1. Wilcox (U.S.A.) has again approached us regarding Article 24(2)
and accepting determination of Fund. He repeated that the United
States could not accept our amendment, but that they recognise
that majority of Delegations here are likely to support us if we
press the issue. They are unwilling that the Conference should
fail on an issue between the United States and Australia and
Wilcox states that rather than reach this position, they are
prepared to precipitate a break on some other issue.

2. They have given no new reasons against our amendment and have
not suggested any compromise and we remain satisfied that our
arguments are correct on this issue. However, we think Wilcox
sincerely believes that if our amendment were adopted the United
States would not sign the Charter.

3. While believing we are right and appreciating fully political
difficulties in Australia of present text we doubt whether actual
practice would be much different whichever text were adopted. In
either case decision would probably have to be reached by close
consultation between I.T.O. and Fund and differences of view would
have to be solved before decision were reached.

4. Matter would arise when complaint was lodged against country
maintaining restrictions under Article21. [1] Under existing text
Fund would then have to decide on one or more of three facts:-

What is serious decline,
What is very low level and
What is reasonable rate of increase in members' monetary reserves.

On basis of this decision Organisation might then have to
recommend member to withdraw or modify its restrictions (assuming
basis was not 'imminent threat' of decline, when Organisation and
not Fund has final decision). But I.T.O. itself has control over
sanctions if member does not accept recommendation to withdraw or
modify restrictions, and if I.T.O. disagreed with Fund's ruling.

It would be likely that member would not accept recommendation and
I.T.O. would not permit sanctions, so Fund decision would in
effect be stultified.

5. Moreover if Fund makes bad decision which member accepts, fact
of decline in monetary reserves should soon provide evidence of
faulty decision upon which member could again act on own
initiative to re-impose restrictions.

Finally recommendation of I.T.O. would probably be to relax or
modify restrictions rather than to withdraw them entirely,
especially if there were any real doubt as to wisdom of Fund's
decision. This again would allow time for facts to speak for
themselves and member would again be free to intensify
restrictions without prior approval from anybody as soon as
evidence of need to do so appeared. There would presumably be some
unnecessary loss of monetary reserves, but this should not be
severe, and administrative difficulties should not be great if
restrictions were merely relaxed and not eliminated entirely.

6. For these reasons, (for regard for its own prestige) [2] and
perhaps also to prevent drain on its resources we believe Fund
would be unlikely to take unreasonable decisions preventing
members from maintaining restrictions under criteria provided in
Article 21 and in any case would hesitate to give determination
with which the I.T.O. disagreed.

7. Clayton will be back within the next few days and I shall
telegraph again when I have seen him, particularly in relation to
whether in fact the United States would reject the Charter if they
are defeated on this issue. Committee will probably reach
Article24 about New Year. [3]