111 Australian Delegation, Geneva, to Cabinet Sub-Committee on Trade and Employment Conference

Cablegram ITO128 GENEVA, 12 June 1947, 1.55 p.m.

SECRET

Current tariff negotiations are being confused because of doubts about the continuance of restrictive Import Control systems. We believe that an Australian decision during the progress of these negotiations to issue licences freely for currently [1] available goods from all countries other than those with especially 'hard' currencies' e.g. United States, Switzerland, would be advantageous to Australia. [2] It would- (A) Demonstrate our good faith in the matter of removing trade barriers.

(B) Lessen the difficulties of obtaining tariff concessions from other countries in our efforts to obtain better marketing opportunities for Australian products in the countries with which we are negotiating. It will be obvious that reduction in a tariff rate can bring little (if any) benefit in terms of opportunities for extending trade if the country reducing the tariff continues to maintain licensing restrictions or prohibitions against the imports of the particular goods. Clearly we are not in a position to press other countries to give us assurances against import restrictions on products on which they grant tariff concessions unless we are prepared to give them assurances of similar nature on the products on which we grant them tariff concessions.

(C) Strengthen the attitude we have taken re justification for quantitative restriction for balance of payments purposes.

(D) Strengthen attitude which the United Kingdom and other countries are taking in relation to the possible need for discrimination in application of quantitative restrictions for balance of payments reasons.

(E) Earn goodwill which may well prove valuable if difficulties with United States develop.

We recognise that the decision on the above question cannot be based solely on the considerations referred to above. From the general economic point of view there are other factors which would tend to support an casing of import restrictions viz- (A) While purchasing power continues to press on the [a]va[i]lable supplies of goods in Australia extra imports are the only significant means of increasing the flow of goods without bringing about a substantially corresponding increase in expendable incomes thus maintaining that pressure.

(B) While our export income remains high we can avoid steadily increasing lending funds (which may in practice become substantially frozen except for limited purposes) only by spending more freely on imports. In view of our insistence in the Charter discussions on the obligation of members to use their current international resources to the full it would be wise for us to avoid unduly large accumulations.

(C) Provided relaxation is not extended to hard currency countries it would not be contrary to United Kingdom interests. Insofar as it contributed to the restoration of European economies it would be helpful. Delay in the restoration of these economies is the major factor in United Kingdom difficulties and the general dollar shortage.

It is possible that you have already been examining this problem in relation to the possible coming into force of Article 25 [3] of the Draft Charter. We recommend however that early consideration be given to relaxation of import restrictions on goods from all countries other than those with specifically 'hard' currencies and that in relation even to these consideration be given to relaxation of restrictions on commodities of major importance to small economies where the value of imports likely to be involved is not so great as to have any material significance in our balance of payments.

Particular case of this is involved in your Schedule 11 Cuban requests item 24 cigars which states that the matter of prohibition is to remain one of administration by Trade and Customs.

The leader of the Cuban delegation has presented a letter stating- (A) Cigars are one of Cuba's most important export products.

(B) Prohibition is a serious obstacle to success in getting reciprocal and mutually advantageous agreement.

(C) Removal of prohibition is desired.

Australian responses to Cuban requests are necessarily limited.

Cuban responses are regarded by Commerce as reasonable and further modifications in our favour under consideration. To some extent the position of Cuba in relation to cigars is analogous to our own with wool. Apart from the general issue dealt with above we feel it would be helpful if prohibition on cigars could be removed or modified. Early advice would be appreciated.

1 i.e. those for which demand is constantly high relative to supply.

2 McFarlane outlined this proposal to U.K. officials after he received a copy of this Cablegram. See Document 153.

3 Article 25 concerned the elimination of quantitative restrictions.

[AA : A1068, ER47/1/28, i]