Your telegram No. 277. [1]

We are very sorry to learn that the Commonwealth Government have
felt unable to agree to an extension of Reciprocal Aid on the
lines desired by the United States Government. As regards the main
causes of difficulty mentioned in your telegram we fully
appreciate the extent of the great and growing contribution which
the Commonwealth Government are already making by way of
Reciprocal Aid and the strain which this is placing on
Commonwealth resources. We can readily understand also that the
Commonwealth Government would feel some hesitation in these
circumstances in adding to their existing commitments a new
obligation couched in general terms and involving an unknown
liability in relation to an unspecified number of commodities. As
regards the first point, however, we had hoped that if the
Commonwealth Government should feel that the additional financial
burden involved in acceptance of the United States proposals would
on present estimates be such as to cause them embarrassment,
consultation between our two Governments would result in
arrangements for easing the burden and so clearing the way for
acceptance of the United States proposals.

On the second point it had been our hope that if satisfactory
arrangements could be made between us on the financial aspect, the
Commonwealth Government would be able to convey a favourable reply
in principle to the United States request while protecting
themselves by suitable reservations from possible later demands
under the United States Public Purchase Programme which it would
be beyond their physical capacity to meet. We do not think that
such reservations could be regarded as in any way inconsistent
with the objects of the general scheme. As you know we feel that
this question of the supply of raw materials and foodstuffs as
Reciprocal Aid is a vital part of much wider issues now arising in
relation to the United States, affecting the whole future of Lend
Lease and Reciprocal Aid arrangements. There is a great risk that
these arrangements may increasingly become the target of domestic
political controversy in the United States leading in turn to a
growing deterioration in our general financial and economic
relations with them with the danger that we may find ourselves
once again in a 'war-debts' atmosphere. If we are to check this
tendency it is essential that United States public opinion should
be brought to look upon Lend Lease not as a commercial transaction
or investment, but as part only of the large conception of pooling
of resources among the United Nations, each nation contributing
its maximum to the common war effort in men, money and material
without any thought of repayment except in victory. We are
advised, however, that if we are to be able to demonstrate that
pooling of resources between British Commonwealth and the United
States is already fully effective, it is essential that we should
take urgent steps to rectify the present apparent anomaly that raw
materials and foodstuffs required by the United States Government
from British Commonwealth sources are excluded from Reciprocal
Aid. In this connection we have been much disturbed by recent
developments in the United States resulting from the wave of
ignorant and ill-informed criticism let loose by the five
Senators. [2] We are urgently considering what steps we can take
without embarrassing the United States administration with a view
to our case being publicly stated, e.g. through issue here of
White Paper on the present Mutual Aid arrangements. The Prime
Minister has taken up the matter personally with President
Roosevelt and I will keep you informed of developments. If the
proposed White Paper is issued it will be most important to
include also announcement of extension of Reciprocal Aid to cover
raw materials and foodstuffs from the United Kingdom, Southern
Rhodesia and Colonies, and this could clearly have more impressive
effect if Dominion Governments felt able to join with us in making
parallel announcement on similar lines. New Zealand and Union
Governments and the Government of India have already indicated
their willingness to accept United States proposals in principle
having regard to the large issues at stake and we earnestly hope
that if reply on behalf of Commonwealth Government has not already
been conveyed to State Department, Commonwealth Government will be
willing to hold up their reply until we have been able to consult
them further in the light of the Prime Minister's consultations
with the President.