Received 5 October 1941
I hesitate to worry you almost before you are in the saddle [1],
but I feel that I should send you something of a background to the
proposed agreement dealt with in Dominions Office telegrams 591
[2] and 592 [3], particularly as you will see from these telegrams
that it is proposed to take action early next week.

While conversations referred to in paragraph 2 of Dominions Office
telegram 591 were initiated for the purpose of dealing with Lease
Lend, they have now widened out into something bigger, namely the
whole question of Anglo-American post war economic co-operation.

These discussions showed that there are questions of major policy,
including issue of Imperial preferences, that have to be faced.

These questions also emerged in drafting the fourth of the eight
points in the Atlantic Charter-and were got over by inserting
'with due respect for their existing obligations'-and at a meeting
of Allied Governments September 24th (see No. 50 [4]).

The position now is that decision as to the Empire's post war
economic policy must be taken in the near future. This raises
definite issues whether the United Kingdom post war policy is to
be one of bi-lateral arrangement, using her bargaining powers to
the maximum, aided by such devices as exchange control, or a
policy of multilateral agreements with the greatest possible
elimination of Trade discrimination.

While the United Kingdom['s changed] [5] position due to her war
effort and the realisation of a large proportion of her overseas
investments might point to the necessity of the former policy, it
is being increasingly recognized that such a policy would:

a. be disadvantageous to the economic interests of the United
Kingdom and
b. be fatal to the realisation of the principles set out in the
Atlantic Charter.

The reason for (a) is that the U.S.A. will emerge from the war so
strong financially and economically that a fight with her based
upon bilateral bargaining could hardly be successful particularly
as the U.S.A. would probably be able to organise a Pan-American
bloc.

The reasons for (b) are because:

1. Political co-operation could hardly be maintained side by side
with bitter economic warfare.

2. The realisation of Roosevelt's freedom from want and improved
labour standards, economic advancement and social security,
referred to in the fifth point of the Atlantic Charter, could be
brought about only by British Empire-American co-operation based
on achieving the objectives in our own country, and in co-
operation to assist other countries to follow this line. Another
reason from the point of view of countries with undeveloped
resources, such as Australia, is that only under a policy of
expanding world trade could they hope to find a market for
products of their increasing primary and secondary industries.

My own impression is that responsible opinion here and in the
United States realises the need for broad visioned and generous
[economic cooperation between the British Empire] and U.S.A. and
progressively a practical basis upon which it can be given effect
will be thrashed out.

The above will give you some background, but I suggest you should
see a letter and two memoranda [6] I sent to Menzies on July.

18th, and also a letter I wrote to Fadden on September 25th [7] as
soon as it arrives.

With regard to the immediate issues raised by Dominions Office
telegrams, the following is the position: for political reasons in
the United States, the President is most anxious that an agreement
down the lines of draft contained in Dominions Office telegram 592
should be arrived at at an early date.

In order to meet this wish of the President, and yet not to
prejudge Imperial preference and bilateral possibilities, the
United Kingdom Government has put forward the proposed redraft of
Article VII which is intended to avoid committing the United
Kingdom Government until it has had an opportunity to fully
consider the great issues involved and consulting the Dominions
with regard to them.

As you will have no opportunity of dealing with this matter before
the United Kingdom Government has to make a further move with the
U.S.A., I suggest you might telegraph in reply to Dominions Office
cable 591 saying that you would have no objection to the redraft
of Article VII, but that you consider it essential that there
should be early consultation between the United Kingdom and
Dominions Governments on all issues involved, particularly in view
of the conversations contemplated by the final sentence of the
redraft of Article VII. [8]