URGENT

Reference cable No. 29 of 19th January. [1] Proposed Eastern Group
Supply Council, whilst we are generally in accord with the
proposals as a commencing point for the establishment of the
Council, we desire to offer the following comments, related in
each case to the paragraphs in your cable.

2. Paragraph 3(f): We would be glad to receive particulars of the
Far East Internal Provision Office. [2]

3. Paragraph 5: We agree that the primary function of the Council
should be the receipt from the Central Provision Office of demands
and the allocation of orders amongst the participating Governments
within their known capacities at the time and assume that demands
will be coordinated by the Central Provision Office in
consultation with the Council where necessary. We assume also that
the Central Provision Office will confer with the Council
regarding the acceptance of suitable substitutes in those cases
where the group countries cannot provide supplies strictly in
accordance with the service specifications.

We anticipate that priority questions may arise and that these
would be determined by the Central Provision Office in
consultation with the Council.

We feel that the functions of the Council will be developed as
experience is gained and that some advantage will accrue from
leaving some important points to be discussed after it has met and
considered them.

4. Paragraph 6: We note you propose confining power to purchase
and hold stocks in the case of the small supply offices only. The
Delhi discussions regarding purchasing and holding were related in
the main to seasonal supplies which are produced or available in
quantity at certain periods of the year only. For example, we
understand it was necessary for India to order timber supplies
twelve months in advance in order to be in a position to meet
anticipated demands from the Mid-East. The same difficulty may
arise in regard to the supply of certain other materials and
foodstuffs.

As to holding, we refer to War Office telegram received by the
Government of India during the Delhi Conference suggesting that
stocks should be accumulated at depots in India which would act as
clearing houses for Mid-East supplies.

It was never contemplated that purchases would be made direct by
the Council, and it is agreed that these should be made through
the Governmental Machinery in the country of supply. We feel,
however, if firm demands are not forthcoming in time that the
Council should have power to incur liability for the purchase and
holding, if necessary, in the country of supply, or elsewhere as
may be determined, of seasonal supplies and materials likely to be
in short supply. Experience indicates the need for such policy to
enable anticipated demands to be met.

5. Paragraph 7: Though it is agreed certain items of equipment are
unobtainable within the Group we suggest that the proposed initial
list of items to be excluded from the operations of the Council
should be referred to the Council for comment in the light of its
knowledge of the manufacturing capacities of the Eastern Group
Countries.

We consider it essential that each member of the Group should be
free to supply to the extent practicable from its own resources
the requirements of its forces at home or abroad.

6. Paragraph 8: We had assumed the inclusion of instruments and
medical supplies and concur with the exclusion of petroleum and
coal.

We consider Navy, R.A.F. supplies and raw materials should be
brought into the scheme to the greatest extent practicable and
that this matter should receive early consideration.

7. Paragraph 9: We await particulars of the financial powers
proposed to be granted with particular reference to our
observations in our paragraph 4 above, but agree that at present
the Council should not have authority to incur capital commitments
in relation to the expansion of existing industries or the
creation of new ones without reference to the Governments
concerned.

8. Paragraph 10: We refer to the terms of reference to the Delhi
Conference which was asked to direct its attention to the
essential needs of industry and commerce for the maintenance of
the defence services, and the civil population. However, we agree
that in the main, the Council should deal with Civil Economic
questions in so far as they arise in connection with and are
incidental to Military supply. At the same time, civil
requirements are in many cases so wrapped up with Military
requirements that it will be difficult to divide them. Moreover
there may be certain essential civil requirements not directly
related to Military requirements but which would have a very
important reflex [sic] on the general situation and it may be
necessary as time goes on for the Council to advise in connection
with these matters. It would seem desirable, therefore, that while
concentrating upon the general question of Military requirements
and civil requirements associated with Military requirements steps
should be taken which would enable Council to have at its disposal
information as to the essential civil needs of the Eastern Group
Countries, particularly in those items where short supply exists
or is threatened in respect of important commodities so that,
should it become necessary for action to be taken by or advice
tendered by the Council, time would not be wasted at that stage in
gathering information.

9. Paragraphs 13 and 14: While we agree that any major
transference of plant machine tools and skilled personnel from the
U.K. or North America must be one for decision by His Majesty's
Government in Great Britain, as the exigencies of the war
situation may dictate, we sincerely hope that any limited requests
that the Australian Government may make for skilled personnel
plant or machine tools will receive prompt and sympathetic
consideration.

10. Your cablegram No. 42 of 25th January [3]: We have appointed
Sir Bertram Stevens, formerly Premier of New South Wales, as
Australian representative and he is due to leave Sydney by air on
28th February. With him will travel Mr. W. Howie as adviser on
munitions and military stores generally. Mr. Gollan, at present
Australian Trade Commissioner in India and a member of our Delhi
Delegation, will be seconded as adviser on supply generally
probably with an assistant. Mr. 0. C. W. Fuhrman, formerly
attached to Australia House, will act as Official Secretary and
will leave Sydney on 21st February. Stevens will have a personal
secretary also. We are agreeable to making the above staff
available for Council office work also as far as is practicable.

We welcome your appointments and suggestions as to clerical staff.

Any further information on office and other arrangements would be
helpful. [4]