219 Mr J. A. Lyons, Prime Minister, to Sir Earle Page, Minister for Commerce

Cablegram unnumbered 22 June 1938 Following letter dated June 22nd,

'With reference to your further letter of June 14th 1938 [2] on the subject of export of iron ore from Australia, I have the honour to inform you that the views of your Government in this regard have received fullest consideration of the Commonwealth Government, but that it is regretted that decision to prohibit exportation of iron ore from Australia as from July 1st next cannot be varied except to extent referred to in paragraph 9 of this letter.

2. Whilst a detailed survey of Australia's iron ore resources has not yet been made the Commonwealth Government is nevertheless in possession of convincing information that accessible deposits of ore of adequate tonnage capable of economical development are so limited as to occasion greatest alarm concerning the future of Australian iron and steel industry.

3. The statement which I made in August 1937 [3] in which Yampi Sound was referred to was made at a time when information available was inadequate. Subsequent to that date a general review of iron ore deposits was made by Commonwealth Geological Adviser, and it was the serious position revealed in report of this review which compelled Government to decide upon prohibition of export. I feel that your Government will recognise the right of any government to vary its policy from time to time to conform with changing conditions and in the light of any fresh facts which may come before it.

4. Your letter under reference contains the observation that Commonwealth Government has taken into consideration only the quantity of iron ore which can be economically developed. That is true. The Government Advisers have stated that there are quantities of ore in Australia which by reason of their inaccessibility cannot be economically developed. For the purpose of placing Australian industry in a position to meet competition of other countries which have access to cheap raw materials these deposits are valueless. Moreover, improvements in method of treatment etc. are not likely to alter this state of affairs within any foreseeable period.

5. The position in regard to pig iron and steel products differs from that of ore, for reason that up to the present the quantities which are exported are comparatively small. The situation is, however, being watched closely and if there should be any material change it will be necessary for Government to consider its attitude in this regard.

6. Your Government's reference to monopolistic profit must be based on a misapprehension as to position. The proposed prohibition will be enforced solely to conserve ore for Australian requirements. Any question of danger of development of a monopoly within Australia is entirely a matter of domestic concern.

7. According to Dr Woolnough [4] there are only two groups of ore deposits in Australia which could be economically developed, namely, Iron Knob Group and Yampi Sound Group. The former is being actively exploited. It is certainly no reflection on Australian industry however in its relatively early phase that development has not yet occurred at Yampi Sound.

8. If, as you suggest, a quota system were applied to Yampi Sound it would be necessary, both on constitutional grounds and on grounds of equity to apply it equally to all other localities of the Commonwealth. The adoption of this course would result in such a depletion of accessible reserves of iron ore as greatly to imperil the future of Australian industry and seriously to retard Australian development.

9. It is realised that shipping arrangements are in existence for export of substantial quantities of iron ore to Japan and elsewhere and that if prohibition is rigidly enforced as from July 1st the Shipping Companies and consumers who may not in short time available be able to make any alternative arrangements may suffer hardship. In the circumstances and with a genuine desire to maintain good faith with the peoples of Japan and other countries interested in these shipments the Commonwealth Government has decided to permit export under licence of quantities of ore which were arranged for prior to my announcement on May 19th and which will not have been shipped before July 1st provided shipments are made on or before December 31st next. The total quantity involved in this regard is approximately 150,000 tons 90,000 tons of which is for Japan.

10. The Commonwealth Government views with concern suggestion that its decision in respect of exportation of iron ore may have some effect upon traditional amicable relationships of our respective peoples. It is convinced, however, that if the whole of the facts are placed before the people of Japan they will recognise that Commonwealth has no alternative in the interests of the preservation of the Australian industry but to adhere to course upon which it had previously decided. 11. The Commonwealth Government repeats its previous assurance of goodwill and sincerely trusts that your Government will appreciate the unusual circumstances which have arisen and sincerity of purpose with which these circumstances are being met.' [5] Ends.

LYONS

1 Torao Wakamatsu.

2 Document 216.

3 Commonwealth Parliamentary Debates, vol. 154, P. 288.

4 Commonwealth Geological Adviser.

5 The duplicate of this letter sent to Wakamatsu contains some minor textual variations (see AA : A981, Australia 90).

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