498 Legation in Washington to Department of External Affairs

Cablegram 780 WASHINGTON, 27 May 1942, 12.31 a.m.

SECRET

From McCarthy. [1]

Your cable 614 May 21st. [2] The substance of the cable was conveyed by me to Hawkins [3] when we discussed arrangements for the re-opening of our trade agreement discussions. He said that subject to detailed scrutiny of views stated in the cable, speaking for himself, he considered that there was nothing in principle that he could question from the American standpoint, including the idea of America's responsibility as a creditor country. Regarding Article 7 he said that the action of the Australian Government in deciding to go on with the treaty and in raising at the same time the question of Article 7 was quite sound and in fact opportune. It had just been decided that the 'Interdepartmental Committee for Commercial Policy and Trade Agreements' (he is chairman), with certain other individuals, engage in studies relative to Article 7. He could say it was the view of the State Department that the carrying on of trade agreement negotiations side by side with Article 7 discussions was the best way to meet the objective set out in Article 7 though trade agreements should not wait upon decisions under Article 7.

He visualised concrete decisions being made under Article 7 from time to time which might in themselves broaden trade opportunities or might make treaties more effective. For example some time ago we discussed a clause (an escape clause) which would safeguard Australia's position in the immediate post-war period if she had exchange difficulties. Action under Article 7 might obviate recourse to this clause or shorten the period over which it would be required. He also accepted without reserve the example that under Article 7 America might agree to review trade agreement legislation to empower them to grant more than 50% reductions in duty. This would influence agreements under negotiation at the time and where agreements already made facilitate supplementary agreements.

Brigden [4] and I saw the British Embassy Representative (Opie [5]) who dealt with the Mutual Aid Agreement when under negotiation and it was learnt that very recently the United Kingdom people both here and in London had been giving some thought to the question of opening conversations and how they could best be handled. Procedure has not been decided upon but an impression has arisen in England that discussions (opening discussions at any rate) will be held in London.

Our sub-section learnt confidentially that strong pressure will be brought to have them here. Opie said that the association of current trade agreement negotiations with Article 7 discussions was in keeping with their considered views. He also mentioned the example of American Trade Agreements Legislation being broadened as a result of conversations under Article 7. He and Phillips [6] are going to England on a brief visit shortly and on their return will be able to tell us more.

We gather there has as yet been very little actual discussion between the U.K. and American officials as to the procedure for conversations or date of commencement. Our impression is however that both are considering making a start.

1 Commonwealth Shipping Representative in the United States.

2 Document 493.

3 Chief of Division of Commercial Policy and Agreements, U.S.

State Department.

4 Financial Counsellor at the Legation in Washington.

5 Counsellor and Economic Adviser at the U.K. Embassy in Washington.

6 U.K. Treasury representative in the United States.

[AA:A981, USA 203, ii]