377 Commonwealth Government toMr R. G. Menzies, Prime Minister (in London)

Cablegram 185 2 April 1941,

The reduction in value of our exports of foodstuffs to United Kingdom to 13.6 million in 1941-42 and subsequent years for duration of war would spell the death-knell of our primary industries if war were prolonged; would create very serious problems in public and private finance; and would adversely affect war effort. We are forced to the conclusion that United Kingdom Government makes decision without due regard to our interests.

When war broke out we were ready to complete contracts for foodstuffs supplies. We conducted negotiations quickly and were most moderate as to price and conditions. Industries have been organised efficiently and shipping has been managed so as to bring about every possible improvement and eliminate all waste. We have done everything we have been required to do under the contract and have exerted extraordinary efforts to meet every requirement of the United Kingdom. We were partly instrumental in persuading the United Kingdom Government to adopt a favourable attitude to wool storage in the United States, and this alone has resulted in substantial shipping economy. At the request of United Kingdom Government we have concentrated on Naval shipbuilding instead of commercial shipbuilding. Now we find ourselves isolated because of our distance. If we had not been efficient in the above respect we would be better off because by now applying more efficient methods in export industries and shipping we could mitigate the effects of the imports policy which the United Kingdom Government now propose to adopt to our serious detriment.

We recognise the value of the Lend and Lease Programme which opens opportunity for U.K. Government to secure American foodstuffs without payment and probably transported in American ships. This holds obvious advantages to the U.K. over supplies from Australia.

We also perceive the advantages of securing certain bulky commodities such as wheat from nearer at hand and we know the strain which is imposed on refrigerated shipping space.

However, we must lodge an emphatic protest against progressive restrictions on supplies from us without adequate explanation and without putting into effect obvious economies in the use of British ships some of which are still running in non-combatant waters which could be served by other ships.

Without details of the proposed reductions in imports from us in the third year of war we cannot properly assess the extent of the disaster in store for us, but we cannot willingly accept the position as it stands at present.

As to meat. We have diverted beef supplies to the Middle East and have increased canning side of industry and production of baconer carcasses. The reduction of U.K. Government's undertaking from 249,000 tons to 144,000 tons is made on the grounds of shipping position which is said to be most serious but reason as applicable to Australia is not explained. As far as we know the losses of ships on U.K.-Australian run have been negligible. We assume much shipping is required for Mediterranean activities but we have no explanation whatever. In an attempt to cope with the position we are framing a comprehensive policy. One aspect of this is large scale canning of mutton. For this, unfortunately, tin plate supplies are inadequate and we appear to be unable to secure supplies from U.K. or from the United States. Supplies of tin plate from latter country have to be ordered through the British Purchasing Commission. Australian requirements are apparently not regarded as important and consequently, our canning industry will soon cease to operate. We are still without any idea whatever regarding U.K. meat purchasing policy. They have been sympathetically considering it for some weeks and there it stays as far as they are concerned.

We are trying to secure machinery to dry our entire egg pack and are endeavouring to increase output dried milk. We have already increased output of canned milk for Malaya at U.K. Government's request.

Have they any restrictions in store for our dairying industry? We are greatly disturbed at attitude of United Kingdom Food Ministry and their advisers, and feel they are not sufficiently considerate of our vital interests and their continual change of policy such as pigmeats makes continuous programme impossible for us.

We would stress for your special information that suggested reduction in our food exports would have following repercussions- financially and economically:-

(1) London funds will be seriously affected. For current half year we are providing 18m. sterling for overseas war expenditure. We had hoped to build up next financial year but with reduction of exports by 20m. our funds will fall and it will be impossible for Australia to make any contribution next year. Moreover, a higher level of London funds will be necessary for requirements other than war because of increasing debt charges and rising sterling prices.

(2) Maximum reduction of imports from U.K. will be inevitable.

Scope is limited as most of the imports are required for war and essential purposes. There is very little scope for restriction of non-sterling imports which are required for war and essential purposes, vide our telegrams Lease and Loan Bill relating to imports from U.S.A.

(3) Reduction of exports and imports will adversely affect our general economy and Central Bank assistance running into many millions will be needed to finance surplus stocks, storage, etc.

and enable primary producers to carry on. This assistance will be necessary over and above the huge task that lies ahead of financing a war programme over 50m. greater than the present year.

(4) In these circumstances we will be forced to resort to dangerous financial expedients which will have adverse effects on our war effort.

TINPLATE Reductions in bulk shipments of meat add to our difficulties in regard to tinplate, as we may need to tin and store large quantities of meat during the next twelve months.

We are at present faced with very great demands for processed foodstuffs for the War Office and the Eastern Group, while at the same time, United Kingdom supplies of tinplate have been reduced.

We are in daily communication with Clapp [1] in New York on supplies from U. S. A. but are informed that our demands must be approved by the British Steel Corporation for the British Purchasing Mission, with every prospect of severe rationing for U.S.A. as well as United Kingdom supplies.

United Kingdom authorities apparently fail to realise that while the War Office is demanding more canned foods from us, the Board of Trade or other control is obstructing supplies of container material.

We are controlling users of tinplate here, and economising in all dry packs, but at present cannot get sufficient for essential civil needs, for supplies for our own Defence Forces and Admiralty, plus new supplies for War Office and Eastern Group, and supplies for canning meat that must be absorbed and stored in tins for future use.

Cabinet appreciates representations made by you to British Government and your observations on shipping. Nevertheless, they take such a serious view of the position that we have cabled you at length. Cabinet is not only concerned at the first impact of reduction of food exports, but as to the secondary effects which will seriously hamper our war effort and may well affect recruiting. We desire you to press in strongest manner possible the views of Cabinet and endeavour to secure some modification of the proposed restrictions. If these representations fail and we are forced to acquiesce in diversion, then we desire you to press for quick decision on your proposals that reserves of food be created here for the United Kingdom and that United Kingdom Government should co-operate in financing these reserves up to point of shipment.

To sum up, we want the following information:-

(1) Particulars of proposed reductions in imports.

(2) Particulars of the reasons beyond bald reference to shipping losses.

(3) Whether the U.K. Government are prepared to buy products even if not immediately shipped. Oft repeated sympathetic observations without subsequent results are exasperating.

(4) Whether the United Kingdom Government are prepared to help us to secure adequate supplies of tin plate from the United States at once to enable us to can the meat surplus created by their restrictions and for other canning requirements. Affirmative reply is not sufficient. We want them to cable their Purchasing Commission to expedite shipment.

(5) Particulars of commodities United Kingdom intend to secure from United States and other countries to replace our goods.

(6) Is there any hope of a plan for shipment of Australian goods to North America in ships which will not go into fighting zone.

Such Australian goods might then be picked up by Empire ships and taken to the United Kingdom, or might replace equivalent goods sold by United States to the United Kingdom.

We are making a list of major indispensable articles essential to the maintenance of our basic primary and secondary industries. We think the only obstacle permitted to stand in way of these essential articles should be our physical inability to secure them, and that our actual needs determined by war conditions should form the basis for our purchases rather than any quota based on previous year's quantities, that Great Britain should assist us to secure these goods from U.S.A. if unable to supply them herself-and especially before they are supplied to neutral countries. Their provision would increase our export capacity both for munitions and food and enable our full war strength to be utilised.

1 Head, Australian Division, British Purchasing Commission in the United States.

[AA: A3 196, 1941, 0.4053]