For Dr. Evatt from Colonel Hodgson.
After various talks with key men in the State Department, the
following are some of my impressions, especially as regards
For about three months the Department has not functioned owing to
the Presidential Elections, the absence of the President on
holiday, hold up by the Senate and the four new Assistant
Secretaries  and general reshuffle of positions. One moment the
Press are attacking them for not having any Foreign Policy and
then when any pronouncement is made usually after a Fait Accompli,
such as Greece and Poland, that they had no cause to issue such a
statement. As a consequence there seems a marked hesitancy to face
up to any of the big problems which we are studying, such as the
pacific future of Germany, Peace Treaties and World Organisation.
It is difficult to obtain an agreed Departmental view on any
subject. This is particularly true of commercial relations and I
gather Hawkins  went to London without any clear notion of what
the Government or the State Department wanted.
There are two conflicting schools of thought in the State
Department as regards any multilateral Commercial Agreement-
(A) That any International body set up should be purely consultive
and advisory. It would be an exchange for information, a
repository for the receipt and examination of statistics from
Member States and with powers of recommendation to achieve the
objective of Article VII of the Mutual Aid Agreement. Each State
Member would negotiate freely on bilateral lines within the
general principles of any agreed convention.
(B) That the Member States should initially enter into binding
obligations embodied in the Convention itself to reduce tariffs or
at least not to raise them and not to take discriminatory
commercial measures in regard to which the International Authority
set up under any such convention would have authority to enforce.
This view is strongly held, but those opposed state the agreement
would be so circumscribed by reservations and take so long to be
brought into operation as to make it almost worthless.
I gather from the latest cables and Departmental notes I have seen
here on this subject that a Conference on this subject was
contemplated some time early in the New Year. I think this will be
found to be incorrect. The State Department estimate that Hawkins
will not return for three months. The position will then be
examined in the light of the informal London conversations and a
decision reached as to whether they are to be continued on an
official basis or other Countries brought in, A fundamental issue
is involved at the outset. The United Kingdom desires a reduction
of the United States tariff as a prerequisite whereas the United
States is insistent that preferences including Imperial
preferences must first go.
At the same time as the multilateral approach is being pursued the
United States is conducting and is prepared to conduct bilateral
In this respect I was advised informally that the United States
was now prepared at any time or place to reopen conversations with
Australia on a bilateral basis with a view to post-war trade. This
might be examined as to whether we consider the time opportune.
The question of the Australian Full Employment Policy was raised
by them informally very early with me. They are most interested
and would, I think, come into a conference provided they had a
prior chance of examining the Agenda and provided possibly that it
was held in America so that opinion here could be educated. At the
same time I am not sure if our experts from Australia on their
return have conveyed to you the strong feeling in some quarters in
the United States against the Full Employment Policy. One fact to
be borne in mind is that the Department of State in its recent
reshuffle is now controlled by men representing the wealthiest
families in America. Even before this it was strong enough to damp
down on Miss Perkins and Department of Labour at Philadelphia when
they were fast coming our way.  Much spade work has been done
but they have to be thoroughly convinced on the following issues-
(A) Would not a full employment agreement as the first objective
of international economic relations mean that it would be
difficult if not impossible to obtain a lowering of tariff
barriers by individual countries? Therefore should not a
multilateral agreement covering tariffs, discrimination exchange
control etc. come first.
(B) The President has promised sixty million jobs. With the
industrial potential here and an assumption of a large exportable
surplus such as motor cars and trucks, how is this going to affect
employment elsewhere. Conversely how will full employment policies
elsewhere affect these jobs.
(C) The officers I saw appreciate that the policy of full
employment can be worked under a totalitarian system such as
Germany with price and wage fixations, regimentation and rigid
Governmental control of business, This system would be quite
unacceptable to the United States and they would like to know the
concrete ways and means contemplated for application to a
democratic system such as ours.
(D) If the partial answer to (C) is by Governmental expenditure on
public works leavened out over lean years based on a policy of
deficit . . .  their rejoinder is that this was tried during
1932-1938 and were rescued only by the war purchases of the
Keynes may say the United States Government did not go far enough
but where would a spiral increase lead to?
(E) Would not a policy of subsidies to consumers or process for
the stimulation of production be just as efficacious.
I mention these as indicative of the various viewpoints one has to
controvert and as a guide to the people who are preparing our
briefs for the proposed Conference.