The application of Lease Lend principles to the procurement of
supplies is still the subject of much discussion and consideration
both in United States and United Kingdom circles. Much conflict of
opinion is apparent even among American administrative people
regarding application of Lease Lend principles to articles not
directly connected with defence. Enunciation of principles which
would enable various administrations at the Australian end to
determine what line of action to adopt with regard to various
categories of supplies, especially civilian necessities which
Australia finds it necessary to obtain from the United States, is
still a long way off. Only one point can be considered as
definitely established at the moment, viz. that 'supplies clearly
essential to maintenance of the war effort' can be procured under
Lease Lend without question, providing that there are sufficient
funds available by appropriation, but with the exception that in
some cases requisitions pertaining to supplies which are
definitely required for use in the armed forces or in defence
organisations may be rejected for various political reasons.

Examples of these are typewriters and accounting machines for
Service departments, artificial teeth, spectacles and parts,
toilet paper, and other articles which do not readily suggest
themselves to the popular mind as being associated with defence.

In the matter of priorities in supply, the United States
Government may sometimes desire to retain particular goods for
their own use, but this is not peculiar to Lease Lend
transactions.

2. It is recognised that the term 'supplies essential to
maintenance of the war effort' admits of varying interpretations
and that, because of this, difficulty will be experienced in
practical application. In this matter of interpretation there are
quite a number of categories, [commencing with those] [1] which
are obviously defence, for example, tanks and planes, including
materials and components which beyond doubt are to be used for
defence purposes, and ranging through instruments of production,
materials or components which may be used for defence, into fields
where particular goods are so far removed from direct association
with the war effort as to make the case for their supply under
provisions of the Lease Lend Act essentially debatable.

3. Up to the present, the authoritative statement (Dominions
Office telegram 445 of 29th June [2]) that everything possible
should be brought under Lease Lend including necessary civilian
supplies officially stands, but there is evidence that this view
is by no means universally held in American circles. In fact, our
talks suggest that there is a trend away from it. We cannot state
this with certainty, however, as responsible opinion appears to
swing to and fro, and even important decisions might easily be
reversed at short notice.

4. We gather that as a matter of financial policy, a tendency
existed for a while to stretch the application of Lease Lend
itself to goods of doubtful eligibility to tide the sterling block
over the problem of finding cash for huge quantities of war
supplies which the United Kingdom had on order under private
contracts when Lease Lend came into operation and which for
technical reasons could not be brought under Lease Lend and that,
as the problem of financing these extraordinary commitments
moderates, the Lease Lend administration will aim to revert to a
position where Lease Lend supplies will be confined more strictly
to articles more closely connected directly with defence. We
cannot be satisfied however that this view will prevail. We have
further gained the impression that a section of American
Administration fears political embarrassment and popular reaction
against Lease Lend policy if it became widely known that
quantities of articles which might be held to be only [remotely
connected with] defence were being lease lent to the Dominions.

5. To meet conditions as they stand at the moment, we suggest as
an interim policy that your Lease Lend machinery concentrate on
those categories which are obviously for defence purposes, those
which because of their nature can be, and without doubt, placed
into defence category and those the requisitions for which can be
supported by a clear cut and more or less self evident case. We
are satisfied that it would be wise to move slowly and cautiously
into the field of civilian necessities and suggest that you
refrain from requisitioning supplies in this category under Lease
Lend where case, though legitimate, is weak, where supporting
evidence is incomplete or too general, where the arguments though
probably sound suggest some subtlety-in short in any case where
the facts are insufficiently conclusive or the case is not self
evident.

6. We realize that this is in some respects the marked reverse of
advice already forwarded to you and we might have to change it
again at short notice (pressure for dollars, for example, might
cause a loosening of the interpretation instead of what we think
we now detect as a tightening), but we can only plead the seeming
impossibility of getting authoritative conclusive decisions and
great susceptibility to change which seem inherent in the whole
scheme. In building up your clearing house Organisation, we do not
suggest that any action already taken be reversed regarding
civilian necessities but rather that you hold your hand or move
slowly for the present. We would expect that even a relatively
brief pause might give time for a clarification of the various
issues involved at this end and at the same time enable the
clearing house organisation at your end to be brought into
operation more gradually.

7. Returning to those categories upon which we suggest you should
concentrate, we urge that every effort should be made at the
Australian end to utilize the Lease Lend principle to obtain the
largest proportion possible of those supplies identifiable as
directly necessary for defence or as directly associated with
production of articles for the purposes of defence (including
goods ordered by or destined for private concerns for use in
Australian production of articles directly connected with
defence), these being supplies which are obviously procurable on a
Lease Lend basis. We fear that difficulties will arise through
recrudescence of obvious defence purchases which would be made
through private sources for cash, which we understand is now the
case. They tend to reach a material sum in aggregate and it is
advisable to guard against the suggestion that we are applying for
Lease Lend admission of doubtful cases and paying cash for those
not doubtful. In other words we propose that, in lieu of the
present policy of paying cash for many articles directly required
in connection with defence which would be admitted without
question under Lease Lend and trying to obtain under Lease Lend
articles of doubtful eligibility, you should permit necessary
requirements of the latter to be obtained in the ordinary way of
business and arrange that all Government instrumentalities
concerned, which for reasons of expediency now issue instructions
to pay cash for particular requirements in defence supplies or
authorize a private importer to import in the ordinary way, should
in future arrange to obtain under Lease Lend more and more of
Australia's requirements of articles directly connected with
defence which it is necessary to import from the United States,
including only those transactions which are too small in value as
not to warrant action under cumbersome Lease Lend procedure.