Consideration of your I.T.O. 261 and 269 has been somewhat hampered by delay in getting repeats of indecipherable passages, not all of which yet received. In the meantime following immediate reactions will assist you:
1. In view of the new evidence of United States desire to secure a negotiated agreement along the lines originally contemplated, and our faith in the sincerity of the United States Administration's endeavours, we are now prepared to reopen negotiations where they left off.
2. This is not to be taken as an indication that the latest wool offer is regarded as anything like adequate.
3. We asked for 17 cents reduction and would have been reasonably pleased with 14 cents. Now we fear we may, in the light of recent developments, be asked to pay more than we can afford to give even for 14 cents.
4. We are most anxious not to have to consent to any reduction in preferences on dried and canned fruits in excess of the initial British responses notified in your I.T.O. 50 and 52 and we think you should take a firm stand on this at the outset. We would take less than 14 cents on wool to avoid this and other inconvenient demands. How much less depends on the nature of the demands and the strength behind them, which we are unable to assess at this stage.
5. We think it may be reasonably easy to lift the American offer to 10 cents (which is pretty close to the 8 1/2 cents already offered) and we would like to get it up, if possible, to 11 cents (which is practically a one-third reduction). At the same time we do not want to stimulate excessive American demands on us.
6. On a 10 cents basis we think our existing responses and the preference reductions in (4) above are quite a sufficient price to pay, and we would expect further direct concessions on beef and butter. We would also fee1 justified in giving strong support to British efforts to secure further concessions on textiles, both as to rates and the quota.
7. If we could get 11 cents or better we might be able to go a little further with reductions of our own tariff, but not very far. Timber, for example, might be further investigated.
8. We have no objection to your further exploration of an ad valorem rate on wool, but are not optimistic. The same applies to the other devices mentioned in latter part of alternative 4 of I.T.O. 261.
9. We would like to have, as soon as possible after negotiations are resumed, an overall picture of American reactions to our own offers (including British, Canadian and New Zealand preference reductions) and their response to such counter-demands on wool as you may in your discretion decide to make. Without this we will be very much in the dark.