I was very pleased to have the opportunity on May 12 to discuss
with you the desirability of utilizing the present favorable
situation for placing our commercial relations on a more
permanently satisfactory basis.

I feel strongly that every effort should now be made to work out a
mutually beneficial plan which, in addition to contributing to the
solution of certain wartime economic problems, would also help to
stabilize conditions after the war and avoid the extremes to which
proponents of excessive national self-sufficiency, and perhaps of
discriminatory policies, may attempt to go. In this connection I
mentioned to you the possibility of negotiating a trade agreement.

In compliance with your request, I shall briefly outline the
possible general scope of such an agreement and some suggestions
regarding procedure.

Cooperation between the Governments of the United States, the
United Kingdom and Canada made possible the negotiation of the
mutually satisfactory agreements signed on November 17, 1938,
involving, among other things, the modification of certain tariff
preferences accorded by Canada to the United Kingdom and certain
tariff preferences accorded by the United Kingdom to Canada. We
envisage a similar approach at this time. An agreement between the
United States and Australia would naturally require schedules of
concessions by both parties. The Government of Australia doubtless
would be interested in the possibility of obtaining reductions in
United States duties on Australia's important export products. My
Government would be interested in obtaining reductions in the
margins of tariff preferences accorded by Australia to certain
products of various parts of the British Empire, and the reduction
of the absolute level of the Australian tariff on a few products
such as lumber. While it is realized that Australia has made
commitments to other British Governments to maintain various
margins of preference, it is believed that the United Kingdom
Government, for example, might be willing to waive its preferences
in Australia to the extent of making possible a satisfactory
United States-Australian trade agreement, if Australia likewise
agreed to such reductions of preferences accorded its products in
the United Kingdom market as would make possible a satisfactory
supplementary trade agreement between the United States and the
United Kingdom.

In negotiating trade agreements during wartime, account must of
course be taken of wartime conditions and the uncertainty
regarding the post-war economic situation. However, provision can
be made for various contingencies by incorporating suitable
'escape' clauses in an agreement. For example, under the 'wartime
escape clause' in the United States-United Kingdom agreement, the
United Kingdom has introduced temporary import restrictions on
American products included in the agreement without contravening
the terms of the agreement. Any United States-Australian agreement
would of course contain a similar clause. As another example, some
provision would probably have to be made to permit action
necessary in order to meet foreign-exchange emergencies. Possibly
the best way to provide for the adjustment of the agreement to
changing conditions would be to set up for the purpose a mixed
commission on which both governments would be represented.

Preliminary study in the State Department suggests that a basis
might be found for the negotiation of a significant trade
agreement between our two countries. I believe that the most
satisfactory way of verifying this and of making progress toward
possible negotiations is for both parties to get together in
confidential exploratory conversations and examine together the
detailed facts involved. Formal exchanges of views between the two
Governments, in the absence of such conversations, probably would
be so general that they would not be very helpful. In contrast, a
joint factual examination might well result in a fairly simple
solution of problems which in the abstract appear to be extremely
complex. While informal exploratory talks would naturally have to
be on an ad referendum basis so as to insure that the highest
quarters in both Governments are in agreement with the possible
content of an agreement, I feel certain that both our Governments
would be in a better position to judge the situation after
exploratory talks had reduced the generalities into comparatively
definite terms.

It is therefore suggested that you designate officials of your
Government to explore the possibilities of a trade agreement with
American officials at Washington. It must be emphasized that such
exploratory conversations would have to be highly confidential. It
would be extremely unfortunate for there to be any intimation that
our Governments are even considering the possibility of a trade
agreement, until there is the maximum possible assurance that
negotiations for such an agreement would be promptly and
successfully concluded. I should also mention that United States
trade-agreement procedure requires that public notice be given of
intention to negotiate and that an opportunity be given to all
interested parties to express their views in writing and at public
hearings prior to the undertaking of any definitive negotiations
or any definite commitments.

On a previous occasion when similar exploratory discussions of a
highly confidential character were undertaken, they were handled
for your Government by the Australian Trade Commissioner, Mr.

Macgregor, who was already here and whose frequent visits to the
Department could easily be accounted for on other grounds. If,
however, you consider it preferable to send representatives from
Australia, it is suggested that the mission should have some other
stated purpose so as to minimize publicity.

In view of the scope of the Empire preferences and their relation
to a possible United States-Australian agreement, it seems obvious
that such an agreement could be considerably more comprehensive if
the United States negotiated simultaneously with other British
Empire Governments, such as the Governments of the United Kingdom,
New Zealand and the Union of South Africa. However, there appears
to be no reason on this account for delaying confidential
exploratory talks between representatives of our two Governments.

In fact, concrete progress in United States-Australian exploratory
conversations would tend to expedite and facilitate possible
simultaneous negotiations with other British countries. You know,
of course, that confidential discussions regarding the possibility
of a supplementary trade agreement between the United States and
the United Kingdom have been in progress for some time.

In closing, I should like to emphasize again my concern regarding
the basically unsatisfactory state of commercial relations between
the United States and Australia and my conviction that the present
uniquely favorable conditions for rectifying the situation should
not be allowed to pass without the most serious efforts being made
to reach an understanding. It would have been most unfortunate if
the acrimony engendered by the state of virtual 'trade war'
between our countries during 1936 and 1937 had not subsided prior
to the outbreak of the present war.

I wish to express my pleasure at having had the opportunity of
meeting you and discussing questions of mutual interest. Mr. Hull
[1] has requested that I take this opportunity to reiterate his,
as well as my own, best personal wishes.

DEAN ACHESON