1. With reference to your cable to Secretary of State for Dominion
Affairs, London No. 122 repeated to me as No. 124 [1] our
Delegation at Geneva has already been instructed that my
Government is in full sympathy with your position and that it
should assist your Delegation in working out amendments to meet
your case. Our only qualification was that any amendments should
not be such as to leave the door open for other countries to
practise restrictions which would injure Australian export trade
or prevent its development. With this qualification, which applies
equally to New Zealand's export interests, we feel you will be in
full agreement.

2. We are most anxious, within these limits, to do out utmost to
secure amendments which will meet your position, and our
Delegation will be again instructed of our views. It is our desire
that a charter should be evolved which will not only be acceptable
to the Australian Government but will also be such as to command
New Zealand's willing adherence, and we should be disappointed if
your dissatisfaction with progress in Geneva on the Charter led
you to refrain indefinitely from taking your place with us in the
I.M.F.

3. While this position is sincerely held by my Government, we
should be lacking in frankness if we attempted to minimise the
difficulties of reconciling your special position and the present
terms of the draft Charter without undermining the foundations of
the whole structure. How to permit legitimate expansionist use of
quantitative restrictions whilst guarding against disastrous
abuses of the system such as occurred before the war is the crux
of the problem.

4. We confess that at the moment we do not have a ready answer to
this problem, but we are anxious that our Delegation should help
in finding it. They have recently informed us that they have been
working closely with the New Zealand Delegation to this end, and
at a recent British Commonwealth meeting took the initiative in
proposing that a small influential Committee be set up to consider
this question when it comes before the Conference this week.

I am cabling to our Delegation immediately for further advice on
latest developments in this matter, and will repeat the
instructions already given to co-operate closely with your
Delegation.