Trade and Employment Discussions

Coombs arrived for his lightning visit shortly after your
departure. [1] He was only in Canberra for four days and the going
was fairly hectic. We were more or less continuously in committees
of one sort or another, both Ministerial and Departmental.

Coombs' main item for discussion was, of course, the American
attitude on wool. But although it was the major policy problem it
occupied a relatively small place in the discussions. This was
because the attitude of the Ministers, particularly that of the
Treasurer, was so clear cut and firm.

All agreed with Mr. Chifley that a trade agreement without any
reduction in the American wool duty just could not be sold in
Australia and the Treasurer himself maintained his earlier
intransigent attitude of 'No wool cut, no participation by
Australia'.

Coombs himself was anxious to avoid any definite decision as to
what would be done if it proved impossible to alter the present
American response but the going was difficult until the Cabinet
Committee in which Dr. Evatt participated. In this Committee Dr.

Evatt pooh-poohed any idea of walking out of the Conference, and
argued that this was not the way things were done. This had
considerable effect on the phraseology used as to what Australia
would do, but I am not clear as to what it means in the substance.

It certainly does not mean any alteration of the view that an
agreement without a wool cut is just a political impossibility for
us.

So at the moment the matter stands on the basis that Coombs has
been strengthened in the very firm line he took with Clayton at
Geneva, but the ultimate possibilities have been, at any rate
nominally, left open.

Articles 14 and 24 of the draft Charter were also thoroughly
discussed with Ministers whilst Coombs was here. Article 24 you
remember is the one known as the 'automatic rule' which provides
that any reduction in a foreign rate of duty must automatically
operate to reduce the margin of preference between B.P.T. rate and
the M.F.N. rate. This is the rule which Australia has refused to
accept and Ministers reiterated this viewpoint. It is, of course,
a perfectly logical and valid viewpoint for Australia to take and
the Americans have admitted this in private conversation. The
difficulty for the Americans is that the automatic rule has
political significance in Washington. Consequently, Coombs is, at
the moment, pursuing in Geneva some form of re-draft which will,
it is hoped, remove our objections whilst at the same time
preserving its political value to the Americans.

Article 14 is the article which prohibits any new preferences but
at the same time saves the British Preferential system as existing
at the end of the Geneva negotiations. You will remember that it
was this Article which Coombs had failed to discuss sufficiently
with Ministers and which was the subject of that telegram of ours
to the Delegation setting out all the difficulties which we felt
were associated with our acceptance of the Article.

Article 14 was thoroughly canvassed with the Ministers and Coombs
emphasised that, so far as the Americans were concerned, it was a
case of 'No Article 14-no agreement'. In other words it is the
American 'wool cut'. Coombs also argued that the British
Commonwealth was in a very favoured position under the Article for
the following reasons-
(a) practical politics precluded any significant extensions of
British Preferential system anyway;

(b) the Article specifically preserved the existing preferential
system (i.e. after Geneva);

(c) the only elimination of British Preferences as between now and
the end of Geneva would be negotiated ones in return for value
received;

(d) the Article prohibited new preferential systems on the part of
other countries. Coombs stressed this latter point particularly.

He pointed out that in present circumstances there would naturally
be a tendency for many countries to establish new preferential
systems which, by definition, must necessarily be to the detriment
of the British Commonwealth. Coombs further argued that there were
already many significant indications that this tendency to
establish new preferential systems was in fact already operating,
e.g., Eastern Mediterranean countries.

After weighing up these advantages as put by Coombs against the
admitted disadvantages as set out in our telegram, it was finally
decided to refrain from pressing objections to Article 14 provided
that Article 24 was suitably amended. Everybody, even Customs,
seemed pretty happy with this decision. The United Kingdom is of
course already committed to it as you are aware.