The second session of the Preparatory Committee for an
International Conference on Trade and Employment commenced in
Geneva on the 10th April, 1947. The Committee re-elected as
Chairman, Monsieur Max Suetens of the Belgian Delegation, who was
also Chairman of the first session.

After the more formal business had been disposed of, Mr. Erik
Colban (Norway), the Chairman of the Drafting Committee, presented
the Drafting Committee's report and this report, like that of the
first session of the Preparatory Committee, has now been made
public. We have not yet had time to make a detailed examination of
the report of the Drafting Committee, but we are hoping to do so
at an early date.

The opening days of the Conference have been taken up with
statements of principles by the leaders of each Delegation. The
transcript of these speeches has been forwarded to Australia. They
are, I think, of significance in the stress which is placed upon
the determination of each country to succeed in the drafting of a
Charter for an International Trade Organisation, and to make a
contribution towards the objectives of the organisation by a
substantial reduction in tariffs. The speech of Sir Stafford
Cripps is an excellent summary of the United Kingdom position in
relation to these discussions, and I attach a copy of it for your
perusal. You may recall that last year in his opening speech, the
Leader of the U.S.A. Delegation referred to the consequences for
other countries if the negotiations should fail, and stated that
U.S.A., whilst it would be affected, would be in a position to
withstand the difficulties. In his speech this year, Sir Stafford
Cripps referred to this comment and made it plain that the United
Kingdom could, and if the necessity arose, would meet the
difficult situation in the event of there being a failure in the
negotiations.

Owing to the delay in the arrival of Mr. W. L. Clayton, the Deputy
Leader of the United States Delegation mainly confined his remarks
to quotations from the speech of the President of the United
States made at Waco, Texas, on the 6th March, 1947, and he
stressed the President's concluding words 'the negotiations at
Geneva must not fail'. He went on to refer to the public hearings
through the United States and the investigations by a Committee of
the United States Senate of the draft Charter and said that at the
appropriate time, a number of additional suggestions for the
improvement of the draft Charter would be made. He reported that
the United States was now prepared to table concessions to each of
the other countries, members of the Preparatory Committee, and
that they were anxious for an early commencement of the actual
negotiations.

The leader of the Indian Delegation-the Minister for Commerce-
referred in appreciative terms to the amendment made at the first
session to the draft Charter to include the chapter on industrial
development. Australia secured, at that meeting, strong support
from the Indian Delegation in its proposals for this section and
the present emphasis of the Indian Delegation that this is a more
positive and constructive aspect than the removal or reduction of
trade barriers is of considerable interest.

We have not so far commenced any of the detailed tariff
negotiations and it seems likely that there will be a delay of
some days before there is agreement concerning the procedure to be
followed. You will already have had my cable referring to the
discussions at a meeting of Heads of Delegations on Saturday last.

Developments in this subject will be reported to you by cable, but
some general comments on this topic follow.

There are certain other matters upon which some comments should be
made.

Tariff Negotiations and Procedure:

U.S.A. has stated that they had proceeded upon the principle
stated in the procedural memorandum that at the commencement of
the negotiations all countries would lay on the table the
concessions which they proposed to make in response to the
requests which they had received. They had therefore reviewed the
whole of the likely negotiations and on the basis of the
concessions which they expected to receive in the sixteen direct
negotiations and the indirect benefits from the remaining
negotiations had determined the responses which they were prepared
to offer to other countries.

When I suggested that much of the procedural memorandum was
unnecessary and that there were only a few matters of principle
upon which agreement was necessary prior to the commencement of
the negotiations, the U.S.A. Delegation agreed with the exception
of the proposed variation that would temporarily limit the
exchange of responses. This was the course proposed in the cable
sent by the U.K. Delegation following the discussions at Spencer
House and is referred to in my letter of 24th March, 1947.

A number of Delegations indicated that they were not yet in a
position to table many responses, partly because some requests
were still outstanding and that others had been received but a few
days before. The U.S.A. Delegation stated that if, in these
circumstances, countries were to delay the commencement of their
negotiations, they would have to contemplate revising and
curtailing their first offers.

They indicated, however, that the degree of variation in the
offers which they had already prepared would depend upon the
number of negotiations that were likely to proceed and the time
within which they would be commenced.

It was therefore agreed that the facts should be obtained and that
on the basis of these, the U.S. Delegation stated that they would
determine their future attitude towards the negotiations.

As explained in my cable, this involves us in a decision on a
number of points and makes more urgent the need for a
determination of our policy in relation to negotiations with the
United Kingdom.

I think it unlikely that we need take too seriously the U.S.

proposal to revise their first offers. If the negotiations proceed
on the basis suggested by the U.K., it would merely mean that the
commencing circle would include something less than the whole of
the seventeen members of the Preparatory Committee. As the members
advance with their preparations the circle would increase and as
that occurred the U.S.A. responses should become widened and
return towards the level at which they were originally prepared.

There is, however, a possibility that the U.S.A. Delegation will
wish to refrain from commencing negotiations until such time as
all countries are prepared to proceed with all their negotiations.

That may involve a considerable delay and, I believe that, on
balance, because of this the U.S.A. will eventually agree to a
commencement of the negotiations even if these were to be only
those in which the U.S.A. is directly involved.

All the other members of the Preparatory Committee are in favour
of the United Kingdom proposal, particularly as none of them is as
well equipped for the commencement of the negotiations as the
U.S.A.

U.K. Negotiations:

We have despatched some detailed comments on the telegram
forwarded to you by the Dominions Office [1], and we have also
transmitted a draft reply which we think would be appropriate.

This subject is one which must be dealt with by telegram and
consequently, I shall refrain from comment here that would merely
duplicate my telegrams to you. The problem, however, has been
removed from the immediate circle of the British Commonwealth by
the fact that the United Nations has informed the Preparatory
Committee that the United Kingdom has lodged rate requests, inter
alia upon Australia.

Draft Charter.

There has been a discussion concerning the programme for the
further drafting of the Charter for an International Trade
Organisation. It seems likely now that it will not be possible to
commence the detailed consideration of the Charter prior to May
15th. This will provide a period beforehand which can be devoted
exclusively to tariff negotiations. Thereafter, both will proceed
concurrently. It has been agreed, however, that a discussion prior
to that date of any Article of the Charter, for the purpose of
facilitating the tariff negotiations, should not be precluded.

This is subject to the understanding that delegations do not
commit themselves at this stage either to the particular Articles
which should be included in any general agreement on tariffs, or
to the wording of the Articles. I am hoping that we will be able
to proceed rapidly with our own re-examination of the Charter in
the light of the report of the Drafting Committee, and that
thereafter we shall be able to send our recommendations to you for
consideration, as provided in your memorandum of instructions,
dated 18th February, 1947.

Ministerial Representation:

At the commencement of the discussions, the United Kingdom
Delegation was led by Sir Stafford Cripps, but he has now returned
to the United Kingdom and will not be present in Geneva until some
progress has been made in the tariff negotiations. The Hon. Walter
Nash has arrived to lead the New Zealand Delegation and spoke on
their behalf at the opening Plenary Session. At this stage I think
it is possible to continue without the presence of a Minister from
Australia although there may be developments relating to the form
of the negotiations which would make his presence very desirable.

I shall, however, keep you closely informed about this by cable.

Non-Governmental Advisers:

The Non-Governmental Advisers have arrived in Geneva and I have
had a number of discussions with them. The U.S.A. Delegation
raised some objections to the presence of non-governmental
representatives from various countries being present in the block
of offices wherein are located the secret documents relating to
the tariff negotiations. After consultation with the Secretariat
and the U.S.A. Delegation I thought it best to meet the objection
and we have arranged for suitable office accommodation in Geneva
where it is possible for the non-governmental advisers to maintain
their headquarters. They will also have a room in another section
of the Palais des Nations. I have discussed with them in broad
outline the problem with which we are faced in considering the
possibility of a reciprocal Trade Agreement with the United
Kingdom and other countries upon whom we have few requests to
make. I have asked them to submit their advice on this problem, if
possible jointly, or should they prefer to do so, as individual
advisers. I have also informed them of the acquiescence of other
Delegations, including the U.S.A., in our views upon the scope and
application of the procedural memorandum.