Your 1283. [1] The Congressional Sub-committee of the Truman
Committee [2] considering Lease Lend is expected to end its
hearings within a fortnight. It has already asked about raw
materials and been told that requests for Reciprocal Aid have been
made but that replies have not been received. While they are still
sitting it is, I think, better not to present a formal refusal of
the U.S.A. request which is calculated to raise the general issue
for Lease Lend and Reciprocal Aid between U.S.A. and Australia.

The attacks made by the five returning Senators [3] upon the
Administration's conduct of affairs in other countries as
insufficiently solicitous of American interests have not yet died
down and this fact makes it still more untimely (see our 1190 14th
October [4]).

I therefore suggest that the communication of this refusal be
deferred for a little. In any case I should like to draw attention
to some considerations which arise out of the proposed reply.

I shall certainly be asked whether the reference to manpower means
that it is intended to reduce the production of the raw materials
in question. The American understanding of the matter has been
that it was entirely a question of finance, that dollars were
obtained for essential war materials such as lead and lead and
zinc concentrates, that they went into the dollar pool and were
reflected in our sterling position and that, whether this was or
was not discontinued in favour of supply on a basis of Reciprocal
Aid, production and the employment of manpower thereon would be
the same. The question was originally raised by U.S.A. Treasury
with the British Treasury from the point of view that the U.S.A.

Administration was unable politically to expose itself to the
criticism of allowing dollar funds [to be obtained in this manner
while incurring] [5] a huge domestic expenditure on Lend Lease.

The course of domestic and political events has necessarily
hardened the Administration in this attitude and I should expect
the response to our refusal to transfer the raw materials to
Reciprocal Aid to lie in the direction of seeking other means of
securing the same result. It would probably suit the
Administration politically to make some public exhibition of
firmness in dealing with the question. Probably their
disappointment with the answer will be reflected in a general
stiffening on Lend Lease, but it is also possible that they will
consider taking a more definite decision restricting or refusing
civilian supplies under Lend Lease and requiring that civilian
supplies be purchased.

There is already a movement afoot in the Administration to exclude
all assistance of a capital nature, as for example the supply of
plant susceptible to permanent or indefinite post-war industrial
use.

There is a realisation with men like Mr. Harry Hopkins and Mr.

Dean Acheson that Australia cannot be expected to bear an ever
increasing burden of Reciprocal Aid and I believe that there would
be no difficulty in securing their support for a review of the
entire position and the establishment of clear limitations both on
the nature and amount of Reciprocal Aid, whether expressed in
monetary terms or with reference to manpower or both. Further, if
it was thought desirable, the question might be considered in
relation to the revision which I understand the Government
contemplates of the planning of the Australian war effort.

But it is another thing to make the request for the transfer of
the particular raw materials in question the occasion of a
specific refusal. It is likely to be dealt with by United States
as an independent matter and as one raising difficulties for the
Administration. Moreover, they will take the view that it is
wholly a financial question and that though an increase in the
budgetary gap may result, the corresponding loss of London funds
should be cared for by United Kingdom. It is not easy to foretell
the exact measures they will take but it is at least conceivable
that the response will be restriction of Lend Lease, particularly
on account of civilian goods, coupled perhaps with some open
statement on the subject.

Before delivering the message to the State Department,
particularly in its present form, I should like to take it up in a
personal and unofficial way with Mr. Harry Hopkins if that course
meets with your approval. He would, I believe, discuss the whole
matter freely and with friendliness to our point of view.

I shall await your instructions.