99 Department of Trade and Customs to McCarthy (in Washington)
Cablegram 56/Smart 8 (extract) CANBERRA, 13 January 1943
Our telegram No. 25 of 6th January Trade Negotiations.  In our summing up of the position reached in these discussions we are concerned at the Stiffening attitude shown by American officials in their efforts to remove as many as possible of the so-called discriminatory preferences operating in favour of Empire trade. We have already stated that we are prepared, in association with other British countries and the United States, to adjust our external trade policies in conformity with a more liberal plan of international trade, but the extent of our progress towards this objective at the present time must be limited by the degree to which the United States are willing and able to move in the same direction.
We fully appreciate the fact that the United States are bound by the provisions of the Trade Agreements Act both as regards the purpose of the Act in promoting American exports and also the limitation which it imposes on the reduction of existing import duties. It is equally desirable and more necessary for Australia to expand her export trade and the proposed agreement must be such as will assist both countries in this respect. At the same time, so far as Australia is concerned, the proposed agreement would fail in its purpose if it accentuated in any marked degree the balance of merchandise trade between the two countries of the pre- war period.
In your Trams 12, Section 5, of 7th July last  you state that in the American view the only benefit we can expect is from products such as wool and foodstuffs upon which duties will still be high after 50 per cent reduction. We agree with this view.
Although we have not yet received the American responses to our requests on a number of items it is obvious that, even if these requests were met in full, the resultant benefits would be moderate and the market prospects for these primary products would remain uncertain.
On the other hand our proposed concessions to the United States offer wide and certain benefits to American trade. Imports into Australia from the United States consist largely of manufactured commodities, in which supply can readily be related to demand and in which full advantage can accordingly be taken of any tariff concessions received.
Although it is obviously impossible to assess the relative values of the concessions proposed with any degree of accuracy, it is considered that, in terms of increased trading opportunities, the advantage lies with the United States.
American insistence at this stage in pressing for concessions which we find extremely difficult to meet indicates possible dangers to Australia in these negotiations if that attitude is maintained. In the post-war period Australia will have a major problem not only in placing her demobilised forces in suitable employment in industry, but also in transferring the majority of employees now engaged in purely war work to civilian production.
As regards some specific items no basis exists at the present time on which we can safely offer any worthwhile concession and it is desirable that these items be reserved for consideration in subsequent negotiations for a second agreement at a later date. It is expected that the question of what the United States officials regard as excessive preferences will come under consideration in the projected discussions on Article VII of the Mutual Aid Agreement and an appropriate policy may then be devised in association with steps to be taken by the United States for reductions in excessive tariff levels.
[Parts II and III have been omitted. They set out details of tariff concessions the Commonwealth Govt was prepared to make on individual items.]