Reciprocal lend-lease negotiations-
(1) Have given consideration to Washington developments in light
of your telegrams E.S. 52 [1] and [E.S.] 58 [2] which raise
following major questions:-

(a) Separate Mutual Aid Agreement.

(b) Provisions of draft exchange of notes on reciprocal lend-
lease.

(c) Assistance to overseas balances.

(2) You will recollect that question of separate Mutual Aid
Agreement was discussed very fully in April and as result views
expressed in my telegram P.M. 41 [3] were accepted by yourself and
United States Government (see your E.S. 2 [4]). It was definitely
agreed that separate Mutual Aid Agreement was unnecessary and the
R.L.L. agreement would be governed by United Kindom-United States
Mutual Aid Agreement-, this to be done by link up in suitable
preamble.

(3) New United States proposal is complete departure from this
arrangement but no adequate reasons have been given. I feel we
should know why arrangement which was only reached after very
careful examination and agreed to by United States is now no
longer regarded as satisfactory by United States. We have already
given assurance of postwar co-operation (see telegram 28 of 11th
February to Casey and his reply [5]).

(4) I am informing United Kingdom Government that United States
has renewed request for separate agreement and that it is now
under consideration. [6] In view of their 358 of 4th April [7]
suggesting that there were practical advantages in a link up
arrangement and that our decision would tend to be precedent for
other Dominions I have asked for their further comments.

(5) With regard to (b) advices from Legation [8] indicate that
draft exchange of notes was conceived quite independently of joint
discussions which were being carried on with Acheson [9] on basis
of United States memorandum of 24th March [10] and indicate it is
now necessary to start afresh. The draft does little more than set
out principles of Reciprocal Aid in broad basis. We had already
informed the United States Government that we accepted general
principle of Reciprocal Aid (my P.M. 14 of 31st March [11]) and it
is in fact now being furnished on increasing scale to United
States Forces in Australia. Our early offer was a broad one
coupled with request for assistance to our overseas balances. In
joint discussions United States suggested it was better for R.L.L.

to be moderate. Accordingly we were awaiting settlement of this
aspect and certain practical matters before finalising the details
here. We had assumed that joint discussions with Acheson were
directed towards this end and that results would be embodied in
memorandum or series of memoranda as indicated in your E.S. 2.

(6) It is unfortunate that new draft was not made basis of certain
joint discussions. However it is now being examined in detail and
our tentative views are as follows:-

(a) See no objection in principle to use of broad terms (subject
to such variations as we may require upon further examination).

(b) Agree with you that clause safeguarding our right to interpret
details and limits etc. is necessary.

(c) Agree that draft should make provision for agreed
supplementary memorandum on practical application of its
principles to Australia.

(7) As all parties in first instance agreed that matter should be
subject of joint discussions I presume that joint discussions will
now be resumed upon basis of draft exchange of notes. But in all
the circumstances it is considered desirable that in the first
place representatives of United Kingdom, Australia and New Zealand
should confer amongst themselves upon the new basis presented by
United States. United Kingdom Government is being asked for its
views on this aspect [12] and detailed instructions will be sent
later.

(8) Re (c) our representations for assistance to our overseas
balances are being reconsidered in light of United Kingdom
guarantee but before making final decision regarding our
particular requests for United States assistance reply is desired
from Legation to related questions raised in telegram 671. [13]
See particularly paragraphs 4, 7, 8 and 9. As it now appears that
R.L.L. is desired by United States on wider basis than
contemplated in recent discussions it is all the more necessary to
consider matter carefully before arriving at final decision. Our
war expenditure next year will run into 400m. and R.L.L. may cost
from 40m. to 60m. Any assistance from United States would not only
help our Budget and exchange position but would also assist Empire
Dollar Pool and lessen extent of our reliance on United Kingdom
guarantee. However, in view of United Kingdom guarantee we are
asking for their accounts. Further instructions will be sent after
consideration of advices from Washington and London. [14]