374 Commonwealth Government to Addison

Cablegram 394 CANBERRA, 9 November 1945

MOST IMMEDIATE SECRET

Your D 2069. [1] Commercial Policy.

As intimated in my cable 1516 [2] the Australian Government is prepared to join in discussions on commercial policy and to engage in the bilateral negotiations with a sincere desire to reach a satisfactory settlement on the basis of making concessions in return for equivalent reciprocal concession by other countries, particularly United States, which will enable trade, employment and living standards to be improved.

2. We feel it is essential, however, to approach the discussions free of any commitments, even implied.

3. Whilst we appreciate that there would be no formal commitment on the Australian Government to the text of the proposals, the mere fact of their publication and your association with them will naturally give them considerable status in the eyes of the public and they will reach the conference stage with the support of the United States and United Kingdom Governments. Furthermore since a number of the matters dealt with are of joint concern to Britain and the Dominions, it will naturally be assumed that the United Kingdom Government would not have supported the proposals without the tacit concurrence of the Dominion Governments. We would therefore be involved by the United Kingdom's support.

4. There are certain sections of the document which in their present form would be unacceptable to us, and furthermore we have not had time to study the implications to Australia of many of the revised proposals. Indeed some of them in their modified form are not yet available to us.

(a) With regard to preference the formula proposed is even less acceptable than the proposals contained in your D 1909 [3], to which we indicated our objection in our 1516 October 23rd. In particular subparagraph (b) and (c) of para 2 of your 2070 [4] appear to tie the United Kingdom and the Dominions without any corresponding undertaking from the United States. Further the reservations in respect of war-time increases in revenue duties outlined in your D 1909 have apparently been abandoned. We must say quite definitely that we do not agree to the formula and are not prepared to associate ourselves with it. Furthermore we recognise that if you agree to the formula and associate yourselves with it we are inextricably involved whether we agree or not. We would therefore not wish you to agree to the formula nor to commend it publicly even with the commentary which you have proposed. If however the acceptance and public recognition of this formula are unavoidably associated with the financial aid, we are not able to assess the position in view of the fact that we have not been associated with your discussions with the U.S.A. and we are therefore at a loss to form any judgment on the matter nor to say any more than we have said above.

(b) In regard to quantitative regulation of imports into United Kingdom we would wish you not to accept any prior commitment or implied obligation which would adversely affect in any way the preference which you now accord to Empire meat under the Ottawa Agreement.

(c) We have not yet seen the revised proposals relating to quantitative restriction of imports for balance of payments purposes but the original in your dispatch D 148 [5] would be quite unacceptable to us. It has always been our view that freedom to impose quantitative restriction of imports for the purpose of restoring a balance in international payments was essential.

(d) In regard to export subsidies including their interpretation we would wish that the document issued for the Conference should not in any way preclude us from explaining at the appropriate time our home consumption prices, and arguing that they do not justify any retaliatory or countervailing duties by other countries. In our view these arrangements do not differ in effect from other forms of subsidy apparently acceptable.

We mention these only as illustrations of matters covered by the proposals to which we could not even appear to be committed without considerable political and economic embarrassment.

5. It is for these reasons that we feel that we must reserve a right to approach the conference without being tied in any way to the text of the actual proposals, and be free to submit alternative or additional proposals before and during the conference and to voice our objections to the American proposals when discussions begin without embarrassment to your Government or to ourselves. We would wish this to be clearly understood by the Americans and we must be free, if necessary, to make our position clear to the Australian public.

6. In the circumstances, therefore, we regret we are unable to meet your wish that we should convey to you the general concurrence of the Australian Government in the course contemplated by you.

7. We are conscious, however, that the United Kingdom judgment on this matter cannot be divorced from the financial aid discussions which you have been conducting. We appreciate that you are facing a difficult and delicate task during these negotiations. We are not in a position to make a judgment as to what on balance may be the best course of action, taking the two sets of discussions as a whole. We would emphasize, however, our view previously communicated to you that financial aid would provide a solution only if United States policy, both domestic and international, will make it possible for the United Kingdom and the sterling area to become progressively independent of further assistance. In this respect we attach particular importance to the United States policy in relation to employment and foreign investment as well as in relation to tariffs.

8. It will be necessary for us to make our position clear in Australia as soon as the United States makes its proposals public.

We would therefore be grateful if you will keep us advised of developments and would appreciate receiving as soon as possible the text of any statement you propose to make.

1 Dispatched 6 November. On file AA : A1066, A45/2/5/4. It recounted the results of Anglo-American negotiations on commercial policy, especially over the reduction of tariffs and elimination of preferences. The U.K. Govt was concerned that the reduction or elimination of preferences should not be conceded before the level of tariff reduction had been established, while the U.S. Govt was under pressure from public opinion on the preference issue.

Agreement was reached on the U.K. Govt's basic position that no advance commitment on preference was required, and it remained the responsibility of individual govts to negotiate on the level of preference elimination to be undertaken. The U.S. Govt intended to publish the proposals which resulted from these negotiations, and then to invite further 2 Dispatched 23 October. On file AA : A1066, ER45/1/5.

3 See Document 316, note 3.

4 Dispatched 6 November. On the file cited in note 1. This cable contained the formula on preferences agreed between the U.K. and U.S. Govts. Sub-paragraph (b) read 'All negotiated reductions in most favoured-nation tariffs will operate automatically to reduce or eliminate margins of preference'. Sub-paragraph (c) read 'Margins of preference on any product will in no case be increased and no new preferences will be introduced.' 5 Not located.

[AA : A1066, A45/2/5/4]