291 Cranborne to Commonwealth Government

Cablegram 250 [1] LONDON, 19 September 1944, 2.08 p.m.

TOP SECRET MOST IMMEDIATE

Lend Lease in Stage II.

My telegram of 14th September Australia No. 243, New Zealand No. 191. [2]

1. The Prime Minister and the President have discussed at Quebec the question of scope and scale of Lend Lease and Mutual Aid after the defeat of Germany and during the war with Japan. They have agreed that a joint United Kingdom - United States Committee should be set up to consider this question. United States members will be Morgenthan, Stettinius and Leo Crowley. [3] The Committee will agree and recommend to their Governments the amount of Mutual Aid in munitions, non-munitions and services which is to be provided for the most effective prosecution of the war. Pending its recommendations no major decisions are to be taken by either Government without the approval of the Committee as to programmes of Lend Lease Aid.

2. The Committee is to be guided by conclusions reached in conversation between the Prime Minister and President of which the following are salient points- (a) The President agreed with the suggestion of the Prime Minister that during Stage II we should continue to get food, shipping etc., from the United States on Lend Lease to cover our reasonable needs.

(b) As regards the suggestion that Lend Lease for munitions should be on a proportional basis (see my telegram under reference paragraph 1(a)) the President at first indicated assent but Morgenthau then suggested that it would be better to work on definite figures, to which the President agreed. This point will need further clarification.

(c) The President agreed that no conditions should be attached to delivery of supplies under Lend Lease which would jeopardise reestablishment of our export trade provided that no articles obtained on Lend Lease or identical thereto were exported or 'sold for profit' (i.e. for more than the price at which they are entered in United States books plus reasonable allowance for transport and similar charges).

3. We are now engaged in rapid preparation of estimates for the Committee, using as a starting point figures of manpower which we shall have to devote to non-munitions production and the fighting services in Stage II. As to non-munitions we are told that Morgenthau has shown a desire to take account of the amount of Reciprocal Aid when determining Lend Lease assistance to be given.

4. A fresh meeting of United Kingdom-United States Committee is due to take place on Wednesday 20th September in Washington.

Although this meeting will, no doubt, be concerned mainly with questions of procedure we expect that the Committee will soon get down to the business of detailed estimates.

5. We are anxious that the Committee should pay full regard to the needs of Australia and New Zealand and the most convenient way of ensuring this would seem to be that it should be furnished with estimates of your munitions production and requirements in Stage II in a form which will enable them to be fitted into estimates for other parts of the Empire. (We have already repeated to our representatives estimates as regards non-munitions contained in Commonwealth Government telegram 226 [4] and New Zealand 200.) We suggest, however, as a first step that authority should be given to your representatives in Washington to place themselves in touch with United Kingdom Minister Resident for Supply immediately so that early discussions can take place as to best procedure for enabling Australian and New Zealand position to be taken fully into account. Meanwhile we are considering urgently who United Kingdom members of proposed committee should be and will telegraph further as to this as soon as decision has been taken.

6. It is specially desired that these arrangements should be kept very secret at this stage.

1 Addressed to the N.Z. Govt as no. 202.

2 On file AA:A571, L41/915A, iv. It stated that the U.K. Govt's policy in discussions on Lend-Lease in Stage II (i.e. after the defeat of Germany) was that British Empire forces should receive the same proportion of munitions supplies under Lend-Lease as they were currently receiving, and that the scope of Lend-Lease for non-munitions should continue unchanged.

3 Administrator, Foreign Economic Administration.

4 Dispatched 6 September. On the file cited in note 2.

[AA:A571, L41/915A, iv]