332 Legation in Washington to Commonwealth Government

Cablegram 1042 WASHINGTON, 28 October 1944, 4.53 p.m.

TOP SECRET MOST IMMEDIATE

Lend Lease Stage II. United Kingdom Representatives invited Australian and New Zealand Representatives to attend a further meeting yesterday afternoon October 27th to discuss developments since the meeting held on October 9th. [1]

Keynes said that the United Kingdom had presented its case to the United States of America ten days ago. On the whole discussions with the Americans had been satisfactory so far. There was no reason to anticipate any difficulty regarding Munitions requirements although detailed requirements had to be examined by Service Representatives. The Australian and New Zealand Representatives should get in touch at once with United States Service Representatives. As regards Non-Munitions items it was hoped that by 1st January [2] the United Kingdom would have obtained reasonable freedom to export. Specific Non-Munitions requirements were now being released one by one for consideration by various expert Missions following upon a general consideration by the [3] Committee.

It was now desirable for Dominion Representatives to be brought in to discuss their [4] Non-Munitions requirements with the American Representatives. It would be advisable for figures of Dominions requirements to be given in some detail. A meeting had been arranged for Tuesday October 31st of the United Kingdom and the United States Top [5] Committee with Morgenthau [6] at which the Australian and New Zealand Representatives should present their cases emphasising their special situation during Stage II and explaining their figures. United Kingdom would be presenting a supplement of its own case in which certain corrections would be made and some amplification given of particular items. Any corrections and amplifications in Dominions requirements should be presented at the same time.

Revised cases should be made available to the United Kingdom Representatives late on Saturday October 28th and the whole British Commonwealth case should be ready by Monday October 30th.

It was not necessary to deal further with petroleum and shipping requirements as there was every reason to think that the United Kingdom figures which included Dominion figures were likely to be accepted.

In answer to a question Keynes said that it was quite possible that the United States might raise the question of continuation of reciprocal aid. American Service Representatives had already raised the question of reaffirmation of the principle of Mutual Aid and it was not clear how far this point might be pressed. It was possible that they would ask whether Australia for instance would be prepared to extend the geographical area of reciprocal aid so that American forces operating North of Australia could receive such aid. This precise point had not been raised but it was desirable to give consideration to it in advance.

We made it clear to Keynes that when the reciprocal aid agreement with the United States was entered into, Australia had insisted on limitation of such aid to the Commonwealth and its territories [7] and we expressed doubts as to whether the Commonwealth Government would be prepared to give any undertaking at this stage that the geographical area of reciprocal aid should be extended. A number of factors would have to be considered. For instance Australia during Stage II might wish to make supplies available to British Forces in the Pacific; numbers of American troops in the Pacific are likely to increase to such an extent that aid in a wider area might become embarrassing; if Lend Lease supplies to Australia were restricted severely Australia might be compelled to reconsider her ability to maintain the existing level of reciprocal aid.

We are preparing a further memorandum elaborating the Australian case containing the latest figures and kind of breakdown suggested by Keynes. The memorandum will also emphasise the special position of Australia while the Pacific War continues and point out that Australia is not likely to be in a position to obtain any substantial relief by diversion from war to civilian effort [8] when the European hostilities close. Need for continuance of a substantial measure of Lend Lease in order to give us a reasonably balanced economy will also be stressed. It will be argued that our programme is designed to give us such a balanced position and that it should be accepted on this basis without continual scaling down on points fully eligible and civilian end use. Keynes agrees that in existing circumstances we should press for grant of 100% of our carefully considered requirements without deduction of some percentage on the ground that this percentage is not eligible because the goods are for civilian use. We will also stress the importance of an improved procedure for implementation of allocations to ensure that goods allocated are in fact obtained from factory within a reasonable time.

We would appreciate urgent advice as to the attitude we should adopt if we are asked for an undertaking to continue reciprocal aid on any prescribed scale and if we are asked to extend the geographical area of reciprocal aid. In the absence of instructions to the contrary before Tuesday we will merely affirm our understanding that reciprocal aid on the present basis will be continued. The Reciprocal Aid Agreement provides for discussions in common on questions of effective use of resources. We feel, therefore, that we should not indicate any unwillingness to confer if such questions are specifically and directly raised with us by the United States Authorities. In this event we will go no further without reference to, and further advice from you.

1 See Document 313.

2 A sign here indicated 'mutilated'.

3 A sign here indicated 'mutilated'.

4 A sign here indicated 'as received'.

5 A sign here indicated 'as received'.

6 A sign here indicated 'mutilated'.

7 See Documents on Australian Foreign Policy 1937-49, vol. VI, Document 39. 8 A sign here indicated 'as received'.

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