1. It has been announced from Batavia that the Republican Government has for a second time clearly rejected the United States offer of good offices. 
2. The United States authorities have stated that they propose to inform the Council that, while the Dutch have accepted their offer, the Republicans have not.
3. It is also officially stated from Batavia that the Republican authorities accept the Australian proposal of arbitration by Australia and the United States. If therefore, the United States makes such a statement as indicated above, you should state that, while the Republican authorities had accepted an offer of arbitration, the Dutch authorities had rejected it.
4. It is now almost a week since we asked that the Australian resolution concerning a Commission of Arbitration and a Commission of Observers be put forward.  The prompt action taken by the Security Council originally has now been prejudiced by the delaying tactics being employed in the Council and you should, at the earliest oppurtunity, press these two separate proposals to a vote even though you are not confident of the numbers. The original resolution of the Council spoke of arbitration, not mediation, and we are confident that you would not only have the numbers on the Commission of Observers, but probably, if the matter were forced to a vote, have the numbers on the question of arbitration.
5. We would have no objection if the Security Council nominated for the Commission of Observers members of the staff of Consular officers already at Batavia. It should be made clear, however, that this arrangement was a matter of expediency to save time, and the appointments were as from the Security Council. It is a matter of great urgency that a team of observers should commence work immediately, without the loss of a day. This question should be dealt with first and separately. This would meet points (a) and (b) of the Chinese resolution  and should therefore receive their support.
6. Point (c) of the Chinese resolution, merely enabling the Council to act if the Settlement is unduly prolonged, is quite unacceptable and, in any case, mediation is now ruled out by the legitimate refusal of one of the parties. Mediation between the two parties, one of which has a great predominance of force and of economic power and is supported by other countries with economic power in this area, can only lead to unjust bargaining of the type initiated by the Axis powers before the war. There is no room for compromise on the principle of arbitration by the appropriate international body or by a group of arbiters nominated by that body. We would, however, be prepared to accept a Commission of three, one of whom would be nominated by each of the two parties and a third by the Security Council. This should be put forward as a compromise, in view of the position which has now been reached, that is, the Indonesian rejection of the United States offer and the Dutch rejection of our own offer.