Your telegram 394 [1] repeated Wellington 228.

COMMERCIAL POLICY

We have studied your message with care and are, of course, most
anxious that in supporting the United States proposals as now
revised as a basis for discussion at the March Conference we
should not cause you embarrassment. The following is a broad
appreciation of the position as we see it.

2. It is, we think, common ground between all members of the
Commonwealth that if we are to secure the conditions of expanding
trade and full employment which we all desire we must endeavour to
obtain the broadest measure of International co-operation for the
orderly conduct of trade and the freeing of trade channels
throughout the world. For this purpose the co-operation of the
United States is essential. Unless we can reach agreement with the
United States on terms which would enable her to play her full
part in a broad programme for liberalising trading conditions, the
countries of the world will inevitably be driven back to those
very practices of economic selfsufficiency and restrictionism
which did so much damage before the war, and the political or
economic consequences would alike be incalculable.

3. For our part, therefore, and bearing in mind that in the
conditions in which we have emerged from the war the rapid
expansion of our export trade is essential to our economic
recovery (and, therefore, to those countries whose sales to us
must be largely conditioned by the purchasing power of our people)
we have felt greatly encouraged by the growing realisation in the
United States that their prosperity is dependent on world
prosperity and by their eagerness to take the lead in a campaign
to assist the development of international trade under conditions
which would recognise the interdependence of countries and would
make for rising standards everywhere. We have, therefore, welcomed
the conversations which have been taking place in Washington in
pursuance of Article VII of the Mutual Aid Agreement and feel that
the United States proposals as now revised in the discussions mark
an important advance towards the goal of International co-
operation in the economic field and should serve very well as a
basis for discussion in the projected International Conferences.

4. In these discussions we have avoided the danger that we might
have to concede because of our need for financial aid measures
which we should not have been willing to concede in the context of
Commercial Policy alone. Indeed to do them justice the American
negotiators have not, in fact, sought at any time to use our
financial necessities as an argument in the discussions. The whole
Commercial Policy problem has been approached on its merits and
the document which has now resulted is the fruits of a genuine
attempt to hammer out the most hopeful lines of approach on which
there would be a genuine chance of arriving at a subsequent
agreement acceptable to all parties.

5. It is natural and indeed inevitable that after the prolonged
discussions which have taken place with [our] negotiators, the
United States Government should now wish to know before publishing
their document and issuing the proposed invitations to other
countries that they can count on our general support of the
proposals. It would be impossible in the circumstances for us not
to give the Americans an indication of our attitude and having
regard to the extent to which our negotiators have succeeded in
securing the recasting of the document on lines acceptable to us,
we feel that we can hardly do otherwise than return a favourable
reply. Indeed, to seek further amendments at this stage when the
Americans regard themselves as having done all they can to meet
our views (as indeed they have done) would, we are advised, lead
to a break which would deprive us all of the opportunity of
bringing America into an agreement which would open up world
markets and so assist in obtaining the full employment which is
our objective.

6. We fully understand your desire that Australia should approach
the March Conference free of any commitment even implied. The New
Zealand Government have expressed a similar desire. We feel,
however, that you would not wish this to preclude us from looking
to you for encouragement in supporting the United States proposals
as a basis of discussion. So far as tariffs and preferences are
concerned, what has been under discussion with the Americans is
the line on which negotiations regarding tariffs and preferences
would be conducted and as has been made fully clear in our
commentary there is no commitment on any country to reduce any
particular tariff or any particular preference any agreement being
dependent on there being satisfactory reciprocal concessions. The
position expressed in Paragraph 1 of your telegram is thus fully
safeguarded. As regards non-tariff matters it must be expected
that each country attending the March Conference will have its own
points to raise and its own contribution to make to a general
agreement. This is well understood and the present proposals are a
basis for discussion only but what matters, it seems to us, is
whether the general approach in these proposals is on lines
calculated to advance matters towards a satisfactory agreement. We
ourselves regard the proposals as they now stand as most promising
from this standpoint and we have every hope that subject as it is
to each participating country being assured of full freedom to
pursue further at the March Conference any topics of special
interest and importance to it the Commonwealth and New Zealand
Governments will agree with this broad conclusion.

7. A separate telegram [2] follows on the specific points raised
in your telegram. Of this clearly the most important is the
question of the formula dealing with tariffs and preferences and
on this we feel that the points you make are, in fact, met when
the formula is read with the commentary which has now been agreed.

We are particularly anxious that there should be a broad
understanding between us that whatever views may be put forward at
the March Conference on the various proposals in the United States
Document, the line set out in the formula for dealing with tariffs
and preferences will not be called in question.

We earnestly hope, therefore, that having regard to the extreme
difficulty which has been experienced in securing United States
agreement to a formula and commentary which we suggest fully
safeguards our common desiderata, the Commonwealth and New Zealand
Governments will feel able to acquiesce in this position.