10 McFarlane to Chifley

Cablegram 413 WASHINGTON, 2 April 1948, 6.28 p.m.

IMMEDIATE SECRET

Further to my cable 402 [1], I would not interpret Chancellor's request as preliminary to a change of policy under which Australia and other sterling area countries should rely for dollars solely on respective earnings and drawings from Fund. Such a policy would force redirection of exports and harm all concerned.

2. It may possibly take six months before Marshall Aid results in any substantial benefit to the United Kingdom (the organisation still has to be built up) and as United Kingdom's drawing quota from Fund to September has been practically exhausted and the drain on reserves will continue in meantime, Chancellor is probably looking to other available means to reduce that drain.

3. The Fund will necessarily adopt a more conservative policy to future requests from Marshall Aid countries. However, no consideration has yet been given to the question whether any further drawings by United Kingdom should exclude any provision for other members of the sterling area and that such members should look direct to the Fund. If it does arise I feel sure United Kingdom would object. Whilst United Kingdom cannot rely with certainty on future drawings, I think it might be reasonable to assume that some limited drawings would be permitted in exceptional circumstances which may include some provision for Dominion sterling countries.

4. Cable 61 says it is 'most unlikely Marshall Aid will cover dollar deficit of sterling Dominions' also drain on reserves will be substantial in first year and stresses need to intensity dollar savings. This together with background above and my previous cable explains more fully reasons actuating request for Australia to draw.

5. I can understand some hesitation on your part to make drawings because of our indirect benefits to United Kingdom. Australia cannot accept any change of policy under which we would have to rely for dollars on own earnings plus drawings from the Fund or alternatively a fixed ration from United Kingdom pool. In the circumstances, however, I think Cripps's request not unreasonable provided United Kingdom still recognises a continuing obligation to make dollars available within reason. You might, therefore, think it desirable to get an understanding on this latter point before you make definite decision.

6. Have discussed with Wilson who agrees.

1 Document 8.

[AA: 1838/283, TS706/1/1]