20 October 1937
With reference to the attached Circular Telegram B.114 , the follow ing preliminary observations are made on the points raised by the British Government on which consideration by the Commonwealth Government is asked. 
The recommendation of the Advisory Committee of the League of Nations which was adopted by the General Assembly was to invite the signatories of the Nine-Power Treaty of Washington of February 1922 to consult with a view to settlement of the Sino-Japanese dispute by agreement.
The basis of the consultation was conciliation. Should conciliation fail the possibility of other means of effecting a settlement was not overlooked, and the Advisory Committee indicated that it might be desirable to make proposals through the Advisory Committee to the General Assembly, whose session is not closed but merely adjourned. It appears, therefore, that the courses of action mentioned in the cablegram are not applicable at this stage. There is no obligation on the part of the signatories to impose sanctions or other form of pressure on one of the parties. We would, or could, only agree to any such action by virtue of a specific League obligation, following on collective agreement and decision, supported by co-operation on the part of those Powers who are signatories of the Nine-Power Treaty, such as the United States and any members of the League.
Economic pressure of any kind could only be effective if it had the full support of all League Members as well as the signatories of the Nine-Power Treaty, and the fact that the League has referred the dispute to the nine Powers does not absolve them from further participation in any decision or action to effect a settlement. At this stage, therefore, it seems that the Commonwealth Government should not commit itself to any course of action or to consider the settlement of the dispute on any basis other than conciliation. It was, moreover, on this understanding that the Commonwealth Government accepted the invitation to participate in the Conference. Should conciliation fail further measures will certainly have to be discussed and recommendations made to Governments. If such recommendations take the form of economic pressure against Japan, and the signatories as well as League Members are prepared to guarantee mutual support, then on a long-range view an Anglo-American combination against an aggressor would be the best hope for the future peace of the world and safety of Australia, and we would probably be unwise to refuse to co-operate in such circumstances. This, however, does not call for any decision though the possibility must be kept in mind.
Later advice has been received from the External Affairs Office in London to the effect that the British and American Ambassadors at Tokyo have stressed the desirability of Japan attending the Conference on the 30th October.  The Japanese Government has not yet made its decision, but the Minister for Foreign Affairs has indicated that Japan generally was against accepting the invitation and was opposed to any idea of a mediation by a number of Powers. If the decision is reached that Japan will not be represented this indicates that settlement by conciliation will be hopeless, and that consideration must be given almost from the outset of the Conference to other measures.
In view of all the circumstances, it is felt that only an interim reply should be sent to the British Government and that the gravity of the issues raised is such that the reply of the Commonwealth Government is a matter for consideration by the whole Cabinet.