Your telegram No. 277. 
We are very sorry to learn that the Commonwealth Government have felt unable to agree to an extension of Reciprocal Aid on the lines desired by the United States Government. As regards the main causes of difficulty mentioned in your telegram we fully appreciate the extent of the great and growing contribution which the Commonwealth Government are already making by way of Reciprocal Aid and the strain which this is placing on Commonwealth resources. We can readily understand also that the Commonwealth Government would feel some hesitation in these circumstances in adding to their existing commitments a new obligation couched in general terms and involving an unknown liability in relation to an unspecified number of commodities. As regards the first point, however, we had hoped that if the Commonwealth Government should feel that the additional financial burden involved in acceptance of the United States proposals would on present estimates be such as to cause them embarrassment, consultation between our two Governments would result in arrangements for easing the burden and so clearing the way for acceptance of the United States proposals.
On the second point it had been our hope that if satisfactory arrangements could be made between us on the financial aspect, the Commonwealth Government would be able to convey a favourable reply in principle to the United States request while protecting themselves by suitable reservations from possible later demands under the United States Public Purchase Programme which it would be beyond their physical capacity to meet. We do not think that such reservations could be regarded as in any way inconsistent with the objects of the general scheme. As you know we feel that this question of the supply of raw materials and foodstuffs as Reciprocal Aid is a vital part of much wider issues now arising in relation to the United States, affecting the whole future of Lend Lease and Reciprocal Aid arrangements. There is a great risk that these arrangements may increasingly become the target of domestic political controversy in the United States leading in turn to a growing deterioration in our general financial and economic relations with them with the danger that we may find ourselves once again in a 'war-debts' atmosphere. If we are to check this tendency it is essential that United States public opinion should be brought to look upon Lend Lease not as a commercial transaction or investment, but as part only of the large conception of pooling of resources among the United Nations, each nation contributing its maximum to the common war effort in men, money and material without any thought of repayment except in victory. We are advised, however, that if we are to be able to demonstrate that pooling of resources between British Commonwealth and the United States is already fully effective, it is essential that we should take urgent steps to rectify the present apparent anomaly that raw materials and foodstuffs required by the United States Government from British Commonwealth sources are excluded from Reciprocal Aid. In this connection we have been much disturbed by recent developments in the United States resulting from the wave of ignorant and ill-informed criticism let loose by the five Senators.  We are urgently considering what steps we can take without embarrassing the United States administration with a view to our case being publicly stated, e.g. through issue here of White Paper on the present Mutual Aid arrangements. The Prime Minister has taken up the matter personally with President Roosevelt and I will keep you informed of developments. If the proposed White Paper is issued it will be most important to include also announcement of extension of Reciprocal Aid to cover raw materials and foodstuffs from the United Kingdom, Southern Rhodesia and Colonies, and this could clearly have more impressive effect if Dominion Governments felt able to join with us in making parallel announcement on similar lines. New Zealand and Union Governments and the Government of India have already indicated their willingness to accept United States proposals in principle having regard to the large issues at stake and we earnestly hope that if reply on behalf of Commonwealth Government has not already been conveyed to State Department, Commonwealth Government will be willing to hold up their reply until we have been able to consult them further in the light of the Prime Minister's consultations with the President.