1. In transmitting draft agreement for Relief and Rehabilitation the United States Government suggested that before proceeding to definitive action any questions or suggestions from Commonwealth Government might be discussed through diplomatic channels in Washington.  Accordingly you are asked to approach the Department of State along the following lines:-
Political 2. We note that the proposed Central Committee of the Council will be composed of the 'Big Four' but that some provision is made for representation of other countries when questions affecting them are under discussion. Our general view is against the undue domination of any postwar councils by a restricted group of powers and in the present case we hope that full opportunity for effective participation by smaller countries in the Relief Administration will be secured through subsidiary committees. This is particularly important in the case of the Committee of Supplies and Committee for the Far East. You are asked to make discreet soundings regarding American ideas on the membership, chairmanship and location of the various Committees. We should be interested to hear the views of the United States regarding the limits of the Far Eastern region, for example, whether it includes India and Burma.
Legal 3. Article 1, paragraph 2(a) and the corresponding paragraph of the explanatory memorandum indicate that no formal incorporation of the Administration has been provided, but it is assumed that the action of the United Nations in establishing the organisation will bestow upon it all necessary powers. Can we assume that the organisation will function in much the same way as other international bodies, i.e. that it will not carry on any form of business in a corporate capacity with persons within the territory of a member government wherein that member government exercises administrative authority, but will deal exclusively with governments as such: in other words, that the organisation will formulate plans which will be carried out by member governments.
4. We note that Article 1 paragraph 1 purports to confer certain powers upon the Administration, e.g. to enter into contracts. It is difficult to see how these powers could be exercised by the Administration in the absence of some formal incorporation.
5. Paragraph 2(b) of Article 1 raises the question of the constitutional competence of the Federal Parliament and Government to pass measures and take administrative action for relief purposes therein defined and, though it is probable that the external affairs and defence powers will be sufficient, it is conceivable that some of the Government's actions may be challenged for want of constitutional authority. This point is also relevant to Article 8, which provides for amendment of agreement by a two-thirds vote of a Council. In view of the absence of any limit as regards the nature of amendments which may be made it is impossible to say what the obligations of the Commonwealth under the agreement might be at some future time. It appears that questions of constitutional competence of member States might fall for examination during consideration of any projected amendments.
6. The prevention of activities by foreign voluntary relief agencies, as laid down in Article 4 paragraph 2, would presumably require legislation by the legislative authority in any area affected. There may be some doubt as to the power of the Commonwealth to pass legislation of this character, although point will not be relevant unless Australia is recipient of relief.
Economic 7. We should like to reach a clearer understanding regarding the way in which measures for rehabilitation of war-stricken countries will impinge on long-term reconstruction and post-war reorganisation of world trade. It appears inevitable that rehabilitation, as distinct from relief, will merge into reconstruction or, at the very least, help to create the circumstances in which more permanent international arrangements will have to be negotiated. It appears to us that this should be frankly recognised in the draft agreement and it is suggested that a new paragraph should be added to Article 1 to the effect that, in all its activities, the Administration shall take into account agreements actual and prospective for carrying out the policy of Article 7 of the Mutual Aid Agreements, to the end that action taken for rehabilitation shall not conflict with the policy laid down or proposed to be laid down in such agreements.
8. In support of this view, attention is drawn to the objects set out in paragraph 2(a) of Article 1. We suggest that facilitating production of basic necessities and furnishing essential services may actually include not only restoration of old agricultural industry and power plants, but initiation of new production because of world shortages. Further, the explanatory memorandum suggests that the object is to enable countries to provide for their own basic needs. In the case of countries dependent on exports such as rubber, phosphates, or tin, this could only be done by restoration of export industries. We wish to avoid any action taken under the plea of urgent rehabilitation which might introduce or perpetuate uneconomic industries or which might conflict seriously with plans for stabilisation of primary products or for expansion of trade.
9. Article 5, paragraph 3, does not appear to be capable of exact interpretation because of the difficulty of distinguishing clearly between purchases for relief and rehabilitation purposes and purchases for meeting essential needs of local populations during war-time. While sympathising with broad objectives of co- ordinating purchase programmes and preventing undesirable diversion of supplies from war uses to relief stocks, we doubt whether paragraph under reference represents a comprehensive approach to the subject. It appears to us that the greater need for preventing competition between the Relief Administration on the one hand and countries with financial resources on the other hand will arise after the war when, however, the Relief Administration will have only the limited authority given in Article 1 paragraph 2(b). (See note in explanatory memorandum on paragraph 3 of Article 5.) We suggest that participating nations might be asked to enter into a more explicit undertaking to collaborate with the Relief Administration both during and after the war so as to ensure as equitable a distribution as possible of scarce resources.
10. Similar point might be made in regard to shipping. Except in Article 1 paragraph 2(b) no explicit reference is made to shipping and, as in the post-war co-ordination of purchases, Relief Administration can only make recommendations. If our interpretation of Article 1 (i) set out in paragraph 4 above is correct, it is doubtful whether the Administration would have the power to charter ships. We suggest that signatories might undertake specifically to collaborate with the Relief Administration in the provision of shipping.
11. We assume from Article 5 and the corresponding paragraphs of the explanatory memorandum that the relief project is wholly contributory and that contributions may be made by providing credits as well as by gifts in kind. We would appreciate any elucidation which can be given at this stage regarding the nature of the transactions which may be expected to result from the expenditure of these credits by the Relief Administration and the manner in which they can be carried out.