Repeated to London No. 124.

Your telegrams Nos. 238 and 239. [1]

Technical discussions have been proceeding for the last month
between Ministry of Economic Warfare, Officials of the British
Embassy and the relevant Division of the State Department in an
attempt to correlate economic action against Japan. The problems
are not yet sufficiently advanced to warrant political discussions
in which the British Ambassador, the Secretary of State and
presumably myself would join.

I saw Welles [2] and Hornbeck [3] today on the subject matter of
your telegrams. They say that the Japanese policy is to make such
formal protests on every relevant occasion in order to have 'a
diplomatic case' ready for any eventuality. When the Japanese
Ambassador [4] recently made a formal protest to the Secretary of
State [5] on scrap iron he was told that the actions of Germany
and Japan had made necessary American rearmament which in turn
made necessary the conservation of scrap iron resources, and that
in consequence the protest was unreasonable.

The United States Administration replied to all such protests on
embargoes by stressing the domestic necessity, and refuse to be
drawn beyond this.

My personal view is that it is unreasonable to expect Australia
and New Zealand to go anything like the same [relative] [6]
lengths as the United States and Canada in joining in the export
limitations to Japan. Our Australian exports to Japan are very
small compared with North America, and Australian action is likely
to cause little more than irritation, and might even provide Japan
with the excuse of some form of retaliation which in their present
excitable state might possibly set fire to the Pacific area. I
believe that pinpricks and provocation should be avoided by
everyone particularly by countries that are vulnerable to Japan
and we do not want to provide the maximum irritation with the
minimum security. The United States is still providing Japan with
[probably over] half of her imported supplies necessary for war
and if the economic weapon is to be wielded they are from every
viewpoint the people to do it.

The list of current American exports to Japan which is of
considerable range of commodities important in war, shows increase
from twice to seven times peace-time volume.

Welles agreed that the sooner political discussions take place on
this general subject the better.

If and when political discussions start here on this subject I
suggest you authorize me to hold this general view although not to
put forward in a provocative way or in a manner suggesting that we
are non-co-operative [or] desirous of avoiding our share in the
common action,
In view of the early conference at the British Embassy,
preliminary to discussions with the State Department, I would be
glad of advice particularly respecting principal commodities.

As regards the entry of Japanese into New Guinea. Welles commented
sarcastically that we might make privilege dependent on their
similar agreement in respect of Australian Commercial Travellers
entering the Marshall and Caroline Islands.

I am informed on the best authority that the Netherlands East
Indies take the point of view that as neither Britain, the United
States or Australia has made any mutual defence proposals to them
they propose to walk very warily and to take care to give no
offence to Japan. In consequence they are unwilling that the
United States should send naval observers to points in the
Netherlands East Indies. (See my telegram[3] 99 [7]).

In talk with the Chief of Naval Operations [8] here yesterday I
was told confidentially that 12 or 14 P.B.Y. [9] American flying
boats were on their way to Manila.

Welles told me today that American cruiser was proceeding to
Manila.

I have suggested to both Welles and Stark that as they are
unwilling to send a naval squadron to Australian waters under
present conditions they might send single vessel to investigate
conditions in Australian waters by personal observation. Burrell's
[10] material was paper information which might with advantage be
supplemented by such an exploratory visit. Both agreed suggestion
sensible and is being considered.

Admiral Danckwerts has been added to British personnel for
strategic Staff conversations here, which will not begin before
the end of December.

The President [11] and the Secretary of the Navy [12] return to
Washington about 15th December.

Please say if you wish me to repeat relevant portion of telegram
to Latham. [13]

CASEY