The tone of the comments of your 47 [1] on interchange of American
Divisions for Australia with the 9th Australian Division and New
Zealand Division for the Middle East makes me fear that this
question may not be [considered] [2] entirely on its own merits
and from its bearing on the ultimate security of Australia and the
quickest way of winning the war as a whole. I will first clear up
apparent personal misconceptions and I later will indicate my own
approach to this whole problem.

2. Before doing so, however, I would like to point out regarding
your paragraph 2 that my telegram P. 64 [3] was sent after hearing
Roosevelt's telegram read at War Cabinet. A close perusal of the
telegram which has been sent to you in Dom.311 [4] will convince
you that my interpretation is correct.

3. Roosevelt's telegram emphasised the necessity for economising
in shipping and the continuing security of the Middle East, India
and Ceylon. As at least six sentences of his telegram deal with
methods of reinforcing Australia, India and the Middle East I am
surely justified in saying that there is insistence on the
intimate connection between Australia, the Mid[dle] East and the
Indian Ocean theatres.

4. Regarding the statement in your paragraph 4 that my information
is open to some doubt, I would point out that it is open to no
doubt. In paragraphs 4 and 5 of my P. 64 I stated that 'Churchill
said that he had been in touch with Roosevelt on the whole
question of war strategy, that Roosevelt was seized with the
importance of defence of Australia. ... accordingly the President
had made the offer which Churchill has telegraphed to you (in
D.311)'.

5. It must be obvious from my statement and from Churchill's
[cabling] to you the whole text of Roosevelt's telegram in which
he includes the sentence that you mention in your paragraph 3 'we
also agree that the Australian and New Zealand Divisions now in
that region should remain' that Churchill did not conceal his
discussions with Roosevelt.

6. The question as to whether [he] should discuss with Roosevelt
the use and disposition of Australian and New Zealand troops and
the use of American troops in their place is a matter which raises
the propriety of prior discussion with the Australian and New
Zealand Governments if he has any plan to propose. But this is
something quite different from doubting his good faith or my
information. It is not suggested that he was not prepared to carry
out his undertaking to endeavour to send all the Australian troops
back to Australia if you did not approve of any plans he made with
Roosevelt. Yesterday I sent you a wire asking for your decision on
this matter as the British Chiefs of Staff here were being pressed
by the Combined Chiefs of Staff in Washington for reply. [5]

7. I am as keenly desirous as anyone can be of seeing in the
present crisis all our Australian troops back in Australia if that
is practicable. A realistic view must be taken however of the
physical facts of the situation. We must act so that we get to
Australia both at the earliest date and continuously maximum
reinforcements in men, munitions, equipment and aircraft and at
the same time have the maximum goodwill in Britain and America.

8. Goodwill is of very great importance to Australia in the making
available of equipment of all sorts and in accelerating its
despatch. We have at present such goodwill as to induce the
British Government to take some guns out of installed active units
to supply immediate Australian demands. Goodwill towards the
Australian outlook is of great importance when actual Australian
Government proposals for the method of conducting the war in our
own regions are being considered in the highest councils. Goodwill
is especially valuable in determining the allocation of British
shipping for which there is such a clamant demand in every part of
the world and on which Australian defence must rely. Australia
must depend entirely for its reinforcements of men and equipment
on overseas sources. The British people have submitted to severe
increased rationing in order enable more shipping to be available
for war purposes in overseas theatres such as Australia.

9. The goodwill and complete understanding between Roosevelt and
Churchill should be capitalised to Australia's advantage. The
shipping position is more acute than at any other period of the
war and is causing Churchill and Roosevelt more concern than any
other problem and any contribution we can make to the easing of
this problem will be probably more appreciated now than at any
other time.

10. The extension of war activities on such a large scale to the
Far East and Australia and the most intensive increase of the U-
Boat campaign on the Eastern Coast of America and the Caribbean
Sea and in the Atlantic generally have increased the difficulties
of the shipping position. In February the shipping losses so far
reported were 83 ships totalling nearly 500,000 tons. There is in
addition a loss of 158,000 tons of previous months now reported. I
would be surprised if a similar addition of tonnage losses has not
still to be added to the February figures. The known losses of the
first week in March were well over 200,000 tons. This, if
continued, would involve a 10 million loss in a year. The Chiefs
of Staff report that there are at present over 260 enemy U-Boats
operating in the Atlantic and 470 are expected to have been put
into service by the end of the year. The 'TIRPITZ' is at large.

The 'GNEISENAU' and 'SCHARNHORST' have escaped from Brest and the
Japanese raiders have scarcely got properly going yet. The Middle
East campaign depends entirely on reinforcements in men and
material around the Cape. If the allies have to defend the
Caucasus and obstruct the German offensive against the Russian oil
centres in the Spring this is the way in which reinforcements must
go. Active fighting in India, Burma, Australia and the Far East
generally will entail a much longer haul and the sending of
reinforcements on a much bigger scale over this longer haul to
cope with Japanese strength than in any other previous theatre of
war.

11. The presence of Japanese raiders, submarines and warships in
the Pacific and Indian Oceans will entail longer routeings, more
scattered diversions and more convoys of all ships, thus reducing
the effectiveness of the limited shipping tonnage at our disposal.

12. We will be fortunate to produce from all allied countries this
year 8 million tons of new shipping. Britain produced about 1
million tons last year. No matter how successful may be the drive
for increased production of supplies, the beneficial influence on
strategy in all oversea war theatres of the existence of these
supplies will be largely discounted if there is not shipping
available to place them in the appropriate position. Under these
circumstances it seems to me that the most serious consideration
should be given to any suggestion which reduces unnecessary use of
shipping and avoidable movement of troops who are already in
battle positions at strategic points.

13. Last year our great deficiency was shortage in aeroplanes. I
believe this year this shortage will be overcome and that our
great deficiency this year will be found to be shortage of
shipping. I beg therefore that this aspect may receive the fullest
possible consideration before your Government comes to a decision
to do anything which may not use our shipping to the best possible
advantage. Australia depends entirely on shipping for the
conveyance of its produce to market and of its defence
reinforcements from overseas. Because of its remoteness the effect
of any shipping shortage will be felt most quickly and most
acutely.

14. In a rapidly changing war situation decisions must be subject
to continuous review. In last few weeks particularly the position
has changed so drastically as to necessitate a complete
reorientation of outlook in many aspects.

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