41 Commonwealth Government to Cranborne

Cablegram 31 CANBERRA, 4 February 1944

MOST IMMEDIATE

Your telegrams 33 [1] and 34. [2]

1. His Majesty's Government in the Commonwealth of Australia note the reasons which have led His Majesty's Government in the United Kingdom to depart from the line laid down in your telegram 399 [3] and to consider it advisable to indicate your 'agreement' with the United States proposals relating to the items set out in (a) and (b) of paragraph 3 of your telegram 33. We share your view that every effort should be made to secure the adoption of a procedure which will ensure prior notification and discussion whenever changes are desired by the United States Administration. The corollary to resisting any United States proposals which we consider particularly unreasonable may be tacit acceptance of the rest of the proposals, but we do not feel it to be either necessary or desirable to go on record as expressing 'agreement' with the restriction of the scope of Lend Lease. Present trends in United States policy suggest that in future we may perforce have to accept many United States decisions with which we are definitely not in agreement and, in those instances where we feel it would be useless to make further representations, we feel that tacit acceptance is as far as we should go. Our reciprocal aid agreement with the United States [4] specifically reserves to each Government the right to determine the extent of the aid which it shall furnish to the other on Lend Lease terms and, despite the obvious desirability of prior consultation, we do not wish procedures to be developed which might be regarded as limiting the rights embodied in our agreement.

2. We have been advised [5] by our Mission in Washington that an expression of our viewpoint is desired before February 5th and we are instructing our representatives to reply to the Foreign Economic Administration along the following lines:-

(a) We have so far been able to give only preliminary consideration to the points contained in the United States Note of January 7th, 1944 [6], we understand that the proposals contained in that Note are tentative and that they are intended only as a basis for further discussion. The only point on which we understand immediate expression of our views is desired is the proposal to exclude from Lend Lease certain categories of capital goods. We have been informed that this proposal is not intended to apply to requisitions filed prior to November 15th, 1943.

(b) We feel that it is entirely a matter for the United States Administration to determine what shall, or shall not, be included in the scope of Lend Lease. We are, however, appreciative of the fact that the Foreign Economic Administration has invited us to express our views on the present proposals.

(c) In examining the proposal relating to capital goods, we have taken the following points into consideration:-

(i) The list of capital goods based on the Kolesnikoff code [7] transmitted to us is understood to be a tentative list, which is subject to revision:

(ii) Goods included in the list are to be regarded as ineligible for Lend Lease only if they are required for non-military purposes:

(iii) The list is not to be regarded as inflexible and the Foreign Economic Administration will be willing to consider any special cases we may submit in support of a departure from the general ruling:

(d) On the assumption that our undertaking of the various points set out in (c) above is correct, we shall cease filing Lend Lease requisitions for items included in the list of capital goods which we require for non-military purposes, excepting in those instances where we feel that special circumstances warrant the submission of a case for a departure from the general ruling.

(e) We are supplying the United States Forces in this area, under Reciprocal Aid, with a wide variety of locally produced articles of similar type to some of those included in the proposed list of capital goods. In other instances, we find it necessary to import industrial equipment from the United States for the purpose of stepping up the production of commodities which are to be transferred to the United States Forces under Reciprocal Aid. We presume that factors such as these will be taken into consideration by the Foreign Economic Administration in dealing with any requisitions we may submit for items which, under the general ruling, have been transferred from Lend Lease to cash purchase.

(f) There are various other aspects of the proposals contained in the United States Note of January 7th, 1944, which are of considerable importance to Australia, and we should welcome an opportunity of presenting our views on these proposals before they are put into operation. We understand that, with the exception of the capital goods proposal and certain off-shore purchases, of interest only to the United Kingdom Government, the proposals set out in the United States Note have been deferred for further discussion within the Foreign Economic Administration and other interested United States agencies. In particular, we understand that the question of off-shore purchases of petroleum products is receiving further consideration. This latter question is important to Australia and we presume that before any action is taken, we will be afforded an opportunity to express our views. 3. We feel, that if sufficient time had been allowed for a full interchange of views between the interested Governments, it might have been possible to reach agreement on the terms of a joint reply to be transmitted to the Foreign Economic Administration on behalf of all the British Commonwealth Governments concerned. The principle of prior consultation can scarcely be regarded as having been effectively established unless the United States authorities give us sufficient prior notice to enable their proposals to be properly examined and discussed by all the Governments affected.

Effective consultation is impossible within time limits such as those established, apparently by the United States authorities, in this particular instance.

4. Reference paragraph 2 [8] of your telegram 34, we are studying implications of the Machine Tools Inventory proposal which was transmitted to us through the Foreign Economic Administration Mission here and propose to discuss it further with them. We are interested to learn that you have not encountered any similar decision.

5. Reference paragraphs 3 and 4 [9] of your telegram 34. Our latest advice on these sewing machines is that, although they were initially ruled ineligible for Lend Lease, efforts are being made to procure them through the War Department by a bid for assignment. This may result in our obtaining the machines under Lend Lease. Other decisions communicated to us, however, suggest that our conception of 'military end use' does not square with the view held in Washington. So far as we can gather, the criterion adopted in Washington is that the equipment must be used by a uniformed member of the Armed Forces. This definition is regarded by us as too restrictive. We have been informed, for example, that tractors used by the Allied Works Council for construction of military aerodromes are not regarded in Washington as having a 'military end use' and that they would not be procured by the War Department.

6. Reference paragraph 7 [10] of your telegram 34. We note the United States proposal on freights. We understand that for the present this proposal does not extend to coast wise carriage of Australian Government cargo by United States vessels. We are asking our Washington Mission to keep this matter under close observation.

1 Document 37.

2. Dispatched 31 January. On file AA: A571, L41/915A, iii.

3 Dispatched 28 December 1943. On the file cited in note 2. It read in part: 'The decision as to what shall or shall not be included within the scope of Lead-Lease rests purely with the United States Government. The question of agreement does not therefore arise'.

4 See Documents on Australian Foreign Policy 1937-49, vol. VI, Document 39.

5 See cablegram W867, dispatched 28 January. On the file cited in note 2.

6 Conveyed in cablegram 24, from the U.K. Dominions Secretary, dispatched 21 January. On file AA: A989, 43-44/950/8/3/1, ii.

7 Standard Commodity Classification. The list is on the file cited in note 2.

8 Paragraph 2 addressed questions raised in paragraph 4 of Document 33.

9 Paragraphs 3 and 4 addressed questions raised in paragraphs 6 and 7 of Document 33.

10 Paragraph 7 addressed questions raised in paragraph 13 of Document 33 and explained a proposal that freight charges for goods bought for U.S. dollars and carried on U.S. vessels be excluded from Lend-Lease.

[AA:A989, 43-44/950/8/3/1, ii]