Dispatch 44/1/38 WELLINGTON, 18 May 1944

I have the honour to present the following comments on the working
of the Australian - New Zealand Agreement [1] as seen from this
end after a period of almost four months.

2. The chief objectives of the Agreement as set out in Articles 1-
6, namely the exchange of information and consultation on
questions of mutual interest have been attained by the
establishment of the Secretariat both in Canberra and in
Wellington. Through the Secretariat and also through direct
channels the two Governments have been informed of the views of
one another, and in addition background comment and information
have been exchanged. Section 3 of the Agreement, however, agreed
that 'there shall be the maximum degree of unity in the
presentation elsewhere of the views of the two countries'. It is
not clear from this distance whether the maximum degree of unity
in the presentation of the agreed Australian - New Zealand
attitude was in fact achieved at the Conference of the
International Labour Organisation at Philadelphia [2], nor is it
certain whether, in the negotiations in London concerning long-
term marketing of primary products, the two countries have
presented their viewpoints together or merely on parallel lines.

[3]

3. On commercial questions generally affecting the two countries,
I am not altogether satisfied that the fullest exchange of
information and ideas is taking place, or that, since the
Agreement, relations in commercial and supply matters have
developed favourably. I will discuss this point, however, later in
this despatch.

4. The New Zealand Chiefs of Staff Committee have not yet reported
on the armistice and subsequent arrangements dealt with in
Sections 7-12 of the Agreement. A Committee has, however, been
established comprising representatives of the Chiefs of Staff
together with an economic member which might be considered the
nucleus of an Armistice and Post-hostilities Planning Committee.

With reference to the future of the U.N.R.R.A. it is not yet
certain how this and other international bodies will develop, but
the two Governments have consulted together in regard to their
policy towards the Food and Agricultural Organisation and the
question of expenditure of such international bodies in general.

5. The question of a regional zone of defence in the South West
and South Pacific area and the future of a general system of
security have no doubt been discussed in London. The New Zealand
Chiefs of Staff have yet to report on these matters from the
technical viewpoint. The New Zealand Department of Air have not
yet reported on the clauses dealing with civil aviation and in
particular those relating to New Zealand's productive capacity and
personnel. The principles established in these clauses are no
doubt being advanced by the Prime Ministers of Australia and New
Zealand in the United States of America and the United Kingdom.

6. With reference to Section 61 dealing with the exchange of
information about dependencies and territories, a certain amount
of material has been received from the New Zealand Department of
Island Territories. Australia's interest in obtaining details of
all developments in the Pacific Islands has again been stressed
and the Secretariat has been asked to obtain as wide information
as possible for transmission to Australia. Particular aspects
which have been mentioned include such topics as the effect on the
natives of Samoa of the influx of American forces and their
subsequent withdrawal, the construction of air strips in the Cook
Islands, developments in Fiji, and information concerning
Henderson Island and French Oceania. In discussions it has been
learned that the New Zealand Government has recently concluded the
construction of an air strip at Rarotonga in the Cook Islands
which will serve to link the administrative centre with other
islands in the group such as Aitutaki which already have air
strips. With reference to the condition of social services in New
Zealand's Island Territories medical and educational services have
now been restored to the pre-war standards. Economically also the
islanders are being encouraged to return to their previous
position as small agricultural producers to which the Samoans have
reverted fairly readily.

7. In connection with the sections headed 'Welfare and Advancement
of the Native Peoples of the Pacific', the information at present
available concerning the Fijian scheme for a coordinated health
service in Fiji, the islands under the jurisdiction of the United
Kingdom High Commissioner for the Western Pacific [4], and the
Island Dependencies of New Zealand has been supplied. The possible
relation of this scheme to the objectives envisaged under Articles
29 and 31(c) of the Agreement has been impressed on the New
Zealand authorities. Little, however, can be said to have been
done in the way of 'planning collaboration in regard to health
services and communications, matters of native education,
anthropological investigation, assistance in native production and
material development' such as are mentioned in Article 29. The New
Zealand authorities feel that there is little directly in common
between the Island Territories of New Zealand and the External
Territories of the Commonwealth and the scope for co-ordinated
services may prove to be limited. On the other hand the exchange
of views and ideas by a joint conference of Ministers or officials
should be of value and would lead to an examination of the extent
to which planned collaboration was practicable. Consideration by
such a conference of Article 29 and also of the items recommended
for the South Seas Regional Commission under Article 31 might
possibly precede the establishment of the Commission. I should be
glad to learn whether any action along such lines is being
contemplated in Australia. [5]

8. With reference to migration, the Governments have exchanged
information concerning migration, but as I have previously pointed
out no very detailed consideration of this problem has taken place
in New Zealand yet. The reports of the Australian sub-committees
on aspects of migration policy [6] appear to have been of interest
to the New Zealand authorities.

9. Sections 35-37 refer to machinery for collaboration and
cooperation between Australia and New Zealand. The first part of
Section 35 concerns co-operation for defence but I am not aware
that there has been any development in consultation and planning
between the defence authorities of the two countries.

10. In my despatch of 28th February [7] I raised the question
whether anything was being done regarding Article 35(c) of the
Agreement under which the two Governments agreed that 'the
development of commerce between Australia and New Zealand and
their industrial development should be pursued by consultation
and, in agreed cases, by joint planning'. I am not yet aware
whether any discussion has taken place in Australia regarding the
implementation of this and also the following sub-section
concerning co-operation in achieving full employment in Australia
and New Zealand. Certainly nothing has been done so far as New
Zealand is concerned although it is presumed that the clause will
be considered by the newly created Organisation for National
Development. None of the already existing interdepartmental
committees on various economic matters has touched the problem but
although the present plan of the Organisation for National
Development does not provide a suitable sub-committee for its
discussion, the planning committee proposed at the highest level
would probably consider the matter.

11. I feel that the working out of clauses 35(c) and (d) will
require a great deal of thought and might well be the subject of
further investigation in Australia. As an initial step I would
suggest that you examine the desirability of creating a committee
representing those departments immediately concerned with
commercial relations with New Zealand, namely the Departments of
Commerce and Agriculture, Supply and Shipping, Munitions and
possibly Trade and Customs. To such a committee might later be
added representatives of External Affairs and Post-war
Reconstruction in view of the long term and general implications
of the clause. The immediate problem in my view, however, is to
ensure that the departments carrying on present commercial
relations with New Zealand should co-operate fully and should be
mutually aware of what the others are doing. It is not clear at
the moment whether there is the fullest exchange of views and
information between the Departments of Commerce, Munitions and
Supply. I have been particularly concerned about the position of
the Pacific Supply Council. As you are aware the completion of the
programmes of requirements for the Pacific Islands has taken some
time and has caused some dissatisfaction in the New Zealand
Department of Supply. I understand that an Australian official is
to visit New Zealand to discuss this question, but I would urge
that a full meeting of the Pacific Supply Council be held to
thoroughly examine the position. I have spoken to Mr. Picot, the
New Zealand Director of Supply, who has expressed willingness
either to attend such a meeting or to send a deputy.

12. The establishment of an active committee in Australia fully
acquainted with all aspects of past, present and possible future
commercial policy towards New Zealand might enable an informed
approach to be made to New Zealand regarding Article 35(c). As you
are aware, past commercial relations between Australia and New
Zealand have been marked by mutual suspicions and
misunderstandings. I should judge that a feeling of suspicion and
resentment still exists in New Zealand and that even Australia's
efforts to supply New Zealand's urgent war-time needs have not
removed the feeling that generally Australia treated with New
Zealand only when it suited herself and that New Zealand's needs
did not deserve much consideration. In addition, New Zealanders
constantly bring forward the problem of the adverse trade balance
with Australia. This problem might be examined in the light of
providing markets in Australia for such New Zealand goods as wood
products, and also with reference to the possibility of developing
a British Commonwealth or other international clearing arrangement
to obviate the necessity for striking exact trade balances.

13. The interpretation of the joint planning of the industrial
development of our two countries should I suggest be considered in
advance. New Zealanders are apt to regard this merely as the
encouragement of established Australian industries to set up
branch factories in New Zealand. This country is conscious of
Australia's advanced industrial capacity but is anxious to profit
by it in a way involving the maximum employment and production on
New Zealand soil. I would take it, however, that the joint
planning of industrial development envisages something more far-
reaching and it would certainly need to be examined at a
Ministerial conference. In the meantime as I have suggested, an
Australian interdepartmental committee might report on the
problems involved. The Acting Prime Minister and Minister of
Supply, Mr. D. G. Sullivan, with whom I have discussed this
matter, has indicated that he favours that a preliminary approach
should now be made to the whole problem.

14. With reference to further direct consultations between the two
countries, I take it that a formal conference of Ministers of
State could not now be held in Wellington until towards the end of
the year. In the meantime I would urge that if possible a visit be
paid by at least one Australian Minister. If, for example, you
feel that you yourself should await the occasion of a full
conference, I would suggest that talks between Mr. Chifley and the
New Zealand Minister of Finance on international monetary and
marketing problems might be of value, although Mr. Nash will
probably not return to Wellington until some time in July. If he
made such a visit, the Treasurer might be accompanied by an expert
from his Department on international finance arrangements and
possibly by Dr. Coombs whose experience in organising the
Department of Post-war Reconstruction should be of great value to
the Minister and Director of National Planning here. [8]

15. As you are aware there have been some visits by departmental
officers from Australia and these appear to have been of value. A
return visit by the New Zealand Director-General of Agriculture
[9] has, however, been postponed. I would suggest that if
consideration is given by a joint interdepartmental body to
problems of trade and supply, further discussions might well be
carried out between officers of the two countries.

16. Finally, I would report that the Australian - New Zealand
Affairs Secretariat is in daily operation in Wellington and is
helpful in ensuring a full exchange of ideas and information.

There is no need for this body to cut across existing channels of
communication but it has proved itself a useful clearing house and
centre in which all the activities contemplated under the
Agreement can be discussed.

TOM D'ALTON