Your telegram No.206. [1] Trade Arrangement with Japan.

1. In view of the great difficulties which we have explained in
earlier telegrams of providing additional 600,000 purchasing
power to meet Australian Government's request, we have been
urgently investigating other possible solutions in consultation
with Mr. Clark.

2. Most effective assistance which U.K. can offer would seem to be
appreciably increased supplies of steel. As a result of special
efforts we are now in a position to offer an increase of 12,500
tons above the quantity already programmed for Australia in
respect of first quarter of 1950, making a total of 20,000 tons
for that quarter.

3. We recognize, however, that this offer may not entirely
overcome Australia's difficulties, particularly if there are
special types of steel which will in any case have to be obtained
from Japan. We are, therefore, prepared to reduce the U.K. food
purchases on Japan thus enabling us to offer Australia 200,000
additional purchasing power. We make the suggestion in the hope
that it will be sufficient, when coupled with promise of greatly
increased steel supplies, to enable Australian Government to agree
not to press their original request. We are also investigating
whether the United Kingdom may be able to help over supplies of
plywood which we understand Australia had in mind to purchase from
Japan. We await particulars of specifications which Mr. Clark is
obtaining for us.

4. We should be grateful to know as soon as possible whether a
solution on above lines would be acceptable to Australian
Government. [2]

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