Reference your No.1003  relative to Pacific bases.
1. I have submitted to Cabinet a report of your discussions in Washington.  We are glad to note the good progress you have made. It has emphasised the value of the direct approach to the United States, particularly in view of the report, when we were in London, that Mr. Byrnes had not reacted favourably to the approach made to him at the time, in Paris. 
2. The following observations have been furnished by the Defence Committee:-
'The Defence Committee recalled that the background against which United States' request for bases in the Pacific had to be viewed was indicated in the Prime Minister's memorandum relating to the London Conference, and that facilities should be conceded to the United States only in return for the acceptance of Defence obligations under an agreed scheme.
On the other hand, it was clear, from recent cablegrams, that the United States Government is disinclined to consider, at present, the assumption of specific defence obligations concerning the Southwest Pacific, and that an alternative plan, which could properly be regarded as a regional arrangement and which might lead to an informal agreement, was now proposed by the Minister for External Affairs. The Committee observed that the proposed informal agreement related to approval by the United States Government to the principle of reciprocity in connection with the use of bases to be specified in the Pacific, and to subsequent discussion on the service level in relation to the necessary details involved.
The Committee noted further, that the Minister for External Affairs was keeping the United Kingdom Embassy and the New Zealand Minister generally informed of the talks with the United States Authorities, and that he had stated that the United Kingdom and New Zealand would have to participate in the plan.
The Committee concluded that an informal agreement of the scope envisaged in the cablegrams under review can be related to the needs of the Empire strategy in the Pacific, and that in these circumstances, it is to our advantage to secure such an agreement.'
3. Cabinet approves in principle of the approach along the lines that are being followed, and that a plan as suggested be developed through staff conversations on the Service level, subject to later agreement between the Governments concerned, including the implications of military and financial commitments that may be involved in regard to the bases under the control of the Australian Government. 
4. To assist you in looking ahead to the ultimate machinery aspect of the development of such a plan, I would recall the following views expressed to the Prime Ministers' Conference in London:-
'(a) It is fundamental to future arrangements for co-operation in Defence that appropriate machinery should be created to provide for an effective voice by the Governments concerned in Policy and in the higher control of planning on the official level.
(b) There should be assigned to the Australian Government machinery, responsibility for the development of the defence aspect of matters relating to Regional Security in the Pacific, in which the United Kingdom, Australia and New Zealand are concerned, and provision should be made for the representation of the United Kingdom and New Zealand at the appropriate levels on such machinery.
(c) Corresponding provision would also be necessary for Dominion representation on any parallel machinery in the United Kingdom. On the official level, the Australian Government contemplates the strengthening of its Joint Service Staff in London, as a counterpart to the Defence Committee in Australia, and to provide an agency for advice to the Resident Minister in London on Defence matters.
(d) Consideration is also being given to the Australian Joint Service Staff requirements in Washington and at the seat of the United Nations. Development in this direction would depend on any arrangement reached with the United States and machinery which may be created for the purposes of implementing any agreement.'
It was also pointed out to the Conference that:-
'Australia has had considerable experience of working with the United States Forces in the set-up in the Southwest Pacific Area, and though operational control was vested in the Commander-in- Chief, Southwest Pacific Area, under his directive, a close link was established between General MacArthur and the Australian Government. The Americans worked through and were integrated into the Australian Government Machinery in respect of their extensive logistic requirements for which Australia was the source.'
5. The expansion of the Australian machinery to provide for United Kingdom and Dominion representation on the various levels can also readily provide for American representation for purposes of consultation and co-operation. It is realised that it will be necessary to hasten slowly and let the development of any joint machinery evolve by circumstances rather than to endeavour to force its growth. Nevertheless, for the staff conversations it will be necessary to have some ad hoc arrangement, and it will probably be found necessary later to have some established machinery through which to work.