46 Dedman to Chifley

Cablegram F16 LONDON, 22 July 1949, 8 p.m.

IMMEDIATE SECRET

[matter omitted]

7. I discussed the question of borrowing by Australia with the Chancellor privately and there have been informal exchanges between officials. The Chancellor promised his full support should Cabinet decide on this course. United Kingdom officials have suggested deferment of any possible Australian approach to the Fund until the United Kingdom allocation of E.R.P. aid has been decided (probably about end of August) so as to avoid any possibility of the Americans reducing the amount included for R.S.A. deficit, it should also be remembered that the present Fund policy is to refuse drawings to E.R.P. countries and it is possible that for this purpose the Fund might regard Australia as an E.R.P. country because of the inclusion of the R.S.A. deficit in the E.R.P. allocation to the United Kingdom. However, the United Kingdom officials feel that the obvious inadequacy of the E.R.P. during the current year removes the actual basis for the Fund's previous policy and that in the case of Australia the point should not prove troublesome.

8. The question has also been discussed with McFarlane who whilst not underrating the possible difficulties of the American attitude particularly as regards to R.S.A. deficit and also perhaps the Southard memo feels that a cogent case could be made and that it would be hard for the Fund to turn it down. McFarlane will not of course make any soundings even on an informal basis until instructed from Canberra.

9. With regard to the long term plans you will have gathered that at the Cripps, Snyder, Abbott discussions, no concrete proposals were examined. In this respect the chief result of this week's conference has been to achieve a valuable broadening of the framework for the subsequent discussions when concrete proposals will be examined.

10. We placed great emphasis on the need for a world wide pattern of self balancing trade and feel that we obtained recognition from the United Kingdom of the importance of this aspect of the problem including the importance of alternative sources of supply such as Eastern Europe and the significance of trade policies for Germany and Japan as part of the stable pattern of trade. While the United Kingdom have accepted our argument as logical in terms of objectives and while United Kingdom officials say they will take specific action to develop their own trade with Eastern countries, we do [no]t, however, feel confident that they will make the policy of other Western countries towards trade with Communist areas an issue on their subsequent consultations with O.E.E.C.

countries and the Americans, 11. The United Kingdom officials have not yet evolved any concrete propositions to place before the Americans in September.

[AA: A1838, 708/12/1A]