72 Australian Supply Council in the United States to Department of Trade and Customs

Cablegram AUSCO 28 WASHINGTON, 27 September 1941, 8.45 p.m.

The application of Lease Lend principles to the procurement of supplies is still the subject of much discussion and consideration both in United States and United Kingdom circles. Much conflict of opinion is apparent even among American administrative people regarding application of Lease Lend principles to articles not directly connected with defence. Enunciation of principles which would enable various administrations at the Australian end to determine what line of action to adopt with regard to various categories of supplies, especially civilian necessities which Australia finds it necessary to obtain from the United States, is still a long way off. Only one point can be considered as definitely established at the moment, viz. that 'supplies clearly essential to maintenance of the war effort' can be procured under Lease Lend without question, providing that there are sufficient funds available by appropriation, but with the exception that in some cases requisitions pertaining to supplies which are definitely required for use in the armed forces or in defence organisations may be rejected for various political reasons.

Examples of these are typewriters and accounting machines for Service departments, artificial teeth, spectacles and parts, toilet paper, and other articles which do not readily suggest themselves to the popular mind as being associated with defence.

In the matter of priorities in supply, the United States Government may sometimes desire to retain particular goods for their own use, but this is not peculiar to Lease Lend transactions.

2. It is recognised that the term 'supplies essential to maintenance of the war effort' admits of varying interpretations and that, because of this, difficulty will be experienced in practical application. In this matter of interpretation there are quite a number of categories, [commencing with those] [1] which are obviously defence, for example, tanks and planes, including materials and components which beyond doubt are to be used for defence purposes, and ranging through instruments of production, materials or components which may be used for defence, into fields where particular goods are so far removed from direct association with the war effort as to make the case for their supply under provisions of the Lease Lend Act essentially debatable.

3. Up to the present, the authoritative statement (Dominions Office telegram 445 of 29th June [2]) that everything possible should be brought under Lease Lend including necessary civilian supplies officially stands, but there is evidence that this view is by no means universally held in American circles. In fact, our talks suggest that there is a trend away from it. We cannot state this with certainty, however, as responsible opinion appears to swing to and fro, and even important decisions might easily be reversed at short notice.

4. We gather that as a matter of financial policy, a tendency existed for a while to stretch the application of Lease Lend itself to goods of doubtful eligibility to tide the sterling block over the problem of finding cash for huge quantities of war supplies which the United Kingdom had on order under private contracts when Lease Lend came into operation and which for technical reasons could not be brought under Lease Lend and that, as the problem of financing these extraordinary commitments moderates, the Lease Lend administration will aim to revert to a position where Lease Lend supplies will be confined more strictly to articles more closely connected directly with defence. We cannot be satisfied however that this view will prevail. We have further gained the impression that a section of American Administration fears political embarrassment and popular reaction against Lease Lend policy if it became widely known that quantities of articles which might be held to be only [remotely connected with] defence were being lease lent to the Dominions.

5. To meet conditions as they stand at the moment, we suggest as an interim policy that your Lease Lend machinery concentrate on those categories which are obviously for defence purposes, those which because of their nature can be, and without doubt, placed into defence category and those the requisitions for which can be supported by a clear cut and more or less self evident case. We are satisfied that it would be wise to move slowly and cautiously into the field of civilian necessities and suggest that you refrain from requisitioning supplies in this category under Lease Lend where case, though legitimate, is weak, where supporting evidence is incomplete or too general, where the arguments though probably sound suggest some subtlety-in short in any case where the facts are insufficiently conclusive or the case is not self evident.

6. We realize that this is in some respects the marked reverse of advice already forwarded to you and we might have to change it again at short notice (pressure for dollars, for example, might cause a loosening of the interpretation instead of what we think we now detect as a tightening), but we can only plead the seeming impossibility of getting authoritative conclusive decisions and great susceptibility to change which seem inherent in the whole scheme. In building up your clearing house Organisation, we do not suggest that any action already taken be reversed regarding civilian necessities but rather that you hold your hand or move slowly for the present. We would expect that even a relatively brief pause might give time for a clarification of the various issues involved at this end and at the same time enable the clearing house organisation at your end to be brought into operation more gradually.

7. Returning to those categories upon which we suggest you should concentrate, we urge that every effort should be made at the Australian end to utilize the Lease Lend principle to obtain the largest proportion possible of those supplies identifiable as directly necessary for defence or as directly associated with production of articles for the purposes of defence (including goods ordered by or destined for private concerns for use in Australian production of articles directly connected with defence), these being supplies which are obviously procurable on a Lease Lend basis. We fear that difficulties will arise through recrudescence of obvious defence purchases which would be made through private sources for cash, which we understand is now the case. They tend to reach a material sum in aggregate and it is advisable to guard against the suggestion that we are applying for Lease Lend admission of doubtful cases and paying cash for those not doubtful. In other words we propose that, in lieu of the present policy of paying cash for many articles directly required in connection with defence which would be admitted without question under Lease Lend and trying to obtain under Lease Lend articles of doubtful eligibility, you should permit necessary requirements of the latter to be obtained in the ordinary way of business and arrange that all Government instrumentalities concerned, which for reasons of expediency now issue instructions to pay cash for particular requirements in defence supplies or authorize a private importer to import in the ordinary way, should in future arrange to obtain under Lease Lend more and more of Australia's requirements of articles directly connected with defence which it is necessary to import from the United States, including only those transactions which are too small in value as not to warrant action under cumbersome Lease Lend procedure.

1 Words in square brackets have been inserted from the Washington copy on file AA:A3300,103.

2 On file AA:A1608, A59/2/1, i.

[AA:A3195, 1941, 1.19317]