611.4731/141: Telegram

The Consul General at Sydney (Moffat) to the Secretary of State

Sir Henry Gullett2 telephoned me from Melbourne this morning asking me to inform you of the serious position in which the Commonwealth Government is finding itself as a result of the very great increase of exports into Australia, one effect of which has been to reduce available balances with which to meet its overseas obligations. The fact that imports from the United States are continuing to advance while exports to America are increasing only slightly, if at all, is causing the Commonwealth Government acute embarrassment. In the circumstances he asked me to telegraph his request that the United States should now send a delegate to Australia to initiate trade negotiations or else empower me to negotiate with him; he just did not have the staff to send any one to America.

I said that I would naturally transmit his request but that I felt it only fair to point out (1) our disinclination to negotiate elsewhere than in Washington (2) the difficulties of making concessions on competitive products at this stage of our trade agreement program, and (3) the fact that Australia had as yet shown little inclination to talk about reciprocal concessions even if not evenly balanced. He answered that Australia had been very patient and had recognized our political difficulties by not pressing us since 1934 but that now he felt that we should recognize Australia’s serious position. He indicated that the pressure on the Government artificially to restrict American imports was growing stronger in proportion as Australian balance of payments was becoming less favorable.

It is only recently that even insiders have begun to appreciate that despite the almost record year for exports the local boom fostered by the banks has resulted in increased imports to a point where Australia’s [Page 743] London funds are being depleted. In all probability steps will soon have to be taken to check the boom and thus reduce imports. I cannot believe that the Australian Government really expects to reach an agreement with us soon but I do think that it is very anxious for political reasons to initiate formal negotiations.

  1. Australian Minister in charge of trade treaties.