59 Sir Henry Gullett, Minister for External Affairs, to Mr F. K. Officer, Australian Counsellor at U.K. Embassy in Washington

Cablegram 15 15 February 1940,

With reference to your telegrams Nos. 22 and 23 [1] would you kindly convey the following reply to State Department regarding sales of wheat to Japan. [2]

Begins: 'Before outbreak of war Japanese firms were negotiating for purchase of Australian wheat on credit. After outbreak of war Australian Government acquired all wheat including crop harvested December and appointed Wheat Board to market it.

Negotiations between Japanese and Board led to submission of matter to Government in October. At that time marketing prospects for Australian wheat were very poor, and it seemed that alternative to sale on credit was indefinite storage, with all the attendant costs and risks. Government therefore agreed to the deal, in respect of 200,000 tons of wheat, eighteen months credit from date first shipment, purchasers to lift the wheat. First shipment was made 28th December 1939.

Since the conclusion of the above deal there have been negotiations between Australian flour millers and Japanese firms for purchase wheat flour on credit. The Australian Government have not encouraged or authorised those negotiations. The Government have also rejected other proposals for further wheat sales on credit.' Ends.

In conveying the above message to the State Department would you please inform them that Australian flour millers urge the Government to extend these credits, saying their capacity to export to North China is lessened by United States system of export subsidies on flour. Do they propose to continue those subsidies. [3]

MINISTER FOR EXTERNAL AFFAIRS

1 Documents 53 and 54. The copy circulated in Canberra was marked as having been sent to the U.K. Ambassador in Washington.

Officer's name has been taken from the Washington file copy on AA:

A3300, 74.

2 The Commonwealth Govt's reply was handed to the U.S. State Department in an aide-memoire on 23 February 1940. (See note on file AA: A3300, 74 and dispatch Was. 43/400/8 March 1940 on file AA: A981, Trade 68, iv.) 3 On 28 February 1940 the Commonwealth Govt requested R. G. Casey, Minister to the United States, to ascertain whether die U.S. Govt was still permitting the subsidised sale of flour to North China to fill Japanese orders (see unnumbered cablegram on file AA:

A981, Trade 68, iii). Casey replied on 8 March that the United States was subsidising the export of wheat and flour to China, Hong Kong and the Philippines because of an accumulation of surplus wheat in the north-western States (see cablegram 37 on file AA: A981, Trade 68, iii).

[AA: A981, TRADE 68, iii]