Dispatch 44/1/38 WELLINGTON, 18 May 1944
I have the honour to present the following comments on the working of the Australian - New Zealand Agreement  as seen from this end after a period of almost four months.
2. The chief objectives of the Agreement as set out in Articles 1- 6, namely the exchange of information and consultation on questions of mutual interest have been attained by the establishment of the Secretariat both in Canberra and in Wellington. Through the Secretariat and also through direct channels the two Governments have been informed of the views of one another, and in addition background comment and information have been exchanged. Section 3 of the Agreement, however, agreed that 'there shall be the maximum degree of unity in the presentation elsewhere of the views of the two countries'. It is not clear from this distance whether the maximum degree of unity in the presentation of the agreed Australian - New Zealand attitude was in fact achieved at the Conference of the International Labour Organisation at Philadelphia , nor is it certain whether, in the negotiations in London concerning long- term marketing of primary products, the two countries have presented their viewpoints together or merely on parallel lines.
3. On commercial questions generally affecting the two countries, I am not altogether satisfied that the fullest exchange of information and ideas is taking place, or that, since the Agreement, relations in commercial and supply matters have developed favourably. I will discuss this point, however, later in this despatch.
4. The New Zealand Chiefs of Staff Committee have not yet reported on the armistice and subsequent arrangements dealt with in Sections 7-12 of the Agreement. A Committee has, however, been established comprising representatives of the Chiefs of Staff together with an economic member which might be considered the nucleus of an Armistice and Post-hostilities Planning Committee.
With reference to the future of the U.N.R.R.A. it is not yet certain how this and other international bodies will develop, but the two Governments have consulted together in regard to their policy towards the Food and Agricultural Organisation and the question of expenditure of such international bodies in general.
5. The question of a regional zone of defence in the South West and South Pacific area and the future of a general system of security have no doubt been discussed in London. The New Zealand Chiefs of Staff have yet to report on these matters from the technical viewpoint. The New Zealand Department of Air have not yet reported on the clauses dealing with civil aviation and in particular those relating to New Zealand's productive capacity and personnel. The principles established in these clauses are no doubt being advanced by the Prime Ministers of Australia and New Zealand in the United States of America and the United Kingdom.
6. With reference to Section 61 dealing with the exchange of information about dependencies and territories, a certain amount of material has been received from the New Zealand Department of Island Territories. Australia's interest in obtaining details of all developments in the Pacific Islands has again been stressed and the Secretariat has been asked to obtain as wide information as possible for transmission to Australia. Particular aspects which have been mentioned include such topics as the effect on the natives of Samoa of the influx of American forces and their subsequent withdrawal, the construction of air strips in the Cook Islands, developments in Fiji, and information concerning Henderson Island and French Oceania. In discussions it has been learned that the New Zealand Government has recently concluded the construction of an air strip at Rarotonga in the Cook Islands which will serve to link the administrative centre with other islands in the group such as Aitutaki which already have air strips. With reference to the condition of social services in New Zealand's Island Territories medical and educational services have now been restored to the pre-war standards. Economically also the islanders are being encouraged to return to their previous position as small agricultural producers to which the Samoans have reverted fairly readily.
7. In connection with the sections headed 'Welfare and Advancement of the Native Peoples of the Pacific', the information at present available concerning the Fijian scheme for a coordinated health service in Fiji, the islands under the jurisdiction of the United Kingdom High Commissioner for the Western Pacific , and the Island Dependencies of New Zealand has been supplied. The possible relation of this scheme to the objectives envisaged under Articles 29 and 31(c) of the Agreement has been impressed on the New Zealand authorities. Little, however, can be said to have been done in the way of 'planning collaboration in regard to health services and communications, matters of native education, anthropological investigation, assistance in native production and material development' such as are mentioned in Article 29. The New Zealand authorities feel that there is little directly in common between the Island Territories of New Zealand and the External Territories of the Commonwealth and the scope for co-ordinated services may prove to be limited. On the other hand the exchange of views and ideas by a joint conference of Ministers or officials should be of value and would lead to an examination of the extent to which planned collaboration was practicable. Consideration by such a conference of Article 29 and also of the items recommended for the South Seas Regional Commission under Article 31 might possibly precede the establishment of the Commission. I should be glad to learn whether any action along such lines is being contemplated in Australia. 
8. With reference to migration, the Governments have exchanged information concerning migration, but as I have previously pointed out no very detailed consideration of this problem has taken place in New Zealand yet. The reports of the Australian sub-committees on aspects of migration policy  appear to have been of interest to the New Zealand authorities.
9. Sections 35-37 refer to machinery for collaboration and cooperation between Australia and New Zealand. The first part of Section 35 concerns co-operation for defence but I am not aware that there has been any development in consultation and planning between the defence authorities of the two countries.
10. In my despatch of 28th February  I raised the question whether anything was being done regarding Article 35(c) of the Agreement under which the two Governments agreed that 'the development of commerce between Australia and New Zealand and their industrial development should be pursued by consultation and, in agreed cases, by joint planning'. I am not yet aware whether any discussion has taken place in Australia regarding the implementation of this and also the following sub-section concerning co-operation in achieving full employment in Australia and New Zealand. Certainly nothing has been done so far as New Zealand is concerned although it is presumed that the clause will be considered by the newly created Organisation for National Development. None of the already existing interdepartmental committees on various economic matters has touched the problem but although the present plan of the Organisation for National Development does not provide a suitable sub-committee for its discussion, the planning committee proposed at the highest level would probably consider the matter.
11. I feel that the working out of clauses 35(c) and (d) will require a great deal of thought and might well be the subject of further investigation in Australia. As an initial step I would suggest that you examine the desirability of creating a committee representing those departments immediately concerned with commercial relations with New Zealand, namely the Departments of Commerce and Agriculture, Supply and Shipping, Munitions and possibly Trade and Customs. To such a committee might later be added representatives of External Affairs and Post-war Reconstruction in view of the long term and general implications of the clause. The immediate problem in my view, however, is to ensure that the departments carrying on present commercial relations with New Zealand should co-operate fully and should be mutually aware of what the others are doing. It is not clear at the moment whether there is the fullest exchange of views and information between the Departments of Commerce, Munitions and Supply. I have been particularly concerned about the position of the Pacific Supply Council. As you are aware the completion of the programmes of requirements for the Pacific Islands has taken some time and has caused some dissatisfaction in the New Zealand Department of Supply. I understand that an Australian official is to visit New Zealand to discuss this question, but I would urge that a full meeting of the Pacific Supply Council be held to thoroughly examine the position. I have spoken to Mr. Picot, the New Zealand Director of Supply, who has expressed willingness either to attend such a meeting or to send a deputy.
12. The establishment of an active committee in Australia fully acquainted with all aspects of past, present and possible future commercial policy towards New Zealand might enable an informed approach to be made to New Zealand regarding Article 35(c). As you are aware, past commercial relations between Australia and New Zealand have been marked by mutual suspicions and misunderstandings. I should judge that a feeling of suspicion and resentment still exists in New Zealand and that even Australia's efforts to supply New Zealand's urgent war-time needs have not removed the feeling that generally Australia treated with New Zealand only when it suited herself and that New Zealand's needs did not deserve much consideration. In addition, New Zealanders constantly bring forward the problem of the adverse trade balance with Australia. This problem might be examined in the light of providing markets in Australia for such New Zealand goods as wood products, and also with reference to the possibility of developing a British Commonwealth or other international clearing arrangement to obviate the necessity for striking exact trade balances.
13. The interpretation of the joint planning of the industrial development of our two countries should I suggest be considered in advance. New Zealanders are apt to regard this merely as the encouragement of established Australian industries to set up branch factories in New Zealand. This country is conscious of Australia's advanced industrial capacity but is anxious to profit by it in a way involving the maximum employment and production on New Zealand soil. I would take it, however, that the joint planning of industrial development envisages something more far- reaching and it would certainly need to be examined at a Ministerial conference. In the meantime as I have suggested, an Australian interdepartmental committee might report on the problems involved. The Acting Prime Minister and Minister of Supply, Mr. D. G. Sullivan, with whom I have discussed this matter, has indicated that he favours that a preliminary approach should now be made to the whole problem.
14. With reference to further direct consultations between the two countries, I take it that a formal conference of Ministers of State could not now be held in Wellington until towards the end of the year. In the meantime I would urge that if possible a visit be paid by at least one Australian Minister. If, for example, you feel that you yourself should await the occasion of a full conference, I would suggest that talks between Mr. Chifley and the New Zealand Minister of Finance on international monetary and marketing problems might be of value, although Mr. Nash will probably not return to Wellington until some time in July. If he made such a visit, the Treasurer might be accompanied by an expert from his Department on international finance arrangements and possibly by Dr. Coombs whose experience in organising the Department of Post-war Reconstruction should be of great value to the Minister and Director of National Planning here. 
15. As you are aware there have been some visits by departmental officers from Australia and these appear to have been of value. A return visit by the New Zealand Director-General of Agriculture  has, however, been postponed. I would suggest that if consideration is given by a joint interdepartmental body to problems of trade and supply, further discussions might well be carried out between officers of the two countries.
16. Finally, I would report that the Australian - New Zealand Affairs Secretariat is in daily operation in Wellington and is helpful in ensuring a full exchange of ideas and information.
There is no need for this body to cut across existing channels of communication but it has proved itself a useful clearing house and centre in which all the activities contemplated under the Agreement can be discussed.