Following is draft exchange of notes referred to in my telegram
810. [1]

From the Australian Minister to the Secretary of State.

With a view to Supplementing articles Nos. 2 and 6 of Agreement of
May (blank) 1942 [2] between our two Governments for provision of
reciprocal aid, I have the honour to set forth below my
understanding of the principles and procedures applicable to
provision of aid by the Government of Australia to the armed
forces of the United States and the manner in which such aid will
be correlated with the maintenance of those forces by the United
States Government.

(1) Each of our Governments pledged itself in the United Nations
declaration of January 1st, 1942 [3], to employ its full
resources, military or economic, against those of nations with
which it is at war. Each Government undertook in the Agreement of
May (blank) 1942 to provide others with such articles, service
facilities or information, useful in prosecution of their common
war undertaking, as each may be in a position to supply. The
general principle to be followed in providing such aid is that the
war production and war resources of both nations should be used by
the armed forces of each, and of other United Nations, in ways
which most effectively utilize available materials, manpower,
productive facilities and shipping space.

(2) Where appropriate, decisions as to the most effective use of
resources shall be made in common, pursuant to the proper plan for
winning the war.

(3) As to financing the provision of such aid within the fields
mentioned below it is my understanding that the general principle
to be applied is that as large a portion as possible of the
articles and services to be provided by each Government to the
other shall be in the form of reciprocal aid so that the need of
each Government for currency of the other may be reduced to a
minimum. It is accordingly my understanding that the United States
Government will provide in accordance with the provision, and to
the extent authorised under the Act of March 11th, 1941, the share
of its war production made available to Australia. The Government
of Australia will provide, on the same terms and as reciprocal
aid, in accordance with the Agreement of May (blank) 1942, the
share of its war production made available to the United States.

(4) The Government of Australia will provide the United States or
its armed forces with the following types of assistance as such
reciprocal aid, when it is found they can most effectively be
procured in Australia:

(a) All military equipment, munitions and military and naval
stores.

(b) Other supplies, materials, facilities and services for the
United States forces, except for pay and allowances of such forces
and such local purchases as its official establishments may make
other than through official establishments of the Australian
Government as specified in paragraph (5).

(c) Supplies, materials and services needed in the construction of
military projects, tasks and similar capital works required for
the common war effort in Australia, except for wages and salaries
of United States citizens.

(d) Supplies, materials and services needed in the construction of
such military projects, tasks and capital works in territory other
than Australia or territory of the United States to the extent
that Australia is a more practicable source of supply than the
United States or another of the United Nations.

(5) Request by the United States Government for such aid will be
presented by duly authorized authorities of the United States to
official agencies of the Commonwealth of Australia which will be
designated, or in Canberra and in areas where the United States
forces are located for the purpose of facilitating provisions for
reciprocal aid.

(6) It is my understanding that all aid accepted by the President
of the United States or his authorized representatives from the
Government of Australia will be received as a benefit to the
United States under the Act of March 11th, 1941. Insofar as
circumstances will permit, appropriate record of aid received
under this arrangement, except for miscellaneous facilities and
services, will be kept by each Government.

(7) The aid to be provided each other by the signatory Governments
under the Agreement of May (blank) 1942, and as indicated above,
will be provided on the same terms by each Government to the
forces of such of the other United Nations as shall enter into
similar arrangements with them.

If the Government of the United States concurs in the foregoing, I
would suggest that the present note and your reply to that effect
be regarded as placing on record the understanding of our two
Governments in this matter.

I have the honour to be, etc.

Draft reply.

From the Secretary of State to the Australian Minister.

I have the honour to acknowledge the receipt of your note of
today's date concerning the principle and procedures applicable to
the provision of aid by the Government of Australia to the armed
forces of the United States, the terms of which are as follows:

(The Australian Minister's note is here quoted.)
In reply I have the honour to inform you that the Government of
the United States agrees with your understanding as expressed in
that note and that, in accordance with the suggestion contained
therein, your note and this reply will be regarded as placing on
record the opinion of our two Governments in this matter.

Accept, Sir, the renewed assurances of my highest consideration.

Ends.