17 Memorandum prepared for Delegation to Imperial Conference

LONDON, 10 March 1937

THE FOREIGN SITUATION-MARCH 1937

THE SITUATION A YEAR AGO

At the beginning of 1936 the foreign situation might have been summarised as follows: 'Germany is still rearming at full speed, rejoicing at the dissolution of the Stresa front of Great Britain, France and Italy, and aiming at a bloc which will include Poland, Hungary, Bulgaria and, if possible, Yugoslavia. Further, by reason of Germany's desire for eastern expansion both Austria and Czechoslovakia are threatened, though not immediately.

Italy has become antagonistic to Great Britain, due to the policy of Sanctions, and will necessarily emerge in a weakened condition from the Abyssinian struggle, whatever its issue.

France, weakened by her internal condition, both economic and political, has proved an unreliable collaborator for Great Britain at Geneva, and Anglo-French relations generally are severely strained. The unity of the European nations which could hold Germany in check has thus been seriously weakened. The United States remains strictly isolationist.' At the last Imperial Conference, in 1930, the first aim of British foreign policy was enunciated as being 'the preservation of peace based on security and the Covenant', and this might have been literally true for some years thereafter.

The Italo-Abyssinian dispute, however, tested for the first time the obligations imposed by the Covenant upon League Members, and by reason of these obligations Great Britain antagonised Italy with whom she had had a long tradition of friendship. With a militaristic Germany rapidly rearming there was danger for the Empire in an estrangement with Italy, lying as she does athwart the main British communication to the East, which, with the development of the air arm, would be increasingly vulnerable. If Japan too had been antagonised at this time the situation would have been one of the utmost gravity. Empire security demands of British foreign policy that no situation shall be allowed to arise in which Germany in the West, Japan in the Far East, and any Power, such as Italy, on the main artery between the two are simultaneously hostile. At least it can be said for 1936 that it did not see any serious estrangement of Japan.

SUMMARY OF THE SITUATION TODAY

Today, in the first quarter of 1937, the situation, particularly as regards Germany, is no less strained than it was at the beginning of 1936, probably even more so. At the same time several new factors have entered into it, some of which are favourable to Great Britain and the Dominions.

In the first place Great Britain is in process of rapid rearmament and is probably already in such a position as to render it likely that her policy will be respected and feared.

Secondly, Great Britain has now 'shaken hands' with Italy in an agreement which, though it has yet to be tested, was undoubtedly strongly desired by Italy, and which is probably an indication that Italy is not wholly committed to Germany [1]

Thirdly, Great Britain and France have come together again and have for some time been acting in close co-operation, though France's internal political position still remains far from stable.

Fourthly, France has probably once more succeeded in drawing Poland back towards her or at least to some extent away from the orbit of Germany.

Fifthly, the position in the Mediterranean and Near East has been improved by the conclusion of a satisfactory treaty between Great Britain and Egypt [2], and by the happier relations which have been established between Great Britain and Turkey, and which were manifest at the satisfactory conclusion of the Montreux Conference [3]

Lastly, turning to the Far East, despite the known aims of Japanese policy, which may at any time involve a clash with China, Russia or the British Empire, and despite the recent German- Japanese rapprochement, there are signs that Japan, like Italy, does not desire to substitute German to the exclusion of British friendship and would be glad of a closer understanding with Great Britain. At the same time Japan is probably impressed, to some degree at any rate, by the substantial nature of British rearmament.

Despite these favourable factors the situation generally remains very tense. Germany is the chief danger in Europe and, though her long expected demarche as regards Austria [4] proved more pacific than was anticipated, the move against Czechoslovakia, when it comes, is likely to be serious. Germany's internal condition presents grave features and may lead her present irresponsible rulers to seek escape in an 'adventure', probably in Eastern Europe. Meanwhile, in Western Europe, the Spanish civil war presents a prolonged menace to European peace, not in itself, but because of the intervention of Germany, Italy and Russia.

In addition, there are other potential centres of disturbance, such as Memel and Danzig.

GREAT BRITAIN

It would still be true today, as at the time of the Imperial Conference of 1930, to say that 'the preservation of peace based on security' is the first aim of British foreign policy, but many would now hesitate before including, as they did then, the Covenant as a further basis for preserving peace. The events of 1936 have undoubtedly gradually weakened the League's prestige, and there were no League successes, such as the solution of the Saar problem and the Hungarian-Yugoslav settlement of the previous year, to offset the failure to cope with the Italo-Abyssinian dispute. On the other hand the League can claim some credit for the apparently satisfactory settlement, in January, 1937, of the dispute between France and Turkey in regard to the Sanjak of Alexandretta.

The need for some reform of the Covenant has been universally recognised and a Committee is now working on the numerous proposals which have been put forward, but little is expected from its deliberations. None the less collective security, and the Covenant-in a limited form-remain in the forefront of British policy. In his Leamington speech on 20th November Mr Eden [5] said that British arms would never be used for a purpose inconsistent with the Covenant or the Kellogg Pact. [6] He then went on to define Britain's present commitments:-

'(a) British arms may and if the occasion arose would be used in our own defence and in defence of the Territories of the British Commonwealth of Nations.

(b) They may and if the occasion arose they would be used in the defence of France and Belgium against unprovoked aggression in accordance with our existing obligations.

(c) They may and if a new Western European settlement can be reached they would be used in defence of Germany were she the victim of unprovoked aggression by any of the other signatories of such a settlement.

(d) Those, together with our Treaty of Alliance with Iraq and our projected treaty with Egypt, are our definite obligations.

(e) In addition, our armaments may be used in bringing help to a victim of aggression in any case where, in our judgment, it would be proper under the provisions of the Covenant to do so.'

In a slightly later speech, at Bradford on 14th December, Mr Eden [5] also used a noteworthy phrase:-'We must neither mislead others nor be misled ourselves by any of those comfortable doctrines that we can live secure in a Western European glasshouse.' He also stressed the desirability of Germany's co-operation, not only in a Western agreement, but in European affairs generally.

On 17th February the United Kingdom Government issued a White Paper on Defence announcing a possible expenditure of as much as 1,500,000,000 in the next five years. A few days later, the Chancellor of the Exchequer [7], speaking on the second reading of the Defence Loans Bill, which is desired to empower the Treasury to issue sums not exceeding 400,000,000 for defence services between the present time and March 1942, said that 'it would be unfortunate if any apprehension of imminent war was created at a time when there is no reason to suppose that there is justification for such fears,' but they could not afford to relax until they had provided for the country's safety and for its ability to fulfil its international obligations.

The British Ambassador to Germany [8] has since reported that the United Kingdom Government's decision has had a very wholesome effect in Berlin. The German public, he said, had sufficient sense left to realise that Great Britain was not rearming without good reason, and this, combined with the intensive rearmament which they observed everywhere throughout their own country, had aroused uneasiness. One result had been the reference in Dr Goebbels' [9] speech on 12th February to the unlikelihood of war and the peaceful intentions of the German Government.

THE LOCARNO NEGOTIATIONS

With regard to Western Europe, it does not appear that the long- mooted conference between Great Britain, France, Germany, Italy and Belgium with a view to replacing the Locarno Treaties is any nearer. It cannot, however, be ruled out entirely, in view of the facts that (a) despite grave doubts which are entertained as to Germany's intentions, there are signs (such as Dr Goebbels' recent speech) that Germany does not desire to estrange the friendship of Great Britain, (b) the relations between Great Britain and Italy are distinctly better, and (c) France may well be disposed to allow the Franco-Soviet Pact which is anathema to Germany and unfavourably regarded in Great Britain and in Belgium to go into cold storage.

BELGIUM

France is still uneasy at Belgium's attitude, expressed in King Leopold's recent speech on Belgian neutrality, despite the subsequent assurance that Belgium would stand by her League obligations. Belgium's attitude must be largely influenced by the recent rise of a Belgian Fascist party, the Rexists, sympathetic to Nazi Germany. The Brussels correspondent of the 'Times' reported on 6th March that Germany intended to make a new diplomatic offensive to persuade Belgium to break her links with Britain and France and reach a separate understanding with Berlin.

Great Britain has not hesitated to affirm that the independence and integrity of Belgium are one of her own vital interests and that she would help Belgium in the event of unprovoked aggression.

FRANCE

Similar mutual assurances of assistance have been publicly exchanged between Great Britain and France. They relate solely to obligations already in existence, i.e., the remnants of the Locarno Treaties, but they arc welcomed as a clear statement of intention, in contrast to the hesitation and doubt about British commitments to France before 1914.

Relations between Great Britain and France have steadily improved during 1936; their close co-operation is best seen in their attitude towards the civil war in Spain.

The joint action in September last of the three great democratic countries, Great Britain, France and the United States, with regard to French monetary policy, and their decision 'to maintain the greatest possible equilibrium in the system of international exchanges', was a happy instance of international co-operation, particularly as the French devaluation was rapidly followed by similar action on the parts of Switzerland, the Netherlands and Italy.

Unfortunately, the internal political situation in France remains uncertain.

NETHERLANDS

The Netherlands have recently drawn closer to Great Britain and away from Germany. They fear in particular a combination of Germany in the West and Japan in the East, with consequent danger to their colonial empire in the East Indies. Although the integrity of the Netherlands is almost as vital to Great Britain as is that of Belgium, no commitment has been assumed in this direction.

SPAIN

The one part of the world where war is actually being waged is Spain. The military situation remains practically unchanged and it looks as if the struggle will be prolonged. Roughly speaking the insurgents occupy the western half of Spain, while the Government retains the eastern half, plus the Basque provinces on the Bay of Biscay. The fight for Madrid goes on, the insurgents having occupied one section of the city proper for two months past. It would seem that General Franco failed to follow up his initial advantage and lost his opportunity of dislodging the Loyalist forces from the capital on 7th November, the day the Government removed to Valencia. Meanwhile a large section of the city has been destroyed and the evacuation of the civil population has been speeded up.

During the last months of 1936 volunteers poured into Spain from abroad and soon thousands of Germans and Italians were fighting with the insurgents, while French and Russians joined the side of the Government.

After long efforts by the British and French Governments Germany, Italy, U.S.S.R. and Portugal were induced in February 1937 to impose a ban on 'volunteers' in Spain, to take effect on the 20th February, and a ban on war materials to take effect on 6th March.

Plans for the supervision of the principal ports and frontier posts have been elaborated.

ITALY

The year 1937 began well with the signing in Rome on 1st January of an Anglo-Italian 'gentlemen's agreement' [10] This had been gradually led up to by the conclusion of commercial and clearing agreements, by the exchange of friendly speeches during November, the withdrawal of the British Legation guard from Addis Ababa, and the withdrawal of the Italian agent, Count Rossi, from the Balearic Islands. The agreement took the form of a declaration whereby Great Britain and Italy recognised that their interests in the Mediterranean were vital to both parties and were not incompatible. Simultaneously there was an exchange of notes, with an assurance that so far as Italy was concerned, the integrity of Spanish territory should remain intact and unmodified. In addition the British and French Governments have recently informed the Italian Government privately of their willingness to reduce the status of their legations at Addis Ababa to consulates-general, which would amount to a de facto but not a de jure recognition of the Italian conquest of Abyssinia.

Signor Mussolini recently made a speech in which he said that all African accounts were now settled to the last penny; although Fascism rejected the fable of perpetual peace, it desired the longest possible period of peace.

On the whole it would appear that despite their recent agreement [11], Italy is not so deeply committed to Germany as was feared in the latter months of 1936.

As far as the internal situation in Italy is concerned, informed opinion holds that, although the failure of the wheat crop in this of an years will add to the economic strain on the Italian people and lead to discontent, the Fascist regime is certainly not yet in danger on the political side, but could hold the economic situation for a considerable time. The position was analysed by Sir Eric Drummond [12] as follows, in a despatch of A December. 'I am not prepared to estimate the term in years of this "considerable time". If in the absence of world economic improvement and of direct financial assistance from either France, Great Britain or United States, the Fascist authorities begin to realise that the limit of Italy's powers of endurance has been reached, then I think we must look for danger ahead. No doubt at this point the Fascist Government would make one last appeal to those Powers who could render them assistance. It is only if that appeal was rejected that I would apprehend some attempt to distract attention from internal affairs by a foreign adventure.' On the 2nd March, the Fascist Grand Council decided on a five-year programme of militarisation.

VATICAN

The Pope's [13] condition appears to have slightly improved, but in view of the complex nature of his illness and his advanced age there can be little chance of his recovery.

GERMANY

Germany remains Great Britain's major pre-occupation. Political factors which have entered into the problem are-(a) Germany's agreement with Austria, (b) her rapprochement with Italy, though this has probably been off-set to some extent by Italy's recent approach to Great Britain, (c) her pact with Japan [14], either with or without the alleged secret military clauses, and (d) her relations with Russia, against whom the Nazi Government, whether from real or manufactured hatred, never ceases to fulminate. As for the internal situation this winter there is a wheat shortage, prices of wheat and rye being three times world price. In this connection see the following authoritative estimate from Berlin:-

'Last winter was bad and the coming winter seems likely to be in reality worse although the Government is sufficiently warned of the dangers to be ready to prevent any too startling or acute shortages in the food supply.' The four-year plan which is part of the rearmament process is in full swing; and a military adventure in the east or south-cast of Europe is a grave possibility. Dr Schacht [15] continues to harp on the themes of raw materials, both for industry and as foodstuffs, and of colonies (which would include New Guinea). Some solution may be found to the former problem, but any concession as regards colonies would probably only serve to whet the Nazi appetite for increased territory in Europe.

In view of the long delays in the preliminaries of a Locarno conference, a purely political agreement satisfactory to Germany does not seem very likely. Many authorities hold, however, that Great Britain must, as a safety valve to ensure peace, take some action to case Germany's economic situation. They suggest that an outlet be provided for German goods, and that as a beginning the United Kingdom, Australia and New Zealand might do something with Germany in the way of three-sided exchanges, the two Dominions taking more manufactured goods. Failing a political agreement or an economic settlement, and excluding the unlikely possibility of the waning of Nazism, it would appear that the hope of averting an 'adventure' on the part of Germany lies in the strong position of Great Britain today by reason of her rearmament.

POLAND

While it would be unsafe for Great Britain to count too much on continental 'friends', it is probably true to state that Poland is today less in the German orbit than before. She has once again drawn closer to France, and the Polish Foreign Minister [16] recently came to London on the first official visit yet paid to Great Britain.

AUSTRIA

The question of a Hapsburg restoration has again been looming on the horizon. On 14th February the Chancellor, Dr Schuschnigg delivered a speech to Officials of the Patriotic Front the dominant note of which was reported to be 'a firm intention to continue the policy of Austrian independence with a gradual trend towards a monarchist consummation.' Late last week, however, it was reported in the press that owing to recent Italian press articles expressing hostility to the restoration of the Hapsburgs, Dr Schuschnigg had cancelled his intended visit to Rome. (As late as the end of November 1936 the British Minister in Vienna [17] reported that Italy 'still counted for much in Austrian counsels'.)

CZECHOSLOVAKIA

In November last it was reported from Prague that Czechoslovakia was far from contented with its economic relations with France and that French efforts in Prague were not being particularly successful in restoring confidence to a public which was hypnotised by the growing bogey of German domination of Central Europe.

On 15th February M. Delbos [18] told the British Ambassador in Paris [19] that the French Government were afraid of Germany forcing the situation in Czechoslovakia in the near future. He referred to the intense press campaign in Germany against Czechoslovakia, and to Germany's slackening of interest in Spain.

He spoke of his Government's recent move for mutual assistance between the Little Entent [20] collectively and France, and admitted that Yugoslavia and Roumania were hanging back and it was feared they might come into the GermanItalian orbit. His Government felt that it was essential to show Germany that if Czechoslovakia were attacked they would be solidly supported by the Little Entente and France. In the French view the proposed Treaty was the best way to give the warning.

THE BALKANS

Yugoslavia seems still to be steering a middle course, despite her close economic relations with Germany. Dr Schacht has been very active in the Balkans, even going so far afield as Turkey, in addition to turning his attention to Denmark and the Baltic States, and the close economic relations with Germany that now exist may well lead to closer political relations in the case of at least some of these smaller nations, particularly Greece.

Yugoslavia and Bulgaria, long on bad terms, have recently entered into negotiations for an agreement. Turkey has given her approval, but the other members of the Balkan Entente, Greece and Roumania, would prefer a multi-lateral treaty. Greece was apparently only won over at the end of the year by the efforts of the Turkish Foreign Minister [21] and his undertaking that Turkey would assist Greece in resisting any attempt by Bulgaria to raise the question of an outlet (which would be at the expense of Greece) to the Aegean.

Yugoslavia, regarded since the War as Italy's hereditary enemy, has also recently been offered an alliance by Italy, who is anxious to placate all neighbouring countries so as to be free to exploit her Abyssinian success.

RUSSIA

Great Britain during 1936 was liable to be closely linked through France to Russia. Co-operation between the two would probably never be more than temporary and possibly against Britain's permanent interests, at least so long as the policy of the 3rd International for world revolution has the support of the Soviet Government.

During 1935 Germany had allegedly spent the major portion of her revenue on armaments the exact figures being unknown, as Germany has not issued a budget for 3 years. In the second week of 1936 Russia replied by almost doubling her military expenditure and announcing that the strength of the Soviet military forces had reached 1,300,000 men as compared with 940,000 a year before.

Relations between the two countries remain severely strained.

During the year Russia has added to her forces in the Far East and consolidated her influence in Outer Mongolia.

In a despatch of 16th November the British Ambassador in Moscow stated that in his view, as long as the map of Eastern Europe remained unchanged, it was hardly too much to say that there was only one contingency which the Soviet Government really feared: a combined attack by Germany and Japan. 'This contingency', Lord Chilston continued, 'they obviously fear very much indeed, for all their enormous recent progress in the sphere of defence. And if they could come to an agreement with Germany which would positively ensure the neutrality of that country in the event of a Japanese attack in the Far East, they would presumably be prepared to pay highly for it. But they would be optimistic indeed to regard an agreement of this sort as a practical possibility while the two regimes last.' A little later in his despatch Lord Chilston adds-'There is one contingency which, in my opinion, might possibly lead to a Soviet-German rapprochement of a thoroughly undesirable kind. Good reasons appear to exist for believing that the Reichswehr may gain control in Germany in the not far distant future; and if the Red army were to achieve a corresponding ascendancy in this country, then a military alliance might well result.' He concludes, however, by expressing the view that M. Stalin is still to all appearances the undisputed master.

EGYPT

Turning to the Near East, the situation in Egypt is satisfactory.

The Anglo-Egyptian Treaty was approved by both Parliaments in November. The entry of Egypt to the League of Nations will shortly come before the Assembly at Geneva, Australia being among the countries which has extended an invitation. At present Egypt is awaiting the Conference, at Montreux, to discuss the ultimate abolition of the Capitulations in which Great Britain is lending assistance. Great Britain has sent a circular despatch to the other Capitulatory Powers supporting the Egyptian claims and pointing out that the Powers are likely to obtain less rather than more if they are intransigent. There are 14 capitulatory powers and it may well be a lengthy process before the necessary agreements are secured and the Mixed Courts are abolished.

PALESTINE

The situation in Palestine has been much quieter since the British Government took firm measures in September and October last. The Royal Commission which was appointed to enquire into the causes of unrest commenced work in November. At first it was boycotted by the Higher Committee of Arab Leaders because of the British Government's refusal to suspend Jewish migration during the period of inquiry, but the boycott was terminated early in January. It appears that at the sittings of the Royal Commission extravagant demands were put forward by both Arabs and Jews, and neither side seemed to be actuated by the spirit of compromise. Since neither side seems disposed to make any material concession it seems doubtful whether stable conditions are likely to be established in Palestine in the near future.

On the contrary the present comparatively peaceful situation is probably nothing but a truce, and disorders will almost certainly break out on an even more serious scale than before as soon as the Royal Commission concludes its task.

The Foreign Office view is that the United Kingdom Government must be prepared, immediately after the issue of the Commission's report, to adopt a clear and consistent policy, based on principle and not merely expediency, which can be shown to the world at large to be a genuine effort to strike a just and fair balance between the two conflicting obligations. To fail to adopt some such policy and rely rather on repression would probably result in the United Kingdom Government being faced with such wide-spread and bitter hostility in the Middle East and in the Moslem world as very seriously to threaten Great Britain's strategic position, and gravely to cripple her in the event of a larger conflict breaking out elsewhere.

IRAQ

Iraq appears to be fairly quiet since the military coup in November, though it is too early to be sure either of Hikmet Sulaiman [22] or General Bakr Sidqui. [23] A few days after the accession to power of the new Government the Syrian Fawzi, an anti-British leader in the recent Palestine disturbances, received an official welcome and he was recently reported to be stirring up trouble in Iraq.

SYRIA

The conclusion in September of the treaty between France and Syria, designed to replace the French mandate, and forming a close parallel to the British treaties with Iraq and Egypt, had one unfortunate sequel.

Late in November France, for reasons which seemed sound to the United Kingdom Government, declined to negotiate with Turkey over the independence of the Antioch-Alexandretta region of Syria, and rioting occurred in front of the French consulate at Istanbul.

Turkey referred the dispute to the League Council which decided in December to send observers to the spot and to adjourn until January. Early in the New Year it was reported that Turkey, possibly encouraged by Germany, who would eagerly seize on any precedent for the return of territory lost after the Great War, was demanding an immediate League decision and mobilising forces near her southern frontier. The January Council meeting has since solved the difficulty.

ARABIA

Italy is reported to be endeavouring to gain from the Yemen a foothold on the Arabian side of the Red Sea in order to protect her African empire. This aspect is being closely watched by Great Britain.

JAPAN

Turning to the Far East, 1936 passed without any grave political situation arising between Great Britain and Japan. A year ago in reviewing the world situation one could hardly have failed to stress the desirability of a policy of accommodation and neighbourliness with Japan, while at the same time admitting the difficulties in the way though these were less serious than in the case of an agreement with Germany. The past twelve months have been by no means wholly satisfactory so far as the Japanese situation is concerned.

In the first place Japan withdrew from the London Naval Conference in February [24] and has not acceded to the 1936 London Naval Treaty. This agreement replaces the Washington and 1930 London Treaties which expired on December 31st, but is an inadequate substitute.

Secondly, Japan remains silent on the question of the maintenance of the status quo with regard to fortifications in the Pacific, hitherto secured by Article 19 of the Washington Treaties, which it was hoped to save from the wreck.

Thirdly, Japan, like Italy, has recently co-operated with Germany in concluding an agreement, allegedly against Communism.

Fourthly, there have been unpleasant incidents such as the ill- treatment of British sailors at Keelung in Formosa.

Fifthly, the campaign in Japan for the 'Southward advance' policy.

Perhaps the most hopeful sign in recent months is the initiative of the Japanese Ambassador in London [25] with regard to an Anglo- Japanese agreement. Though feeling was somewhat frosted by the Keelung incident, the British Government apparently does not intend to let it affect relations generally. The negotiation of an Anglo-Japanese agreement is perhaps even more of a major consideration for Australia than the securing of an agreement with Germany. In each case unfortunately there is the query, having regard to the form of control, as to whether there is reasonable hope of the Government as at present constituted keeping the agreement. In the case of Japan too, as with Germany, the internal economic condition is a factor which Great Britain must take into close account and can possibly turn to her advantage.

The British Foreign Secretary on 18th January, 1937, handed the Japanese Ambassador in London an aide-memoire setting out the preliminary observations in the reply of the British Government.

On 6th March the Commonwealth Government despatched a telegram to the British Government [26] stressing the desirability from Australia's point of view of better relations between Great Britain and Japan, and the need for a definite understanding, perhaps in general terms on the idea of the recent Anglo-Italian pact, and expressing the hope that, should the present political situation in Japan not jeopardise this favourable atmosphere, no opportunity would be lost of pursuing the matter to a mutually satisfactory conclusion.

The political situation referred to was the fall of the Hirota Administration at the end of January, the inability of General Ugaki to form a Cabinet because of the Army's refusal to supply a Minister for War, and the eventual formation of a government under General Hayashi [27] (Minister for War at the time of the military rising of 26th February, 1936). The External Affairs Officer in London [28] reported early in February that the position in Japan was said to be chaotic, the Premier being 'a child in politics'.

The military hierarchy, on the other hand, feared being put into office themselves, in view of the unanimity of the press against a military government.

CHINA

The relations between Japan and China are, outwardly at any rate, a little easier than they have been in recent months. Until the announcement of the German-Japanese agreement, it seemed probable that Japan would refrain from pressing things beyond a certain point. Now future developments seem to depend on (a) how far the Japanese Government are emboldened by reason of the German agreement and, (b) how far the Government in Tokyo can restrain the military extremists.

During January in certain quarters a rapprochement was predicted between the Central Government of Chiang Kai-shek and the Communists in China in a United Front against Japan. When, however, the Central Executive of the Kuomintang met during the third week in February it took a firm line as regards co-operation with the Communists and declared that no reconciliation was possible unless the Red Army and the 'Chinese Soviet Republic' were both dissolved. The British Ambassador in China [29] considers that the line taken by the Executive on the Communist question should allay Japanese fears and that, coupled with the conciliatory tone of the recent Japanese approaches, it allows a hope that a new atmosphere is about to pervade Sino-Japanese relations. U.S.A.

Little has occurred in recent months to alter the view that the United States remains at heart isolationist. On the credit side of international co-operation are the agreement with Great Britain and France over the latter's monetary policy [30], and certain aspects of the American attitude to both the Italo-Abyssinian and Spanish wars. There is too always a remote possibility that President Roosevelt, secure in his second and final term, may lean more towards European co-operation, especially if internal conditions continue to improve. His re-election is rather more promising from the point of view of international co-operation than would have been the accession to power of the Republican candidate.

SOUTH AMERICA

South America remains outside the complicated picture of world politics. In December 1936 President Roosevelt attended the PanAmerican Conference at Buenas Aires. Though of small practical moment it should be noted that it resulted in the signing of a convention of collective security by 21 countries, providing for an obligation to consult among themselves in the event of a threat of aggression to the American countries.

BRITISH COMMONWEALTH OF NATIONS

Close co-operation between the members of the British Commonwealth of Nations remains a major interest of Great Britain and of Australia in international affairs, but there are recent indications that this might not always be the case with Canada.

The absence of liaison of any kind with South Africa remains a notable gap in Australia's information on Empire affairs. [31]

1 The 'Gentlemen's Agreement' of 2 January 1937 See below under Italy and also Document 13, note 1.

2 The Anglo-Egyptian treaty of alliance of 29 August 1936.

3 The Montreux Conference established a new international convention, signed on 20 July 1936, for the use of the Turkish straits, replacing the Lausanne Convention.

4 After a considerable period of German pressure on Austria, a communique was issued by both countries on 11 July 1936, in which Germany recognised the full sovereignty of Austria, each agreed not to exert influence over the internal affairs of the other (and said this would cover the question of Austrian National Socialism), and Austria agreed to base her policy on the principle of acknowledging herself to be a German state.

5 U.K. Secretary of State for Foreign Affairs. For the full text of the Leamington and Bradford speeches see the Times, 21 November and 15 December 1936.

6 The Kellogg-Briand Pact, or Pact of Paris, signed on 27 August 1928, by which the signatories agreed to renounce war as an instrument of national policy.

7 Neville Chamberlain.

8 Sir Eric Phipps.

9 Joseph Goebbels (1897-1945), German Minister of Enlightenment and Propaganda.

10 The agreement was in fact signed on 2 January 1937.

11 The Berlin-Rome axis, announced by Mussolini on 1 November 1936, following the visit of the Italian Foreign Minister, Count Ciano, to Berlin in October.

12 U.K. Ambassador to Italy.

13 Pius XI.

14 The Anti-Comintern Pact; see Document 12, note 1.

15 Dr Hjalmar H. G. Schacht, German Minister of Economics.

16 Colonel Joseph Beck.

17 Sir Walford Selby.

18 Yvon Delbos (1885-1956), French Minister of Foreign Affairs 1936-1938.

19 Sir George Clerk.

20 Czechoslovakia, Rumania and Yugoslavia.* 21 Rustu Aras.

22 Iraqi Prime Minister November 1936-August 1937.

23 Iraqi Commander-in-Chief of General Staff November 1936-12 August 1937.

24 Japan in fact withdrew 15 January.

25 Shigeru Yoshida.

26 Document 12.

27 General Senjuro, Hayashi, Japanese Prime Minister 2 February-4 June 1937; Minister for Foreign Affairs 2 February-1 March 1937.

28 F. K. Officer.

29 Sir Hughe Knatchbull-Hugessen.

30 25 September 1936.

31 In January 1937 the External Affairs Officer in London, F. K.

Officer, wrote a paper on the foreign situation. This was brought up to date in March by A. T. Stirling, and the paper printed here is the composite memorandum. A further memorandum, to cover the period from March to May 1937, is printed as Document 23.

[FA : A2938, THE FOREIGN SITUATION-MARCH 1937]