the GATT, and some of the UN structure. It was a period of innovation and intellectual excitement. One of the first things that struck me in coming into the Department was that everybody was talking about "postwar planning;" it was a period that attracted many high caliber "professionals."
MCKINZIE: How did you feel about Cordell Hull's view that after the war there was going to have to be more economic integration than there had ever been before?
GAY: This was one of the reasons I wanted to get into this work. My views were essentially the same as those supported by Mr. Hull. My doctoral thesis was in the field of commercial policy. I felt that the terribly bad situation we found ourselves in after World War I, leading to the great Depression of the '30s, the rise of Hitler; and eventually World War II, was basically the outgrowth of extremely unwise economic policies following World War I. Consequently, it was a great satisfaction --
almost at the beginning of my career -- to be involved in a program which was aimed to avoid a repetition of similar mistakes.
I might say, before we proceed further, that a couple of the things that were done later in the period -- the creation of the Marshall plan and lend-lease -- in my opinion were accomplishments of politico-economic genius with deep impact upon the course of world development, helping to avoid the kind of economic deterioration that followed World War I. These were very controversial matters, but I look upon them as works of vast importance -- episodes in our history in which the United States can take considerable pride.
MCKINZIE: You worked first with Harry Hawkins. Could you describe how you happened to get into the Far Eastern and Middle Eastern Branch of the Division of Commercial Policy?
GAY: I did have at that time a particularly strong interest in the Far East. This may have been partly because of my close association with Professor Condliffe who was a long-time expert in Far Eastern affairs. Within a year or so, I was made Chief of the Far and Middle Eastern
Branch, which was composed of some twelve, fifteen people -- professionals on international economic problems. Of course, bureaucracy being what it is, one can't make blanket statements without some reservations, but economic problems, particularly trade problems, anywhere in the Far and Middle East and South Asia that had trade and commercial policy implications, were supposed to funnel through my branch. Obviously, we had contact and certain responsibilities with many interesting developments.
MCKINZIE: As the end of the war approached, do you recall what you anticipated about trade with the Middle East and the Far East? There never had been very much trade with the Middle East except for oil, and the Far East was always more potentiality, I think, than it was actuality. What kinds of projections were you making at that time about trade?
GAY: Well, I recognized, as you say, that trade with that part of the world had not developed as much as it could have under different circumstances, and that this was an area where there was a great need for finding ways and means to exploit those potentialities. I was particularly
pleased, therefore, to get into the part of the Department concerned largely with Far and Middle Eastern problems. This involved an early and intensive introduction into petroleum matters. Petroleum matters, of course, were always an important element in our international economic policy; particularly in that part of the world. It was always a very active field. Many things had been going on which were not widely understood by the public, or perhaps even known by the public. The Department tried to keep it developing in a mutually satisfactory way from the standpoint of the oil countries and the consuming countries. This came to a dramatic climax at the time of the Suez crisis in 1956.
MCKINZIE: Also, there were some discussions in State about what effect bringing in Jewish refugees from Europe might have upon the attitudes of the countries exporting oil to the United States -- this, even before the creation of Israel. Do you recall that issue entering into discussions of the Division of Commercial Policy, or was that considered too much a plain political matter?
GAY: That kind of problem always lurked in the background to some extent. We had fairly forthright relations with
the oil producing countries during the period in which I was involved. We kept in close contact also with other major consuming countries, such as Great Britain, and the oil producing countries -- trying to maintain a stability in the growth and conduct of the industry. The Department itself also maintained a fairly close relation with U.S. investors, partly due to their considerable initiative in keeping in touch with the Department.
MCKINZIE: Did you deal with those people?
GAY: Oh, yes. Looking toward their handling of their part of this evolving relationship, which was of such great importance to both the development of the oil producing countries and the oil consuming countries, in a way which would encourage long-range stability of mutual benefits to the oil countries and the consuming countries. This was not always an easy task, but it was always there. It was always a subject of a good deal of discussion among the tripartite arrangement I mentioned -- the officials of the producing countries, the leaders of the private sector of the petroleum industry, and the officials of the consuming countries like Great Britain and ourselves.
MCKINZIE: There was talk at the end of the war about the revolutionary rising expectations. Some said that increased living standards were going to be necessary just about every place as a result of the communications revolution during the war, and all kinds of other developments. The same people usually said that one way of bringing about higher living standards was through a vast increase in world trade. Did it seem to you that it was possible to raise the living standard -- given the political situation -- in the Middle East through trade?
GAY: Yes. That theme has been an important one, but with relative degrees of importance, at various times, for many years. It was certainly much in our thinking in this period. It came to the forefront, perhaps even more noticably, in connection with the growth of our foreign aid programs, which is another part of the economic work of the department in which I became considerably involved. I got into it in one way or another, particularly after shifting from the Bureau of Economic Affairs to the Bureau of Far Eastern Affairs around 1950.
MCKINZIE: Franklin Roosevelt said that China was going to