517 Legation in Washington to Department of External Affairs

Cablegram 820 (extract) WASHINGTON, 3 June 1942, 3.11 a.m.

MOST SECRET

Reciprocal Lend-Lease Our 811 [1] and your 671. [2]

Comment on draft exchange of notes.

Following from Brigden. [3]

(1) Proposal that Australia should sign the master agreement is a reversal of the attitude when Dr. Evatt [4] arrived from Australia, and is not in line with the recent United Kingdom views, but Dr. Evatt will have direct information. Phillips [5] offered no comment on this aspect, but concurs with comments made in other paragraphs. The question is one of high politics and judgment as to whether the Empire countries would do better now and in post-war settlements as a group, as the United Kingdom has been suggesting. A separate master agreement for Australia implies that United States Lend-Lease will be direct and not through the United Kingdom and that the ultimate settlement will also be direct.

(2) Paragraph 3 of the draft conforms with your views but as a standard document makes no provision for Australia's special problems. The most appropriate course might be to add a paragraph at the end.

(3) Paragraph 4 of the draft might be limited by inserting words in its preamble restricting the Australian offer to the United States forces within Australian territory and to such other United States forces as may be determined. The words 'when it is found that they can most effectively be procured in Australia' are ambiguous. It may be physically possible but financially or economically inequitable.

In 4(b) of the draft the words 'administrative expenses' should be inserted.

Para. 4(d) goes further than we have contemplated hitherto.

(4) Paragraph 6 of the draft does not require that record of aid given or received shall be agreed as between the parties at the time.

(5) Paragraph 7 of the draft is of course new and far-reaching, especially when read in conjunction with paragraph 2. To accept it is to undertake to make similar agreements with Russia, China and many other nations.

(6) The draft is for comment and discussion, and is of course designed as a comprehensive objective from the United States point of view. It appears to have been conceived quite independently of our discussions and the practical considerations we have had under review. In effect we are to start again.

(7) Your 671 may therefore be a new start for us. Acheson's [6] modest ideas have been superseded. As the United States now proposes large-scale reciprocity, your case for special assistance to justify it has a new significance. Action must, however, be delayed somewhat. There will be important people in Washington this week who may hasten events. I am sending more by bag today.

[matter omitted]

1 Document 512.

2 Dispatched 1 June. On file AA:A98, USA 181, i.

3 Financial Counsellor at the Legation in Washington.

4 Minister for External Affairs.

5 U.K. Treasury representative in the United States.

6 U.S. Assistant Secretary of State.

[AA:A981, USA 181, i]