186 Sir Earle Page, Minister for Commerce, to Mr J. A. Lyons, Prime Minister

Cablegram unnumbered ADEN, 13 April 1938, 4 p.m.

SECRET

Your telegram April 8th Yampi. [1]

In our understanding Cabinet decision prohibiting exportation of iron ore was of such a nature as to leave little room for any compromise and we do not consider there are any new factors introduced since decision taken which warrant any variation of the policy decided upon. [2] As we see the position, Cabinet must adopt a firm and unequivocal attitude otherwise our difficulties both internal and external will progressively increase. The public statement notifying Cabinet's decision should, we recommend, embrace the following points 1. Commonwealth Government is satisfied that accessible iron ore resources of Australia are so limited as to compel their conservation for Australian industrial development.

2. The information in the hands of the Government is of such a character as to warrant urgent action being taken to prohibit the export of iron ore mined in Australia.

3. Careful consideration has been given to the proposal made that licenses to export limited quantity of iron ore should be granted by the Commonwealth Government. The Commonwealth Government has come to the final conclusion that such action would be totally inconsistent with the policy which it has been compelled to adopt.

In the opinion of the Commonwealth Government the future needs of Australia require conservation of the whole of the ore resources.

4. The prohibition on export would apply to all Australian mining interests and would apply to all countries.

Our own comments are as follows:

It has been our experience and the experience of other countries that if we are to avoid progressively increasing difficulties with Japan with regard to any contentious question a firm attitude is required from the outset. It is certain that on a question of a non discriminatory export prohibition being applied by Japan Japanese Government would not admit right of any country to challenge it. In any correspondence with the Japanese Consul- General we think endeavour should be made to notify him on the basis conveying information only as decision will affect apart from one Australian company viz. Broken Hill Pty Ltd a British Company and a Japanese Company. Should subsequently Japanese Consul-General under instructions from his Government endeavour to make an inter Governmental negotiation of the question we consider he should be informed that the Commonwealth Government is prepared to enter into correspondence only on the basis that it concerns an investment by a private company.

We can only see progressively increasing trouble if any prospect is held out that ultimately Commonwealth may be prepared to issue licenses for the export of limited quantities. Japanese Company may take this loophole to install machinery now at Singapore and on order. There is less likelihood of division of opinion among Australian public if immediate embargo imposed than if continual recurring discussions take place with regard to iron ore resources and the possibility of the export of iron ore under the license system. Should protracted discussions occur then present opportune moment may pass. Japan is otherwise engaged and is experiencing both political and financial difficulties and if some period of time is to elapse before final decision made then we might find a changed situation.

We consider nothing should originate with the Commonwealth Government on the question of compensation and any claims submitted should be resisted unless prohibition appears likely to raise external political difficulty or leads to majority of trading difficulties or appears almost certain to adversely affect wool markets or unless Brasserts specifically establish that the Commonwealth Government tacitly approve Yampi activities and should as a matter of equity be deemed to have encouraged an irrecoverable expenditure of money.

Finally as we see it the sooner the decision is announced the better; the less public discussion there is on iron ore resources the better; the firmer our attitude at the outset the better. We would suggest that you might consider taking the press into your confidence with a request for co-operation.

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1 Document 181. it was actually sent on 7 April.

2 This refers to the Cabinet decision of 17 March 1938 when it was agreed to prohibit entirely the export of iron ore from Australia, commencing in three months' time. No Cabinet minute has been traced, but the decision is recorded in cables to Bruce and Lloyd (Documents 140, 141). At that time it was intended to announce the prohibition on 19 March. On 18 March, however, it was decided not to announce the embargo as planned, although the substance of the Woolnough report was published then. The announcement was eventually made on 19 May.

[AA : A981, AUSTRALIA 90]