Your telegram No.206.  Trade Arrangement with Japan.
1. In view of the great difficulties which we have explained in earlier telegrams of providing additional 600,000 purchasing power to meet Australian Government's request, we have been urgently investigating other possible solutions in consultation with Mr. Clark.
2. Most effective assistance which U.K. can offer would seem to be appreciably increased supplies of steel. As a result of special efforts we are now in a position to offer an increase of 12,500 tons above the quantity already programmed for Australia in respect of first quarter of 1950, making a total of 20,000 tons for that quarter.
3. We recognize, however, that this offer may not entirely overcome Australia's difficulties, particularly if there are special types of steel which will in any case have to be obtained from Japan. We are, therefore, prepared to reduce the U.K. food purchases on Japan thus enabling us to offer Australia 200,000 additional purchasing power. We make the suggestion in the hope that it will be sufficient, when coupled with promise of greatly increased steel supplies, to enable Australian Government to agree not to press their original request. We are also investigating whether the United Kingdom may be able to help over supplies of plywood which we understand Australia had in mind to purchase from Japan. We await particulars of specifications which Mr. Clark is obtaining for us.
4. We should be grateful to know as soon as possible whether a solution on above lines would be acceptable to Australian Government.