I have to thank you for your letter of 12th August regarding the
Joint Intelligence Organisation.

I have found your observations most helpful, but they do not
remove some of my difficulties, but, in fact, confirm some of my
doubts.

Before commenting on the points you have made, I should like to
put forward an alternative. It is true that, at the Prime
Ministers' Conference at London, it was agreed we should move
forward along the lines you are suggesting. Since that time,
however, there have been remarkable, and even dramatic, changes in
international affairs, and, in particular, in British Commonwealth
relations. The inclusion of two new dominions in India and of
Ceylon and Burma in the British Commonwealth Organisation is
sufficient reason for reconsidering British Commonwealth defence
arrangements. The British Commonwealth Organisation is a flexible
instrument, and these new developments require an adjustment of
previous plans.

Under the new set of circumstances, it would appear preferable
that Australia, and perhaps Australia and New Zealand, should have
an independent intelligence organisation covering our area, and
that other members of the British Commonwealth should have similar
independent intelligence organisations, each being loosely linked,
so that any information which each thought should be communicated
to others could be so communicated. A Joint Intelligence
Organisation of the type previously suggested can in the long run
only lead to embarrassments. Our whole experience of British
Commonwealth relations is that the looser and more flexible they
are the greater the degree of co-operation that is achieved.

I feel sure that both the Prime Minister and the Minister for
External Affairs would want at least to consider such an
alternative before carrying through a decision which was made in a
totally different international and British Commonwealth
situation.

My own personal view is that this Department could offer the most
complete co-operation, using all its resources, both here and
overseas, in a separate Australian or Australian - New Zealand
intelligence organisation, but that it would find the greatest
difficulty in fully co-operating in a joint scheme as at present
proposed.

The following comments on the observations in your previous letter
are irrelevant if the alternative I have suggested is to be
considered. However, they are made in order that the present plan
can be given full consideration.

Scope of Joint Intelligence Bureau:

You confirm that the Bureau and the Signal intelligence Centre are
to be kept informed of current political developments in various
countries. I see great dangers in this. To begin with, it will be
difficult to ensure that these organisations are in possession of
the same facts that we have, or that we are in possession of the
facts that they have, and it is not unlikely that two different
judgments will be made of current political developments. If the
Bureau and the Centre are to be informed on these matters, it
would seem to me that their only source of information should be
through this Department, either from our own agencies or others
communicating through us.

Moreover, it would be a matter of continual embarrassment to us if
other members of the British Commonwealth were being informed of
our own judgment of current political developments in countries in
this area. I could demonstrate this in detail by reference to
recent negotiations on Indonesia.

There is some misunderstanding regarding the officer to be
attached from this Department. No officer can represent this
Department generally, unless he is a senior officer of the
Department working in the Department. If it was previously agreed
that a member of this Department might be included on the staff of
the Bureau, or attached to the staff of the Bureau, this could be
only for the purpose of helping to build up the staff, and it
should be clearly understood that any such officer would not
represent this Department in any way.

Instructions and Regulations:

Regarding instructions and regulations, I previously made the
point that it would be difficult for me to advise the Minister
regarding instructions and regulations which had not been
communicated to me or to him. If a prior condition of
participation by Australia in the British Commonwealth Signal
Intelligence Organisation is the acceptance of principles outlined
in a document which has not even been seen, I do not think we
should agree to participation. If this attitude is taken in the
matter of instructions and regulations, it can be taken in
relation to more important matters, and it would be unfortunate
for us to place ourselves in a position of 'take it or leave it'
because of decisions which had already been taken by United
Kingdom Government authorities.

Communications:

Regarding communications, there will be, in the very near future,
Australian representatives at all important posts throughout this
area, and our experience has been that information received from
our own representatives is considerably more reliable than
information obtained from other sources. The arrangements
suggested underline the difficulties referred to above in relation
to reporting on current political developments. The present
arrangements will lead to one set of facts being sent to the
Bureau and another set to this Department, with no effective means
of co-ordination. My understanding is that the organisation in
London in relation to the Foreign Office is slightly different,
the Foreign Office having a closer relationship with the Bureau
than it would be possible for this Department to have. The cases
are not therefore parallel, but the effective working of the
Bureau, from the point of view of political information, will
depend upon co-ordination first of all in this Department of
relevant facts.

Regarding the means of communication, my understanding is that the
radio communication which is suggested for the Signal Intelligence
Organisation is considered too expensive for the day to day work
of the Government. I find it hard to understand, therefore, why it
should be considered that radio communications can be used in this
connection. Regardless of expense, we must, ourselves, in the near
future, institute direct radio communication with our more
important posts, just because Australian foreign policy cannot be
effectively carried out without such direct communications. Before
decisions are taken on Signal Intelligence Organisation,
therefore, the whole question of governmental communications
should be reviewed.

Location:

I note your comments on the location of the headquarters, and I
can fully appreciate the difficulties involved. At the same time,
it should be stressed again that, as is the case in London, the
success of an intelligence organisation will depend entirely upon
a close link with the Government and with the governmental
departments, such as External Affairs, Commerce, Treasury, and
others, concerned with Government policy in the area of strategic
importance to Australia, and which, through their day by day work,
are most likely to be in possession of the more important set of
facts which go to build up strategic policy.

General Comment:

With regard to your last paragraph, I do not wish in any way to
hold up consideration by the Government of the proposals you have
to put before it, and my previous comments, and, in fact, these
comments, are not designed with that end in view. The matter is an
important one, and I have put for-ward comments merely because I
believe they should be taken into consideration in any final
decisions made. Nor do I wish for this Department to appear to be
pressing a narrow departmental interest in matters of
communications or any other matter. We are entering into a phase
in international relations when, for security reasons, we must
pursue positive policies, and, in my view, the proposals as put
for-ward will embarrass the Government in doing this. I was aware
that the Prime Minister stated that Australia would establish this
Joint Intelligence Organisation, but the question is the type of
Organisation which should be established, and I do not believe
that, without a general review of the position, the alternative
indicated above in my first paragraphs should be dismissed.