Your telegram No.22.
Trade and Employment.
We fully appreciate the considerations which prompted your suggestion that B.P.T. rates need not be discussed at our forthcoming meeting in London (or presumably at Geneva.) We feel however, ourselves that this course is impracticable. The United Kingdom is in a peculiar position among Commonwealth countries in this connection in that United Kingdom exports are spread over a very much greater range of commodities than those of other parts of the Commonwealth. Moreover this country is faced with a gigantic task of expanding the volume of exports and must look for such expansion to Commonwealth countries as well as to the rest of the world. No agreement therefore is likely to be satisfactory to us which does not lead to a general scaling down of the tariffs we have to face. But we shall also have to be prepared to face concessions sought by competitors in Empire markets and we feel that we must be in a position to assess as closely as possible our own position over the whole field if and when concessions to others are agreed.
2.Without exhaustive study it is of course very difficult to determine just what reduction of tariffs is tolerable but the whole conception of multilateral trade involved in the present project depends for its realisation on courageous action now. We feel that the present time when trading connections are fluid is the right time to take some risks in order to establish conditions which will foster the increase of international trade and that to defer such action over a large part of the field will seriously prejudice the chances of success. The limitation of the proposed agreement to a period of three years and the provision of an escape clause which could operate during its currency are both designed to enable countries to accept a fair degree of risk.
3. A particular factor which weighs with us in deciding that we must ask for reductions in tariffs in other Commonwealth countries is that unless there is some contraction of the preference system none of us will secure adequate concessions from the United States but that if there is to be such a contraction the United Kingdom must look for the greater opportunities of trade which will result from the lowering of the B.P.T. rates not merely in some items where preference margins are under fire but in respect of certain other items also. Without that we are doubtful of our ability to agree to that amount of preference contraction which secure[s] a reasonable measure of success in these negotiations important as they are for us and all other countries alike.
4. We shall therefore be forwarding within a day or two lists of requests which we hope you will examine sympathetically but which naturally will have to be discussed in the light of all the other considerations which emerge in the course of negotiations.