647.006/52: Telegram

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

My May 12 [22], 8 p.m. A preliminary analysis of the Government’s new trade measures leads to the conclusion that about 80 percent of our total exports to Australia can maintain their position but that some 20 percent may be lost through artificial diversion, chiefly to British competition. These last, despite the advantages given them in the preferential tariff, primage tax, currency valuation for customs purposes, plus a natural predisposition of the Australian to buy British, have been pressing for further advantages. In fact Gullett stated that as the tariff policies of foreign countries had operated against Australian primary produce and as there was no immediate prospect of increasing sales in markets other than the United Kingdom, more must be sold there and to do that Great Britain must be given a greater market in Australia. Of the pounds 2,290,000 which the Government estimates will be diverted, Australian manufacturers are expected to benefit by pounds 845,000, good customer foreign countries by pounds 135,000 and the United Kingdom by pounds 1,310,000.

In explaining the Government’s policy of licensing, Gullett announced that licenses would be freely granted in respect of imports from all countries from which Australia had a favorable balance of trade or where the Commonwealth was satisfied with the trading position. In the case of countries from which imports would be restricted the Government would be prepared to consider a modification of the restrictions in proportion to increased purchases from Australia which such countries might make from this time forward.

There is a certain amount of local criticism of the Government for bringing forward such drastic changes in its policy as a complete surprise to the commercial community. There is considerable worry on the part of the pastoralists at the possibility of Japanese retaliation against Australian wool. As far as we are concerned there would be no surprise at our withdrawing from Australia generalization of duty free reductions but there is a distinct undercurrent of anxiety lest the new Australian policy may bring about a coolness in relations with [Page 753] the United States and less cooperation in the Pacific. The wisdom of striking simultaneously at American and Japanese trade is seriously questioned.