As you know full well wool is an extremely thorny subject and has been, and is still, causing a tremendous amount of difficulty. I will not weary you with all the developments which have taken place since you left Australia. There is, however, one angle of the question which concerns you very greatly in your new post and where your assistance is required. On this aspect, therefore, it is necessary that I should write you at some length.
You will recollect the difficulties that have been experienced in connection with the sales of wool to Japan. In addition to the problems of quantity, price, and proportion of crossbred to merino wool, there has been the attitude of the Ministry of Economic Warfare, which has been one of insistence that the supplies should be limited to very small quantities and that the period of any contract should be an extremely short one.
Recently the Ministry of Economic Warfare has been stressing that the Japanese should be given assurances as to supplies for a period of one month. This attitude has been regarded in Australia as unreasonable and has caused a considerable amount of friction.
The cables from Australia have stressed their recognition of the paramount importance of denying supplies of vital raw materials to the enemy but, without saying it in so many words, have implied that in regard to supplies of wool to Japan the policy has been rather overdone. Relations were becoming so strained on the question that at a meeting we had on the 6th February, at which all the Departments interested in wool were represented, I urged that the Department of Economic Warfare should prepare a Memorandum giving the Department's view in detail with regard to the question of supplies of wool to Japan. This Memorandum came to light 2 or 3 days after our meeting. Feeling that it would not be regarded as satisfactory if sent to Australia, and in an effort to avoid the trouble spreading any further, I urged that the Memorandum should not be transmitted to Australia, but that I should have a talk with regard to it with the Department of Economic Warfare. At the same time I cabled to Australia giving an outline of the Memorandum and my views on it and suggesting that I should discuss the matter here. I enclose herewith a copy of the cablegram dated the 10th February. 
The suggestion of my discussing the matter with the Department of Economic Warfare was agreed to and I had a long session with Leith Ross  on the subject, the results of that conversation are I think quite clear in my cablegram to the Prime Minister of the 17th February (attached).  This cable I sent to Leith Ross before I despatched it and got his agreement to it.
As you will see from my cable the matter is now to a great extent in your hands. Any gaps there are in the information which I am sending to you, you will no doubt be able to fill at the Embassy.
The discussions in Washington are apparently of the most hush-hush type and as far as I can follow it, the State Department itself is being kept out of the picture. You had, therefore, probably better get the full strength of the position from Lothian  before interesting yourself in the matter.
To my cable of the 17th February I received a reply, dated the 23rd February, from the Prime Minister -this I enclose herewith. It appears to me to be somewhat grudging in its tone in referring to the discussions in the United States. This to me is rather surprising in view of the Prime Minister's very pronounced opinions on the question of Anglo-American relations. It is probably attributable to the fact that as far as I can follow wool has now got a very strong political flavour in Australia and the Prime Minister is being considerably harassed on the subject.
S. M. B[RUCE]