The United States authority recently reopened the question of
bases in the Pacific and informed the United Kingdom Ambassador,
Washington, of the basis on which they are prepared to recommend a
settlement to War and Navy Departments. This is as follows.

(a) United Kingdom Government to surrender their share of
Condominium over Canton and Enderbury and cede Christmas to the
United States Government.

(b) The United States Government to waive all further claims to
other islands where sovereignty is in dispute including Funafuti.

(c) The United States Government to drop any request for further
bases or military rights in the Pacific territories controlled by
the United Kingdom. In other words demands were made a year ago
and will not be renewed and no further requests of this nature
will be made.

(d) The United States Government to give clear title to the United
Kingdom on all remaining immovable installations in the United
Kingdom territories in the South Pacific (other than Canton,
Enderbury and Christmas).

2. As they stand these proposals are unacceptable since they
involve a cession of territory and do not touch on the larger
issue of regional security in the Pacific of which you expressed
yourself strongly in favour last year. [1]

3. However, informal discussions with the State Department which
took place previous to formulation of the latest United States
proposals showed that the State Department were prepared to settle
outstanding territorial questions in the Pacific and also the
question of bases on their merits and without the injection of
extraneous issues. The State Department also indicated that they
were 'probably' prepared to grant us some degree of reciprocal
facilities in areas under their control in particular in American
Samoa and in Canton Island if the settlement they suggested for
Canton Island Base were accepted. Further, no reason was given to
suppose that the United States would not be prepared to grant as
indicated by Mr. Byrnes to Mr. Bevin in Paris last year [2] full
civil and military aviation facilities in bases granted to them in
territory under United Kingdom control. On the other hand, there
is also no reason to suppose that United States would not expect
us to live up to the assurance given by Mr. Bevin to Mr. Byrnes in
Paris last year that some special provision would be made as
regards Tarawa to commemorate the part played by United States
Marines in the capture of the Island.

4. Careful consideration has been given to the problem here and it
is considered that the best way to deal with the United States
proposals would be
(a) To tell State Department quite frankly that we could not
entertain any idea of territorial cession in Pacific and-
(b) In order to meet the main United States desiderata (those in
Christmas Island and Canton Island) to offer in Christmas Island a
99 year lease of the area in which their present base is situated
(which they are now converting into a permanent base) with a small
surrounding strip for development. This strip should be kept as
small as possible in order not to interfere with the colonizing
possibilities in the Island.

(c) As regards Canton Island, to offer prolongation of the
existing 50 years condominium to 99 years, the base area to be
specified and defined in such a way as not to affect British
Commonwealth Air interests or plans for allocation of remaining
parts of the island for planting and for the development of native
quarters.

(d) To agree that in both cases the bases should be exclusively
United States bases. In addition a stipulation to be included in
any agreement reached laying obligation on United States activity
to maintain the base in question.

(e) In the existing bases in Christmas and Canton and in both
Islands the United Kingdom and other members of the British
Commonwealth to have equal rights to the use of the bases
including full civil and military aviation rights at all times;

these to cover the contingency of war in which British
Commonwealth countries were involved and the United States was
neutral and vice versa. As regards civil aviation rights for third
countries, first two freedoms [3] to be granted to members of
I.C.A.O. [4] who have accepted air transit agreement and accord
similar privileges to us in their territories. Other freedoms to
be granted by the sovereign power i.e. The United Kingdom in
Christmas Island and the United Kingdom and United States jointly
in Canton Island.

(f) In addition to civil and military aviation rights requested in
Christmas and Canton, the United Kingdom and other members of the
British Commonwealth to be accorded the right to base facilities
in American Samoa, should these at any time be considered
necessary, and access to air staging facilities in the
Philippines.

(g) The United States to abandon their claim to an exclusive base
in Funafuti and to the cession of that Island and any other of the
disputed island[s].

(h) In the event of the facilities such as auxiliary defences
being desired by the United States on any of the island[s] on
which joint bases were requested, negotiations to be carried
forward from the stage reached in Washington Technical Talks in
March 1946. [5]

(i) An endeavour to be made to get the United States to
incorporate in any form of agreement wording to the effect that
security of the area is to be covered by the foregoing points
which is a matter of concern to the United States.

(j) As regards Tarawa the United States to be offered a grant of 2
acres of land for establishment of a memorial and cemetery to
United States Marines. If the United States ask for an increased
area the United Kingdom would be prepared to examine this in
consultation with the High Commissioner. Sovereignty over the area
of land to remain with the United Kingdom.

5. We are aware that the scheme suggested above falls short in
various respects of regional defence arrangements which you
favour. However, as stated our aim is to prevail upon the United
States to agree to inclusion in any agreement of a phrase
expressing United States concern with defence of the South Western
Pacific area not in a negative sense as originally proposed in
November 1945 which would enable them to withdraw if it suited
them, but in a positive sense in order to enable them to be
brought in. If we can achieve this aim and also obtain an
undertaking from them actively to maintain the bases in question,
we shall not only involve them in Commonwealth Defence
arrangements and secure their acceptance of certain obligations in
return for the rights granted, but we shall also open the way to
discussions at a convenient moment on regional defence. Moreover,
we are turning down outright the idea of territorial cession and
are requesting very far reaching civil and military aviation
rights in exclusive bases in question and we therefore feel that
in this case the grant of such bases is justified especially as
there will be no question of their being developed by the United
States to the detriment of Commonwealth aviation and to the
exclusive benefit of their own. There is finally the consideration
that achievement by the United States of their immediate security
objectives in Japanese mandated islands and the recent reduction
in the service budget allocations coupled with the absence of any
threat to United States interests from the southern Pacific may
correspondingly reduce United States interest in the South Western
Pacific. We should then be on worse ground for negotiating a
settlement of the vexed problem of territorial claims in Pacific.

6. We therefore hope that you will find it possible to agree to
the proposed line of action. We should be grateful if we could be
informed of your views as soon as possible.

[matter omitted]