137 Dedman to Chifley

Cablegram IT0283 GENEVA, 19 August 1947, 11.30 a.m.

MOST IMMEDIATE SECRET

1. In addition to my discussions in Paris with Clayton about which I have already telegraphed you, Delegation have had a preliminary discussion with some of Americans. It [is] difficult to give a general assessment of United States attitude towards our offers and requests but in paragraphs which follow, specific reference is made to what attitude [1] on issues where we are in a position to comment.

2. At that meeting we indicated that in course of negotiations we would seek further concessions on wool, beef and butter. In view of Clayton's attitude we did not press question of wool nor did we make any reference to possibility of conversion of reduced rate to an ad valorem basis. It may be more expedient to introduce this possibility later in negotiations when United States are pressing us to raise our offers.

3. We pressed them strongly on beef and also advised them that we wished to be associated with New Zealand in urging that there should be no tariff quota on butter but that if there were it should be very much larger.

4. They did not hold out much hope for an increase on beef and butter but said they would 'take it back to their people'. Our argument on beef is a very strong one and we feel they might find it difficult to avoid some advance on their offer. On other hand it is not unlikely that for political reasons they will hold to their present attitude. We are now sure that our earlier impression is right-that they have been fairly liberal on manufactured goods but in case of agricultural products, politics loom largely and Agriculture Department is difficult to move even though leaders here might recognise validity and strength of arguments they are called upon to meet. This applies to preference also, our unofficial advices being that United States Department of Agriculture representatives in negotiating teams have shown keen interest in agricultural preferential margins we enjoy.

5. It is clear however that some time must elapse before United States delegation can give firm reply. Our advice is that United States officers represent limit of their authorities but a procedure has been established for their review. This sometimes involves reference back [to] that department concerned and in some cases to President. We expect beef and butter questions will be referred to Agricultural Department in Washington before decision.

In these circumstances we consider only procedure is to revise our offers to correspond with present United States offers and to present them to United States delegation with an indication that they can improve them if the United States can offer more on beef butter and wool.

Since Clayton made it so clear to me that there is no prospect of any c[hang]e [2] in 8 1/2 cents any improvement in wool would have to come in some other way such as a change to a satisfactory ad valorem basis though, like you, I am not optimistic about this.

This gives maximum incentive to United States to improve offers more on these items particularly as modifications we propose are di[rec]ted mainly at agricultural interests which will be influential in deciding whether better offers can be made.

6. Offers which have been made in the United States America have therefore been carefully reviewed in order ascertain what particular offers may be withdrawn. In review the following facts emerge:

Existing offers do not represent maximum we were prepared to give in order to receive satisfactory responses to our requests. We were prepared to go further on following- (a) To reduce a number of most-favoured-nation rates if United Kingdom concurs. United Kingdom pressed us not go as far as we were hoping to go in offering reductions in a number of preferences in initial offers. It was expected that pressure by America would result in some further narrowing of preferences.

(b) To make a substantial offer in respect of motor body panels and, if Treasury concurred, in films.

(c) To reduce further duties on refrigerators and linoleum and radio valves. The offers on these were kept higher than figure to which we had authority to go.

(d) To consider and respond to supplementary requests which included whisky, mining machinery, machinery N.E.I. [3], chains, furniture and wallpaper.

Furthermore if our requests had been met adequately we would almost certainly have had to review our bids on some items.

7. Similarly offers that United Kingdom, Canada, and New Zealand made provisionally on preferences we enjoy were less than we would have been pressed to concede. Senior Canadian Negotiator who is very experienced and enjoys confidence of [4] informed us that with full 50% on wool, beef and butter they would almost certainly have been regarded by United States as 'rather light'.

8. We start off from a position therefore where our offers have been automatically reduced and remainder might not be far short of a fair balance. While United States offers now promise us little expansion of trade we feel it only fair to state that Delegation feels that our offers on protective tariff are such as still leave Australian industry with an adequate competitive margin and so promise United States little prospect of expanded trade. This judgment is shared by Mr Morris, Chairman of the Tariff Board.

Similarly reductions on preferences we enjoy are unlikely to affect appreciably competitive position of export industries concerned.

9. However, we think it important to reduce our offers further in order to maintain attitude we have adopted and to put maximum pressure on United States to improve their offers. In this connection it seems desirable to concentrate on further reductions on agricultural products. This concentrates pressure on Agriculture Department which is centre of resistance and also has incidental advantage that it involves a minimum of adjustment in our negotiation with other countries.

10. We recommend therefore that we be authorised to advise United States negotiators:

1. That in view of unsatisfactory character of their offers we are obliged to amend our offers in following ways- (a) To withhold offers on films, motor car panels and other items temporarily not included in our original offers, (b) To withhold offers on supplementary requests made by United States when our original responses were exchanged, (c) To withdraw from our existing offers following items- i tobacco leaf and cigarettes ii canned asparagus iii raw cotton.

We are doubtful whether tobacco and cigarettes in view of their importance to United States can be completely excluded from negotiations with them. Furthermore present provisions covering mixing arrangements clearly protect Australian practice. We are cabling further on this point.

2. That furthermore we have communicated with United Kingdom, Canada and New Zealand advising them that we would not wish to concur in offers by them affecting preferences we enjoy (as set out in our cables 50, 52 and 190 and in mailed statements) in their tariffs and asking that their offers be amended as follows- (a) Canada to be asked to make no offer on canned peaches and pineapples and to reduce offer on canned [apricots and canned pears] [5] by 1/2 cent.

(b) United Kingdom to be asked to reduce offer on raisins by 6d.

and by [6] reserve canned peaches and pears and apricots.

(c) New Zealand to be asked to reserve raisins and peaches.

3. That if they are able to improve their offers on wool or beef and/or that to New Zealand on butter we would be prepared to reconsider these amendments but except in event of a substantial improvement in wool offer we would, in no case affecting preferences we enjoy, go beyond our present offers (see also paragraph 15 below).

4. That we would regard a conversion on wool duty as now reduced to an ad valorem basis on present values as an improvement in wool offer.

It is difficult to assess what would be reaction to these changes but we have discussed preference items with Canadian referred to in paragraph 7 above and he considers them reasonable in light of changed wool, beef and butter offers and that he would support them in negotiation.

II. Our negotiations with United States are likely to be affected by action United States have forecast in relation to preferences generally. United States consider that offers by Commonwealth countries are an inadequate implementation of undertaking in Article 7 of Mutual Aid Agreement and represent no fundamental change in system and certainly no significant progress towards 'elimination'.

12. We understand that United States delegation has been considering a new approach to Commonwealth countries on preferences which will provide for (a) limitation of United States requests affecting preferences to a narrow range of items (b) a long-term programme for actual elimination of preference of these items. We shall further advise when any developments occur.

13. In proposals outlined above we have proposed that reductions of preferences other than on canned and dried vine fruits to which we have provisionally agreed should stand. There are certain items (e.g. prunes in Canada) where we have never been able to take advantage of existing preference and in which we have no trade on which it might be good tactics to accept elimination if by so doing we can divert pressure from items where preference is important for existing trade or where item is politically difficult e.g. canned peaches. We would recommend therefore that delegation should be given some discretion to agree subject to confirmation from Canberra to further reductions on such items.

14. Would be grateful for early indication whether suggested basis for revised offers to United States outlined in paragraph 10 above is considered adequate and whether discretion recommended in paragraph 13 above is approved. [7]

15. In event of substantial improvement in United States offers on beef and butter consider that we could safely go back to present offers on dried and canned fruits. We would like further time to consider what should be done in respect of tariff items.

1 Words appear to have been omitted from the text here.

2 The word in the text is 'course'.

3 not elsewhere included.

4 A symbol here indicates 'mutilated'.

5 Words in square brackets have been inserted from collecting cable ITO291, dispatched 22 August.

6 Possibly the word 'by' should read 'to'.

7 Cabinet Sub-Committee agreed to the proposals, adding that the Delegation must not 'concur in any reductions in any preferences in Empire markets in excess of those originally offered to the United States'.

[AA : A1068, ER47/1/28, ii]