We do not know what policy you have in mind but if basis of policy
is to permit export of goods to Japan equivalent in value to our
vital needs of imports from Japan under war conditions, then our
exports to Japan would be almost negligible as our imports from
Japan for vital and essential needs would be comparatively small.

It appears necessary that Empire policy at least should be based
on general principles. In addition it would be advisable for the
Empire policy to be co-related in some form to United States
policy.

Our immediate problem is that we have one Japanese ship which was
scheduled to load zinc concentrates today and another scheduled to
load wool tomorrow. In view of your request that export licences
for strategic minerals and metals should be suspended and also
having regard to the fact that payment for these zinc concentrates
had not been made, we are informing the Japanese exporters that
the zinc concentrates cannot at this stage be loaded.

We propose to prevent loading of wool tomorrow pending receipt of
your advices, as payment could only be made out of frozen funds.

A further point which also arises is whether despite agreement
between Governor-General of French Indo-China and Commander-in-
Chief, China Station [7], we should continue to make supplies
available to Indo-China on basis agreed upon.

Would appreciate your earliest possible reply especially regarding
shipment of zinc concentrates and wool. [8]

[AA : A3196, 1941, 0.10720]

1 Repeated to the N.Z. [Acting] Prime Minister as no. 281.

2 Inserted from Prime Minister's Dept outward cablegram register
(AA : A3643, 2).

3 Dispatched 22 July. On file AA : A981, Far East 20A, ii. It
outlined broadly U.K. and U.S. proposals to freeze Japanese assets
and to restrict: trade with Japan in the event of a Japanese
southward move.

4 Japanese assets in the United States, the United Kingdom and the
Dominions had been frozen on 26 July (27 July Australian time). As
Japanese balances in Australia were already subject to exchange
control regulations, the freezing of assets was merely an
administrative procedure (see Document 63).

5 Cablegrams 418 and 419 (dispatched 16 December 1940), Z311
(dispatched 19 October 1940) and Z312 (dispatched 20 October 1940)
are on file AA : A981, Trade 68, iv. Cablegrams Z311 and Z312 are
summarised in Documents on Australian Foreign Policy 1937-49, vol.

IV, Document 186.

6 ibid., Document 386.

7 An agreement between Vice-Admiral Jean Decoux and Vice-Admiral
Sir Geoffrey Layton, signed in January 1941, allowed limited trade
between the Vichy regime in Indo-China and British territories but
proscribed re-export of British goods by Indo-China without the
permission of the British Consul-General at Haiphong. See file AA
: A1608, L41/1/7, i.

8 Cranborne advised on as July that licences for zinc concentrate,
a strategic material, should be refused. The U.K. Govt had no
objection to the granting of licences for wool but suggested that
Japan first be required to repay existing credits from the
available frozen funds. See cablegram 519 on file AA : A1608,
A41/1/1, xxiii.