My telegram 34. Trade and Employment.

We have greatly welcomed the opportunity afforded by the present
Commonwealth discussions to exchange views with your
representatives on the tariff negotiations which are about to
begin in Geneva. We are however much concerned to find that their
instructions, as we understand do not allow for any significant
reduction in your British preferential tariff rates. As you will
be aware from my telegram 34 this is an aspect of the negotiations
to which we attach great importance.

2. These instructions we understand are based [not] [1] on the
relatively late receipt by you of our list of requests upon
Australia, though we should have liked to have been able to give
them to you much sooner than was the case, but on a fundamental
difference in our respective approaches to the problem. We feel
bound therefore to set out our stand-point and earnestly request
you to consider the matter. As indicated in my telegram under
reference the results of the forthcoming negotiations as a whole
cannot be satisfactory to us unless they lead to a general scaling
down of the tariffs we have to face. For we must look to an
expansion of our volume of exports not only in foreign but also in
Commonwealth markets. From this point of view negotiations with
you looking to reductions in the British preferential rates in
Australia form an essential part of our negotiations at Geneva and
a vital factor in enabling us to strike a balance over the whole
field between the concessions we make and those we secure.

3. We gather that one at any rate of the principal reasons which
have led you to
take your present position is that whereas we are hoping to obtain
reductions in the high preferential rates in Australia while
retaining a reasonable margin of preference, the free entry
accorded in this country to a wide range of Australian goods means
that we cannot reduce duties in your favour.

4. We appreciate the point made by your representatives that in
general the preferences which we grant to your goods have their
counterpart in the preferences which you grant to United Kingdom
goods. But a position in which you would continue to enjoy free
entry in to the United Kingdom while our exports remain subject to
such high duties on entry into Australia is one which, we fear,
would not commend itself to public opinion here; it has long been
represented [to] us by exporters that Australian duties are
unnecessarily high, and in the context of negotiations which are
aimed at reducing barriers to trade, these duties, if they are
maintained at their present height at the same time as margins of
preference are reduced, are bound to constitute a serious source
of grievance. In the context of the forthcoming negotiations we
feet bound to say that such criticism would not seem to us to be
without justification.

5. It is common ground between us that the highest importance is
to be attached to the success of the international negotiations
and it is manifest that some concessions must be offered to other
countries, the United States in particular, if we are both to
obtain in the interests of all of us satisfactory reductions of
the high tariffs still existing there. We therefore were prepared
for a number of reductions in the Most Favoured Nation rates in
the Australian tariff to meet the United States and other
countries while at the same time our preferential position was not
being radically impaired. But as you can well imagine we should be
subject, and rightly subject, to intense criticism on the part of
our people if the M.F.N. rates were reduced and the preferential
margins narrowed while the existing very wide disparity between
the preferential rates under our respective tariffs remain
practically unaffected.

6. In formulating our replies to the United States requests I need
hardly say that we have tried to avoid wherever possible damage to
your interests; indeed even our initial replies will be subject to
the condition that Australia receives adequate compensation from
the foreign countries concerned for reduction of preferences in
the United Kingdom market. Likewise, we gratefully acknowledge the
readiness of your representatives to consider our views as regards
the initial replies which you contemplate making to the United
States requests on Australia so far as preferential margins are
concerned. But it remains true that unless some substantial
concessions to us on your British preferential rates are
forthcoming we should have nothing to show our own peoples as
Australia's contribution to a substantial reduction to the
barriers which stand in the way of our export trade.

7. We were urged by your representatives to cut down our requests
on you in order to save you from having to publish further lengthy
lists of items which were the subject of requests. We have done
our best to meet those wishes and have now given your
representatives a very short list of requests in which we feel it
necessary to persist.

8. We have done so on the two assumptions:-

(a) That we need not include at this stage items where our request
is merely for the binding [2] of the present B.P. rate; and
(b) That on a number of other items we shall receive assurances of
speedy review by the Tariff Board with a real prospect that B.P.

rate will be reduced where this can be done without serious injury
to Australian industry.

9. Moreover, we have, at the suggestion of your representatives,
excluded from our shortened list those items which we know to have
been the subject of requests already by other countries and which
must appear in a published list for other reasons than our
request.

10. Nevertheless we should make it clear that a large number of
items even in the last mentioned category are of great importance
to us. We were greatly disappointed to find when we were told of
the replies that your representatives intended to return to the
United States requests that in [practically] no case was it
proposed to reduce the B.P. rates at the same time as the rates of
foreign countries were being reduced. In other words, although the
items had already been published in Australia as the subject of
negotiation, the opportunity is not being taken, as the suggestion
in paragraph 9 would imply, to effect any improvement of the
United Kingdom position.

11. Both on such items and on those in the new short list which is
described in paragraph 7, we most strongly urge you to accept the
principle of reducing B.P. rates. We recognise your difficulties
in doing so in present circumstances and will gladly consider any
suggestion you make, but failure to take account of the essential
needs of the United Kingdom must we feel damage the prospects of
obtaining an outcome over the whole field of the forthcoming
negotiations satisfactory to us and to you.