WOOL

Your telegram of 21st February. [1] Appreciate and Sympathize with
your feelings. Root cause of difficulties and delays in getting
finality is the absence of really effective War Cabinet dealing
with questions of policy and ensuring co-ordination of
departments. Wool is example of this lack. Realize the political
difficulties for you which have resulted. Feel however that
position must be carefully handled if even more serious political
difficulties are to be avoided.

To make clear what I have in mind necessary to analyse the
position at some length.

MOST SECRET

If satisfactory solution to be found there must be:

(a) Clear understanding as to quantities available for neutrals;

(b) Agreement as to a price for such sales which will obviate
dangers set out in paragraph 2 of your telegram of 21st February;

(c) Elimination of unreasonable interference with such sales on
the grounds of economic warfare or trade treaty negotiations.

With regard to (c) my telegram of 17th February [2] gave full
information re Japan. Am hopeful that it will be possible in
future as a result of discussions in the United States to enter
arrangements with Japan for supplies reasonable both as to
quantity and period, and that the Ministry of Economic Warfare
will be as helpful as the circumstances permit in regard to other
neutrals.

Information Clunies Ross [3] has as to position of pending trade
treaties shows necessity to withhold wool supplies pending
finalization likely in most cases to crystallize shortly.

With regard to (a) as a result of representations, see paragraph 2
of my telegram of 6th February [4], repeated and amplified after
receipt of your telegram of 6th February [5], whole question of
supplies for the Allies and neutrals was under examination and I
was becoming increasingly hopeful that the whole position would be
placed on satisfactory basis with elimination of control or
interference by Bradford. This view has been strengthened by long
discussion with Burgin [6] following receipt of your telegram of
21st February.

With regard to (b) situation similar to (a) save that I was less
hopeful of satisfactory arrangement until discussion with Burgin
referred to above.

Position here therefore is that after intolerable delays and many
difficulties we look like arriving at reasonably satisfactory
basis on major questions of supplies, price, economic warfare,
trade treaties and elimination of Bradford.

In the circumstances do not think either cable to Chamberlain [7]
or visit of Minister would help.

With regard to your specific points:-

(1) I emphasized to Burgin that opinion of those competent to
judge is that difference between price paid to Australia and price
at which wool being released is excessive. This he denied and
maintained that increase only sufficient to cover expenses and
small margin for contingencies. If this contention correct price
not more than 25 percent additional to our sale price would mean a
release price involving a loss to the United Kingdom and if we
press this percentage we will be met by counter pressure to reduce
our contract sale price and share the loss.

As any suggestion of reducing amount receivable by producers in
Australia would have serious political repercussions I refrained
from pressing Burgin for details of how difference between
purchase and release price made up and did not put forward your
proposal for maximum increase of 25 percent.

(2) As provision for annual review was designed to safeguard
Australian interests in rising market, I feel a discussion of
price would, under existing circumstances, be embarrassing to us.

(3) Am doubtful of the wisdom of raising this point until major
questions are cleared up. [8]