122 Coombs to Chifley

Cablegram ITO218 GENEVA, 17 July 1947, 2.37 p.m.

SECRET

Yesterday I had informal talk with Clayton about import restrictions. I outlined briefly our balance of payments position both in total and in relation to dollar currencies and put to him the following questions- (1) What would United States reaction be to continuance of import restrictions discriminating against United States after sterling balance convertible.

(2) What would United States attitude be to modification of our import restrictions in favour of countries particularly European countries whose currencies were soft [1] for us.

(3) What would United States attitude be to relaxation of restrictions on minor items not extended to United States, e.g.

Cuban cigars.

In putting question relating to continued discrimination after convertibility of the sterling became effective I indicated that we recognised that with convertibility of sterling we have right to draw upon dollar pool freely in respect of our current earnings and that it would be difficult for us to justify continued restrictions on availability of dollars to Australia as we had broadly justified it in the past. However, since, in short run, dollars available to sterling balance were limited, we felt that for us to exercise our right to draw on pool for dollars would merely mean a reduction in dollar expenditure for other parts of sterling area, particularly United Kingdom and we were consequently anxious not to exercise our rights to an extent which would impose increased hardship on United Kingdom.

Clayton said that the problem was essentially a political one and his main fear was that there would be criticism in United States that United Kingdom had sought our concurrence in an arrangement deliberately designed to enable them to evade an obligation accepted in loan agreement and that if such criticism developed on any scale it would be embarrassing. Consequently administration could not concur in any such arrangements and indeed there could be no official discussions of such a question. On the other hand he was sympathetic with our attitude and he was confident that unless it became politically necessary administration would not wish to make any complaint if we continued discrimination. The main problem would be pressure by individual firms who might be seeking an expansion of their exports to Australia. With present export market more than adequate for most lines of goods, he thought it unlikely that this would prove widespread and some elasticity by Australia in order to meet pressure in relation to particular classes of goods where export markets were less easy to find than for commodities in general would probably deal with this problem. For the rest he felt that provided any general criticism was met by a clear statement that action was being taken without agreement or understanding between Australia and United Kingdom and that it represented a voluntary abstention from exercise of its rights to dollars by Australia he did not anticipate any serious difficulty. He would wish it to be understood however, that if problem became politically difficult in United States they might have to take the matter up with us.

With regard to the second question I indicated that while we were not sure it seems possible that we might be able to purchase more goods in aggregate and make some contribution to restoration of certain European economies if we could ease our restrictions on imports from such countries where currency difficulties were not acute without having to relax them similarly for dollar areas but we recognised that this would represent a further discrimination.

Clayton's views on this question seemed to be that it would present little increased difficulty since it would have justification for making possible a larger volume of trade.

In relation to Cuban cigars Clayton expressed doubts as to whether the United States was a significant exporter of cigars and thought it unlikely that we would get supplies from United States even if restrictions were eased generally but it we felt it necessary to discriminate he thought it unlikely that they would raise any difficulties. He emphasised that indeed they would welcome any contribution to solution of the Cuban problem since they too are reviewing their general trade relations with Cuba to see whether they can make some change in their present attitude which would contribute to a settlement here more satisfactory to Cuba.

I emphasised to Clayton that my approach to him was on a purely personal basis and not on instructions from the Government. He said he welcomed completely personal and informal character of conversation since he would find it difficult to express these views in any official way but none the less we could regard them as indicating his personal view of the attitude Administration would be likely to adopt.

1 i.e. currencies which persistently suffer failing exchange rates due to balance of payments deficits.

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