Repeated to London No. 124.
Your telegrams Nos. 238 and 239. 
Technical discussions have been proceeding for the last month between Ministry of Economic Warfare, Officials of the British Embassy and the relevant Division of the State Department in an attempt to correlate economic action against Japan. The problems are not yet sufficiently advanced to warrant political discussions in which the British Ambassador, the Secretary of State and presumably myself would join.
I saw Welles  and Hornbeck  today on the subject matter of your telegrams. They say that the Japanese policy is to make such formal protests on every relevant occasion in order to have 'a diplomatic case' ready for any eventuality. When the Japanese Ambassador  recently made a formal protest to the Secretary of State  on scrap iron he was told that the actions of Germany and Japan had made necessary American rearmament which in turn made necessary the conservation of scrap iron resources, and that in consequence the protest was unreasonable.
The United States Administration replied to all such protests on embargoes by stressing the domestic necessity, and refuse to be drawn beyond this.
My personal view is that it is unreasonable to expect Australia and New Zealand to go anything like the same [relative]  lengths as the United States and Canada in joining in the export limitations to Japan. Our Australian exports to Japan are very small compared with North America, and Australian action is likely to cause little more than irritation, and might even provide Japan with the excuse of some form of retaliation which in their present excitable state might possibly set fire to the Pacific area. I believe that pinpricks and provocation should be avoided by everyone particularly by countries that are vulnerable to Japan and we do not want to provide the maximum irritation with the minimum security. The United States is still providing Japan with [probably over] half of her imported supplies necessary for war and if the economic weapon is to be wielded they are from every viewpoint the people to do it.
The list of current American exports to Japan which is of considerable range of commodities important in war, shows increase from twice to seven times peace-time volume.
Welles agreed that the sooner political discussions take place on this general subject the better.
If and when political discussions start here on this subject I suggest you authorize me to hold this general view although not to put forward in a provocative way or in a manner suggesting that we are non-co-operative [or] desirous of avoiding our share in the common action, In view of the early conference at the British Embassy, preliminary to discussions with the State Department, I would be glad of advice particularly respecting principal commodities.
As regards the entry of Japanese into New Guinea. Welles commented sarcastically that we might make privilege dependent on their similar agreement in respect of Australian Commercial Travellers entering the Marshall and Caroline Islands.
I am informed on the best authority that the Netherlands East Indies take the point of view that as neither Britain, the United States or Australia has made any mutual defence proposals to them they propose to walk very warily and to take care to give no offence to Japan. In consequence they are unwilling that the United States should send naval observers to points in the Netherlands East Indies. (See my telegram 99 ).
In talk with the Chief of Naval Operations  here yesterday I was told confidentially that 12 or 14 P.B.Y.  American flying boats were on their way to Manila.
Welles told me today that American cruiser was proceeding to Manila.
I have suggested to both Welles and Stark that as they are unwilling to send a naval squadron to Australian waters under present conditions they might send single vessel to investigate conditions in Australian waters by personal observation. Burrell's  material was paper information which might with advantage be supplemented by such an exploratory visit. Both agreed suggestion sensible and is being considered.
Admiral Danckwerts has been added to British personnel for strategic Staff conversations here, which will not begin before the end of December.
The President  and the Secretary of the Navy  return to Washington about 15th December.
Please say if you wish me to repeat relevant portion of telegram to Latham.