444 Department of External Affairs to Embassy in Washington

Cablegram 983 CANBERRA, 14 August 1947, 7.10 p.m.

IMMEDIATE

Level of Japan's Industry.

Reference your 1083, 12th August.

1. F.E.C.084/19 might have been a useful basis for further commission action if it had been adopted when it was first drafted nearly a year ago. Today the situation is quite different because the F.E.C. should leave all decisions on level of industry for the Peace Conference to decide. In the absence of further F.E.C.

decisions on specific levels paragraph 5 of F.E.C. 084/19 [1] will have no practical effect. However little purpose would be served by Australia opposing adoption of the paper at this stage and you may therefore vote for it and make our position clear as outlined in this and other telegrams.

2. Reference your paragraph 3. It was never intended that paragraph 5 of F.E.C. 084/19 or F.E.C. 106 should require a strict or mathematical application of 1930-34 standards to each industry.

In some industries considerations of security may require cuts down to figures considerably below that [level]. There appears to be a tendency in some F.E.C. discussions to adopt the 1930-34 level for every war supporting industry despite the explicit reservation in paragraph 3 of F.E.C. 106.

3. There is no objection to discussion in F.E.C. committees provided you ensure there is no possibility of our being manoeuvred into position where we have tacitly accepted desirability of F.E.C. decisions in this field. So far discussions have been in sub committee but it may be more difficult to refrain from committing ourselves if discussions be allowed to proceed in full committee. Decisions should of course be left to Peace Conference. Moreover policy on these questions will be under review at British Commonwealth conference in Canberra this month and F.E.C. discussion of any sort before then should be discouraged for which course you will no doubt be able to get support from other Commonwealth representatives.

4. You must therefore use your discretion as to degree of discussion provided you ensure that no decision is made by F.E.C.

that no commitment is made by Australia and that freedom of action by Peace Conference is not impaired.

5. Your argument in paragraph 4(B) should not be expressed to F.E.C. since it implies inability on our part to weigh evidence presented by U.S.A. and shows ingratitude to U.S.A. for information and technical assistance it has provided. In general it would appear better to avoid detailed criticisms of sort stated in your paragraph 4. Our case is simply that levels of industry should n[o]w be decided by Peace Conference which is to meet soon.

1 A paragraph identifying industries deemed to be 'war- supporting'.

[AA : A3300/2, 745C]