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

No. 278

Sir: Two and a half months have now elapsed since the Australian Government moved against American trade by making the import of [Page 764] some eighty items in which we are interested subject to ministerial license. Experience has now indicated, beyond peradventure of doubt, that in the application of its policy, not only is the Australian Government diverting some £2,000,000 of our trade, but is avowedly, even exultantly, discriminating against us; furthermore, on the part of certain officials … there have been evidences of considerable anti-American animus. In fact, having once tasted blood, there is always the possibility that the Government’s appetite for further restrictive measures may increase.

In the circumstances, I feel that the time has come when we must decide upon a policy to be pursued after our elections in November. In other words, are we prepared to initiate trade negotiations with Australia then (providing she suspends her discriminatory trade practices for the duration of the negotiations), or are we not?

1. If we are prepared to negotiate, it would seem to me that we must first come to an understanding with Canberra on three questions:

Is the Australian Government prepared to negotiate within the framework of M. F. N. treatment? Would it, for instance, consider the general provisions contained in the Canadian Trade Agreement21 as a basis for agreement, subject only to modification of detail?
Would the Australian Government during negotiations for a period of four to six months agree to suspend its discriminatory treatment of American trade at least to the extent of granting licenses for American imports of the prohibited items equivalent to 100 percent of the figures during the corresponding period in early 1936, while we in turn would restore the privileges of generalization of trade-treaty rates to Australian products. This should be confirmed by exchange of notes.
Where should negotiations be held? Although it might be possible to discuss the general provisions here, I feel we should insist on the negotiations of the schedules in Washington.

I am by no means certain that Australia in her present mood would agree to these preliminary conditions, as the impression is being fostered for local political reasons that Australia stands to gain more from England as a reward for diverting our trade to her than she could from even successful negotiations with ourselves. (As an example of the foregoing I enclose excerpts22 from a recent speech of the Acting Minister of Commerce.) However, I incline to feel that even though the injured party we are none the less big enough to make the first move, provided that nothing occurs during the debates in Parliament during September or October to make an advance on [Page 765] our part seem infra dig or subject to misinterpretation. If made, we should time an approach for the first half of November in order to start any possible negotiations as soon as possible, partly because the nearer we come to the Australian elections in December, 1937, the more intransigent the Australian will become, and partly because the Prime Minister and his colleagues will be leaving Australia in early April for a visit of several months to attend the Coronation celebrations.

2. If on the other hand we are not ready to negotiate after the elections we should be laying our plans accordingly. We must be prepared for the possibility of an extension of the prohibited list and the loss of a lucrative export market in yet other lines of our exports. Furthermore, the Lyons Government, while many of its members are not inherently anti-American, has as a result of (a) British pressure, and (b) political opportunism, burned its bridges to a point where we can expect nothing further from them, unless they are driven to it by the pressure of public opinion.

The essential thing for us is tactfully to dissipate the idea which is much too prevalent, alike in Canberra and among the general public, that America accepts the justice of the Australian contention with regard to two-way trade, and does not really resent Australia’s discriminatory policy. There is a rather naif belief that Australia can be deliberately anti-American in matters of trade and yet count on American political assistance and cooperation. I can see several possible ways by which this assumption might be counteracted,—for instance, (a) by an attempt to arouse the concern of Mr. Eden23 (who is very close to Mr. Bruce24) at an Australian policy which can only tend to drive the United States and the British Empire apart at the very moment Britain desires to see a closer understanding in the Pacific; or (b) by the inclusion in some important speech on our Trade Agreements Program of the whole story of Australian-American trade; or (c) by the publication of the correspondence beginning with the Australian note of 1934. Other and doubtless far more effective ways will undoubtedly occur to the Department.

3. Until we make up our minds as to which course to pursue, we are letting the situation drift. Of course, the decision involves a question of high policy which must receive careful consideration in Washington.

On the one hand, by agreeing to negotiate, we might be accused of putting a premium on discriminatory measures against us, even though our insistence on a suspension of their application during negotiations [Page 766] would probably suffice to answer such an accusation. On the other hand, a continued refusal on our part to negotiate with Australia, particularly with the elections behind us and with the prestige of a vote of confidence in our trade agreement program might result in further losses in one of our valuable export markets.

Respectfully yours,

Jay Pierrepont Moffat
  1. See Foreign Relations, 1935, vol. ii, pp. 18 ff. For text of agreement, signed November 15, 1935, see Department of State Executive Agreement Series No. 91, or 49 Stat. 3960.
  2. Not printed.
  3. Anthony Eden, British Secretary of State for Foreign Affairs.
  4. Stanley Melbourne Bruce, High Commissioner for Australia in the United Kingdom.