I refer to your memorandum of 22nd August on proposals relating to
the liberalisation of intra-European trade and the relaxation of
Section 9 of the Anglo-American Financial and Economic Agreement.

2. I very much appreciate your Government's action in approaching
us on this subject in advance of the Washington negotiations.

However, I am not able to convey to you any change in the
Australian Government's attitude towards proposals for the
liberalisation of trade as explained to the Chancellor of the
Exchequer by Mr. Dedman during the recent Financial Conference in
London.

3. As Mr. Dedman then pointed out, we do not feel able to
acquiesce in any arrangement which would result in the United
Kingdom discriminating or appearing to discriminate in favour of
the trade of the war shattered economies of Europe as against our
own trade. The compromise scheme contemplated in paragraphs 8-10
of your memorandum would therefore not be acceptable to us. It
would be most embarrassing for us if open general licences were to
be issued for goods from European countries while similar goods of
Australian origin were still being dealt with on an individual
licence basis, even if, in practice individual licences were
freely issued.

4. We feel strongly that any arrangement which introduces
discrimination against goods from other Sterling Area countries,
however nominal, is retrogressive and undesirable. Even though the
extent of the discrimination may not be material, it inevitably
prejudices the freedom of trade and financial relationships within
the Sterling Area upon which so many of our mutually beneficial
existing practices are founded.

5. As Mr. Dedman also explained in London we strongly support as
an objective the creation of a multilateral trading system over as
wide an area as possible, and therefore fully approve the intra-
European liberalisation scheme [1] provided it extends, at least
so far as action by the United Kingdom Government is concerned, to
the Sterling Area Commonwealth countries.

6. We were glad to note that the United Kingdom Government have
explained to O.E.E.C. countries that they can only liberalise
United Kingdom import licensing provided that they were free to
extend any relaxations to the whole Sterling Area, and that these
assurances were repeated in the House of Commons.

7. We hope that your Government will be able to maintain this
position both in O.E.E.C. and in Washington, without amending
their stand in regard to both sterling area participation, and the
relaxation of Section 9.

8. If your Government should proceed on the basis of paragraph 6
above, the selection of the actual commodities for which Open
General Licences are to be granted is of considerable importance
to us. We assume that in the preparation of any lists of
commodities which are to be freed from restrictions your
Government would consult with us.