Reciprocal lend-lease negotiations- (1) Have given consideration to Washington developments in light of your telegrams E.S. 52  and [E.S.] 58  which raise following major questions:-
(a) Separate Mutual Aid Agreement.
(b) Provisions of draft exchange of notes on reciprocal lend- lease.
(c) Assistance to overseas balances.
(2) You will recollect that question of separate Mutual Aid Agreement was discussed very fully in April and as result views expressed in my telegram P.M. 41  were accepted by yourself and United States Government (see your E.S. 2 ). It was definitely agreed that separate Mutual Aid Agreement was unnecessary and the R.L.L. agreement would be governed by United Kindom-United States Mutual Aid Agreement-, this to be done by link up in suitable preamble.
(3) New United States proposal is complete departure from this arrangement but no adequate reasons have been given. I feel we should know why arrangement which was only reached after very careful examination and agreed to by United States is now no longer regarded as satisfactory by United States. We have already given assurance of postwar co-operation (see telegram 28 of 11th February to Casey and his reply ).
(4) I am informing United Kingdom Government that United States has renewed request for separate agreement and that it is now under consideration.  In view of their 358 of 4th April  suggesting that there were practical advantages in a link up arrangement and that our decision would tend to be precedent for other Dominions I have asked for their further comments.
(5) With regard to (b) advices from Legation  indicate that draft exchange of notes was conceived quite independently of joint discussions which were being carried on with Acheson  on basis of United States memorandum of 24th March  and indicate it is now necessary to start afresh. The draft does little more than set out principles of Reciprocal Aid in broad basis. We had already informed the United States Government that we accepted general principle of Reciprocal Aid (my P.M. 14 of 31st March ) and it is in fact now being furnished on increasing scale to United States Forces in Australia. Our early offer was a broad one coupled with request for assistance to our overseas balances. In joint discussions United States suggested it was better for R.L.L.
to be moderate. Accordingly we were awaiting settlement of this aspect and certain practical matters before finalising the details here. We had assumed that joint discussions with Acheson were directed towards this end and that results would be embodied in memorandum or series of memoranda as indicated in your E.S. 2.
(6) It is unfortunate that new draft was not made basis of certain joint discussions. However it is now being examined in detail and our tentative views are as follows:-
(a) See no objection in principle to use of broad terms (subject to such variations as we may require upon further examination).
(b) Agree with you that clause safeguarding our right to interpret details and limits etc. is necessary.
(c) Agree that draft should make provision for agreed supplementary memorandum on practical application of its principles to Australia.
(7) As all parties in first instance agreed that matter should be subject of joint discussions I presume that joint discussions will now be resumed upon basis of draft exchange of notes. But in all the circumstances it is considered desirable that in the first place representatives of United Kingdom, Australia and New Zealand should confer amongst themselves upon the new basis presented by United States. United Kingdom Government is being asked for its views on this aspect  and detailed instructions will be sent later.
(8) Re (c) our representations for assistance to our overseas balances are being reconsidered in light of United Kingdom guarantee but before making final decision regarding our particular requests for United States assistance reply is desired from Legation to related questions raised in telegram 671.  See particularly paragraphs 4, 7, 8 and 9. As it now appears that R.L.L. is desired by United States on wider basis than contemplated in recent discussions it is all the more necessary to consider matter carefully before arriving at final decision. Our war expenditure next year will run into 400m. and R.L.L. may cost from 40m. to 60m. Any assistance from United States would not only help our Budget and exchange position but would also assist Empire Dollar Pool and lessen extent of our reliance on United Kingdom guarantee. However, in view of United Kingdom guarantee we are asking for their accounts. Further instructions will be sent after consideration of advices from Washington and London.