Mr. Bruce has communicated to us message contained in your telegram to him No. 156  relating to inclusion of Japanese pearl divers in the proposed exchange.
2. We accept your decision not to agree to the return of these men to Japan and we have noted the strong opinion in that sense expressed by General MacArthur. We have deferred communicating with the Japanese on the lines of the reply proposed in your telegram since we wished to consider very carefully what should be the next step in the event which we fear will be the case that Japanese are not prepared to continue arrangements for exchange on the basis now put forward. We have come to the conclusion that the best plan would be to put forward a reply on lines proposed in your telegram with which we are in general agreement and to which we would therefore propose to give our express support in forwarding it to the Japanese and then to await the Japanese reaction.
3. There are, however, two points on which we should like to make suggestions for your consideration in connection with the proposed reply- (1) As regards paragraph 4 of the proposed reply, if the purpose of the threat to publish is to make the Japanese Government hesitate to break off negotiations we fear that it may well have the opposite effect. We think that on receipt of refusal to release these seamen they will not necessarily refuse to continue negotiations. We therefore suggest that the second sentence of Part 4 be omitted (its omission will in no way restrict freedom of the Australian Government to take any action they think fit in this connection). Moreover, we think it is important that Japanese Government should be told that we still wish to proceed on the basis of an exchange of 1,600 persons on each side and we therefore suggest that first sentence of paragraph 4 should conclude as follows 'and will intimate its readiness to fill the vacancies from selections among other Japanese nationals and to proceed with arrangements already contemplated for exchange of 1,600 British and Allied nationals against corresponding number of Japanese nationals'.
(2) In view of the possibility of publication of this correspondence should negotiations break down we are most anxious to ensure that reply to Japanese Government is such that it affords them no opportunity of contending publicly with any plausibility that arguments contained in it are legally unsound.
For these reasons we should like to offer the following comments on paragraph 2 (1) and (2) and paragraph 4 of the draft reply. Our difficulty is that although these pearl divers are undoubtedly merchant seamen and can therefore in our view properly be treated as prisoners of war, it is not clear that they were all actual members of crews at the time that they were originally detained.
If too much stress is laid on contention that they were actual members of crews there is some risk that Japanese Government will reply with argument based on Art. 6 of Hague Convention XI  to the effect that these men should not under that Article have been taken prisoner at all because although they were persons of enemy nationality and members of crew of a merchant ship at the time of their capture they should have been repatriated after having signed the undertaking provided for in that Article. Fixed policy of the British Commonwealth is not to allow members of merchant crews to sign this undertaking and there are good legal reasons for this attitude as regards the German Government. Our case for disregarding the Convention vis-a-vis the Japanese Government is not so clear and we should much prefer not have to defend it. To avoid this risk, therefore, we suggest for consideration of Australian Government that second, third and fourth sentences of paragraph (1) should be replaced by following sentences 'the deciding factor is that in this case all these individuals although resident in Australian territory at the outbreak of war were seafaring persons who spent large proportion of their lives in ships. A seaman remains a seaman even if he is temporarily ashore and it is clear that these individuals are not covered by any provision of Hague Convention No. XI. In particular it is irrelevant for the Japanese Government to appeal to the spirit of provision of Article 3 of this Convention. By no topographical stretch can the provisions of Article 3 be made to apply to case of Japanese seamen who earn their livelihood by serving in vessels operating in or near Australian waters.' Similarly in the last sentence of paragraph 2 we suggest words they were members of crews' should be replaced by 'they were seafaring persons'.
4. We should be glad to learn at an early date views of Commonwealth Government upon these suggested amendments.