1. Australian Government feels that total amount and distribution of reparations from Japan should be settled urgently. Nearly three years have elapsed since surrender. Assets in Japan are deteriorating; absence of firm decision makes it impossible to plan future development of Japan along peaceful and stable lines;
and absence of decision is playing into hands of those elements of U.S. Government which are opposed to reduction in Japanese war potential. In our view it is therefore more important to get an early and effective settlement than to secure one that is mathematically precise and just. Furthermore, it is possible that the United States may go ahead now and issue an interim directive on reparations shares which we feel would be undesirable as it might provide a final break with Russia in the Far East and prevent all possibility of an eventual Japanese peace settlement to which all countries concerned would adhere.
2. Australian Government therefore feels it would be desirable to make a further attempt at securing an overall settlement of Japanese reparations even though this might involve the abandonment of some of the principles we have hitherto advocated, and even though some countries might get less than they deserve while others might get more. The alternative, we feel, would probably be no reparations at all from Japan for anyone. The immediately following cable contains the text of a proposal which we are considering instructing our representative on F.E.C. to present to the Commission.
3. The chief difficulty in any proposal is to find a solution which is acceptable to the U.S.S.R. without giving her an unreasonably large share. Our suggestion offers some prospect of achieving this by giving U.S.S.R. some degree of parity with the U.S.A.
4. It is believed that our proposal would give the British Commonwealth a satisfactory share of total reparations. In industrial facilities the British Commonwealth would get an initial distribution of 15% with a further guaranteed minimum of 8% (being the balance to U.K. and India under the U.S. proposed schedule), with further consideration to be given to India, Burma, and devastated British territories in the Far East. In shipping the British Commonwealth would get a minimum of 15% and the special claims of the U.K. to a large share of the balance would be granted. In Japanese stocks of gold and precious metal the British Commonwealth would get 15% which is more than we consider likely under any other scheme of distribution; our proposal would also avoid the difficult question of defining occupation costs and would be a way out of the clash with the U.S.A. as to the priority of expenditure on necessary Japanese imports. In external assets the Australian proposal would not completely satisfy the conditions which all members of the British Commonwealth have hitherto insisted upon, but it seems realistic to accept the fact that these conditions will not be accepted by the U.S.S.R. The U.S.A. has already expressed the opinion that all Japanese external assets in neutral countries should be used to defray U.S.
occupation costs, but under our proposal five-elevenths of these assets would go to the British Commonwealth.
5. We propose that there should be no reparations from Japanese current production. A clear decision by the Far Eastern Commission to this effect at this time would appear to us to be a notable contribution towards achieving the objectives of the Allied occupation under the provisions of the Potsdam Declaration. Until the question of reparations from current productions is settled it is impossible for the Commission to make a decision on levels of industry in Japan. Informal discussions last August at the British Commonwealth Conference, particularly in committee, indicated that all members of the Commonwealth were doubtful about the possibility of exacting reparations from current production.
6. The Australian Government desires to secure a whaling vessel in reparations' but realizes that under this proposal the Australian share of 3% would probably not be big enough to obtain a factory ship. It is considered, however, that an arrangement could be reached with the U.K. Government whereby such a vessel might be transferred to us from the U.K. share under terms agreed upon by the two Governments.
7. We should be glad of your urgent comments on this proposal. We believe that the sooner a complete proposal of this nature can be presented to the Far Eastern Commission the better and that the proposal should cover all these categories of assets and not be submitted piecemeal.