18 Wheeler to Nimmo

Letter (extract) CANBERRA, 10 May 1948

AIR BAG PERSONAL & CONFIDENTIAL

I see I must go back to your letter of 10th March, to pick up the thread of comment, so I shall confine myself to selecting some of the more important subjects, rather than dealing with each letter in turn.

2. S.A.S.C. is proving useful as a listening post, and the information which has been handed out at meetings has been valuable. I notice that your proposal that the Dominions should contribute more to the meetings has been discussed, and some results may come to your efforts to promote fuller exchanges of information among members. Such statements as appear now to be contemplated should put Australia's efforts in a favourable light, but I doubt whether information supplied for the use of members of the sterling area other than the U.K. will be detailed enough for worthwhile comparisons. I have in mind the fact that New Zealand's reply to C.R.O.'s request for details of dollar cuts for use in the India, Pakistan negotiations was much less informative than ours. In any case you must be careful not to push the matter too far. As you know we have, as a matter of high policy, always avoided any attempt as between governments to assess relative economy or sacrifice. This policy still stands. What we want is information which will enable us to form a hunch (it can be no more than that) as to whether or not we are being too tough (or not tough enough) on dollars. But we do not want any inter- governmental discussions at any level on this question.

3. Of the subjects dealt with at recent meetings, the address by Clarke was clearly the most vital to us. [1] It is difficult to assess from the written reports how much significance to attach to his statements. Cripps, in his interview with the High Commissioner, showed an appreciation of Australia's position when he said that 'as long as there was a sterling area dollar reserve, Australia would be entitled to draw reasonable requirements' and when he said that the last thing U.K. wanted was to pay dollars for Australian foodstuffs. Nevertheless, it is disturbing if, as Grant gave you to understand, there is a school of thought in the United Kingdom Treasury which believes that each sterling area country should be required to live within its current dollar income. This formula is, of course, not a new one. Eady [2] put it to McFarlane when he was in London and it was also put to Haslam.

If it is merely one way of exerting pressure for economies it is not so bad although still dangerous. If it is a reflection of a belief that the sterling area is a liability to the U.K. and should be jettisoned then it is more dangerous and, I think, fundamentally unsound. In other words it is comparable to the recent American newspaper comment about the sterling area endangering E.R.P. and U.K. having to give up its role as banker to the sterling area. I am surprised at your reports that this idea should gain ground in Whitehall itself and would be glad to have whatever information you can obtain on their thoughts. But be discreet.

leadership by Britain is fundamental to a successful Western Union. However, the position of Australia in the pattern of world trade is inadequately understood in the United States and on the Continent. Australia supplies Europe with food and raw materials necessary to Europe's recovery, or, by supplying Asia, relieves the pressure on other sources. To continue playing this part, Australia must have essential imports, many of which can be obtained only from dollar sources. We have been thinking that it might be worthwhile to get out some well documented statement on Australia's contribution to European recovery. Points which could be made are that Australia has an export surplus with Europe and an import surplus with North America-the exports to Europe represent goods essential to Europe's recovery-the imports from North America represent goods necessary to maintain Australia's capacity to produce goods f[or] Europe-Australia receives payment for her European surplus in inconvertible currencies-already dollar restrictions are hampering Australia's capacity to produce a relatively small additional supply of dollar imports would enable Australia to provide a much larger volume of exports to Europe, and thus ease the burden of E.R.P. on U.S.A. Such a statement might do a good deal towards getting Australia's position better understood. [3]

[AA: 2910, 453/7/1, vii]

1 R.W.B. Clarke, Under-Secretary at the UK Treasury, had emphasised the need for further dollar savings and suggested that some sterling area countries might consider making adjustments in the direction of trade with a view to assisting their own dollar deficits 2 Sir Wilfrid Eady, Joint Second Secretary, UK Treasury.

3 In a letter to Wheeler dated 20 May 1948, Bury commented that the statement would be especially effective if supported by factual evidence to show that a small increase in dollar imports would lead to an income in the volume of food exports to Europe.

[4.] I can appreciate Britain's dilemma. It is clear that active