84 Mr S. M. Bruce, High Commissioner in London, to Mr R. G. Menzies, Prime Minister

Cablegram 152 LONDON, 29 February 1940

MOST SECRET IMMEDIATE FOR THE PRIME MINISTER

WOOL

Your telegram of 21st February. [1] Appreciate and Sympathize with your feelings. Root cause of difficulties and delays in getting finality is the absence of really effective War Cabinet dealing with questions of policy and ensuring co-ordination of departments. Wool is example of this lack. Realize the political difficulties for you which have resulted. Feel however that position must be carefully handled if even more serious political difficulties are to be avoided.

To make clear what I have in mind necessary to analyse the position at some length.

MOST SECRET

If satisfactory solution to be found there must be:

(a) Clear understanding as to quantities available for neutrals;

(b) Agreement as to a price for such sales which will obviate dangers set out in paragraph 2 of your telegram of 21st February;

(c) Elimination of unreasonable interference with such sales on the grounds of economic warfare or trade treaty negotiations.

With regard to (c) my telegram of 17th February [2] gave full information re Japan. Am hopeful that it will be possible in future as a result of discussions in the United States to enter arrangements with Japan for supplies reasonable both as to quantity and period, and that the Ministry of Economic Warfare will be as helpful as the circumstances permit in regard to other neutrals.

Information Clunies Ross [3] has as to position of pending trade treaties shows necessity to withhold wool supplies pending finalization likely in most cases to crystallize shortly.

With regard to (a) as a result of representations, see paragraph 2 of my telegram of 6th February [4], repeated and amplified after receipt of your telegram of 6th February [5], whole question of supplies for the Allies and neutrals was under examination and I was becoming increasingly hopeful that the whole position would be placed on satisfactory basis with elimination of control or interference by Bradford. This view has been strengthened by long discussion with Burgin [6] following receipt of your telegram of 21st February.

With regard to (b) situation similar to (a) save that I was less hopeful of satisfactory arrangement until discussion with Burgin referred to above.

Position here therefore is that after intolerable delays and many difficulties we look like arriving at reasonably satisfactory basis on major questions of supplies, price, economic warfare, trade treaties and elimination of Bradford.

In the circumstances do not think either cable to Chamberlain [7] or visit of Minister would help.

With regard to your specific points:-

(1) I emphasized to Burgin that opinion of those competent to judge is that difference between price paid to Australia and price at which wool being released is excessive. This he denied and maintained that increase only sufficient to cover expenses and small margin for contingencies. If this contention correct price not more than 25 percent additional to our sale price would mean a release price involving a loss to the United Kingdom and if we press this percentage we will be met by counter pressure to reduce our contract sale price and share the loss.

As any suggestion of reducing amount receivable by producers in Australia would have serious political repercussions I refrained from pressing Burgin for details of how difference between purchase and release price made up and did not put forward your proposal for maximum increase of 25 percent.

(2) As provision for annual review was designed to safeguard Australian interests in rising market, I feel a discussion of price would, under existing circumstances, be embarrassing to us.

(3) Am doubtful of the wisdom of raising this point until major questions are cleared up. [8]

1 Document 70.

2 Document 65.

3 Australian member of International Wool Secretariat. 4 Document 47.

5 Document 45.

6 U.K. Minister of Supply. Bruce's record of this conversation which took place on 23 February 1940, is on file AA: M100, February 1940.

7 U.K. Prime Minister.

8 On 16 March 1940 Bruce reported in an unnumbered cablegram (in series FA: A3195, 1.1784) that points (a) and (b) had been exhaustively considered at a meeting with U.K. officials. It was disclosed that wool supplies were considered barely adequate, but that supplies would be made available to neutrals. An assurance was also given that the increase in release price over the price paid to Australia was only sufficient to cover expenses and a small margin for contingencies. Burgin emphasised that it was he who determined policy on the price and external sale of wool and not Wool Control at Bradford. Bruce included a more detailed report of the meeting in a letter dispatched to Menzies on 29 March (on file AA: A461, Q325/10/1, ii).

[AA: A981, TRADE 68, iii]