My telegram 34. Trade and Employment.
We have greatly welcomed the opportunity afforded by the present Commonwealth discussions to exchange views with your representatives on the tariff negotiations which are about to begin in Geneva. We are however much concerned to find that their instructions, as we understand do not allow for any significant reduction in your British preferential tariff rates. As you will be aware from my telegram 34 this is an aspect of the negotiations to which we attach great importance.
2. These instructions we understand are based [not]  on the relatively late receipt by you of our list of requests upon Australia, though we should have liked to have been able to give them to you much sooner than was the case, but on a fundamental difference in our respective approaches to the problem. We feel bound therefore to set out our stand-point and earnestly request you to consider the matter. As indicated in my telegram under reference the results of the forthcoming negotiations as a whole cannot be satisfactory to us unless they lead to a general scaling down of the tariffs we have to face. For we must look to an expansion of our volume of exports not only in foreign but also in Commonwealth markets. From this point of view negotiations with you looking to reductions in the British preferential rates in Australia form an essential part of our negotiations at Geneva and a vital factor in enabling us to strike a balance over the whole field between the concessions we make and those we secure.
3. We gather that one at any rate of the principal reasons which have led you to take your present position is that whereas we are hoping to obtain reductions in the high preferential rates in Australia while retaining a reasonable margin of preference, the free entry accorded in this country to a wide range of Australian goods means that we cannot reduce duties in your favour.
4. We appreciate the point made by your representatives that in general the preferences which we grant to your goods have their counterpart in the preferences which you grant to United Kingdom goods. But a position in which you would continue to enjoy free entry in to the United Kingdom while our exports remain subject to such high duties on entry into Australia is one which, we fear, would not commend itself to public opinion here; it has long been represented [to] us by exporters that Australian duties are unnecessarily high, and in the context of negotiations which are aimed at reducing barriers to trade, these duties, if they are maintained at their present height at the same time as margins of preference are reduced, are bound to constitute a serious source of grievance. In the context of the forthcoming negotiations we feet bound to say that such criticism would not seem to us to be without justification.
5. It is common ground between us that the highest importance is to be attached to the success of the international negotiations and it is manifest that some concessions must be offered to other countries, the United States in particular, if we are both to obtain in the interests of all of us satisfactory reductions of the high tariffs still existing there. We therefore were prepared for a number of reductions in the Most Favoured Nation rates in the Australian tariff to meet the United States and other countries while at the same time our preferential position was not being radically impaired. But as you can well imagine we should be subject, and rightly subject, to intense criticism on the part of our people if the M.F.N. rates were reduced and the preferential margins narrowed while the existing very wide disparity between the preferential rates under our respective tariffs remain practically unaffected.
6. In formulating our replies to the United States requests I need hardly say that we have tried to avoid wherever possible damage to your interests; indeed even our initial replies will be subject to the condition that Australia receives adequate compensation from the foreign countries concerned for reduction of preferences in the United Kingdom market. Likewise, we gratefully acknowledge the readiness of your representatives to consider our views as regards the initial replies which you contemplate making to the United States requests on Australia so far as preferential margins are concerned. But it remains true that unless some substantial concessions to us on your British preferential rates are forthcoming we should have nothing to show our own peoples as Australia's contribution to a substantial reduction to the barriers which stand in the way of our export trade.
7. We were urged by your representatives to cut down our requests on you in order to save you from having to publish further lengthy lists of items which were the subject of requests. We have done our best to meet those wishes and have now given your representatives a very short list of requests in which we feel it necessary to persist.
8. We have done so on the two assumptions:-
(a) That we need not include at this stage items where our request is merely for the binding  of the present B.P. rate; and (b) That on a number of other items we shall receive assurances of speedy review by the Tariff Board with a real prospect that B.P.
rate will be reduced where this can be done without serious injury to Australian industry.
9. Moreover, we have, at the suggestion of your representatives, excluded from our shortened list those items which we know to have been the subject of requests already by other countries and which must appear in a published list for other reasons than our request.
10. Nevertheless we should make it clear that a large number of items even in the last mentioned category are of great importance to us. We were greatly disappointed to find when we were told of the replies that your representatives intended to return to the United States requests that in [practically] no case was it proposed to reduce the B.P. rates at the same time as the rates of foreign countries were being reduced. In other words, although the items had already been published in Australia as the subject of negotiation, the opportunity is not being taken, as the suggestion in paragraph 9 would imply, to effect any improvement of the United Kingdom position.
11. Both on such items and on those in the new short list which is described in paragraph 7, we most strongly urge you to accept the principle of reducing B.P. rates. We recognise your difficulties in doing so in present circumstances and will gladly consider any suggestion you make, but failure to take account of the essential needs of the United Kingdom must we feel damage the prospects of obtaining an outcome over the whole field of the forthcoming negotiations satisfactory to us and to you.