Your 1283.  The Congressional Sub-committee of the Truman Committee  considering Lease Lend is expected to end its hearings within a fortnight. It has already asked about raw materials and been told that requests for Reciprocal Aid have been made but that replies have not been received. While they are still sitting it is, I think, better not to present a formal refusal of the U.S.A. request which is calculated to raise the general issue for Lease Lend and Reciprocal Aid between U.S.A. and Australia.
The attacks made by the five returning Senators  upon the Administration's conduct of affairs in other countries as insufficiently solicitous of American interests have not yet died down and this fact makes it still more untimely (see our 1190 14th October ).
I therefore suggest that the communication of this refusal be deferred for a little. In any case I should like to draw attention to some considerations which arise out of the proposed reply.
I shall certainly be asked whether the reference to manpower means that it is intended to reduce the production of the raw materials in question. The American understanding of the matter has been that it was entirely a question of finance, that dollars were obtained for essential war materials such as lead and lead and zinc concentrates, that they went into the dollar pool and were reflected in our sterling position and that, whether this was or was not discontinued in favour of supply on a basis of Reciprocal Aid, production and the employment of manpower thereon would be the same. The question was originally raised by U.S.A. Treasury with the British Treasury from the point of view that the U.S.A.
Administration was unable politically to expose itself to the criticism of allowing dollar funds [to be obtained in this manner while incurring]  a huge domestic expenditure on Lend Lease.
The course of domestic and political events has necessarily hardened the Administration in this attitude and I should expect the response to our refusal to transfer the raw materials to Reciprocal Aid to lie in the direction of seeking other means of securing the same result. It would probably suit the Administration politically to make some public exhibition of firmness in dealing with the question. Probably their disappointment with the answer will be reflected in a general stiffening on Lend Lease, but it is also possible that they will consider taking a more definite decision restricting or refusing civilian supplies under Lend Lease and requiring that civilian supplies be purchased.
There is already a movement afoot in the Administration to exclude all assistance of a capital nature, as for example the supply of plant susceptible to permanent or indefinite post-war industrial use.
There is a realisation with men like Mr. Harry Hopkins and Mr.
Dean Acheson that Australia cannot be expected to bear an ever increasing burden of Reciprocal Aid and I believe that there would be no difficulty in securing their support for a review of the entire position and the establishment of clear limitations both on the nature and amount of Reciprocal Aid, whether expressed in monetary terms or with reference to manpower or both. Further, if it was thought desirable, the question might be considered in relation to the revision which I understand the Government contemplates of the planning of the Australian war effort.
But it is another thing to make the request for the transfer of the particular raw materials in question the occasion of a specific refusal. It is likely to be dealt with by United States as an independent matter and as one raising difficulties for the Administration. Moreover, they will take the view that it is wholly a financial question and that though an increase in the budgetary gap may result, the corresponding loss of London funds should be cared for by United Kingdom. It is not easy to foretell the exact measures they will take but it is at least conceivable that the response will be restriction of Lend Lease, particularly on account of civilian goods, coupled perhaps with some open statement on the subject.
Before delivering the message to the State Department, particularly in its present form, I should like to take it up in a personal and unofficial way with Mr. Harry Hopkins if that course meets with your approval. He would, I believe, discuss the whole matter freely and with friendliness to our point of view.
I shall await your instructions.