611.4731/190: Telegram

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

Department’s telegram of October 10, noon. Even though I think it is still too early to anticipate a change in Australia’s trade policy toward the United States I am glad that the Department contemplates pointing out that the discriminatory features of this policy are inconsistent with Mr. Bruce’s declarations and with the trade policy advocated by the British Government.

1. As to substance I entirely concur in paragraphs 1, 2, 6, 7 and 8 of the Department’s draft. The three intermediate paragraphs, however, seem predicated on a misunderstanding of the Australian position. It has never been the local financial or budget position that has been worrying Canberra but the question of balance of international payments and the difficulties of meeting commitments abroad. For us to discuss Australia’s present financial position would enable her to come back with counter arguments that there has been little or no improvement since May as (a) during the last fiscal year she just maintained her overseas funds by the influx of new capital but was not able to increase them; (b) the export figures for July and August show a less satisfactory picture than last year; and (c) as a result of the current drought the estimated yield of wheat this year has dropped well below last year’s figures. More important, however, I feel that the whole emphasis in our note should be placed on the three new international factors, as found in the last three paragraphs and not be weakened by the introduction of secondary and controversial issues.

2. In the circumstances I respectfully suggest substituting for paragraphs 3, 4 and 5 one short paragraph along the following lines: “During the past few months there have been several developments both within Australia and elsewhere in the world which have so confirmed the favorable outlook for Australian economic and financial stability as to lead the American Government to hope that the time has now come for reconsideration of Australia’s policy of discrimination against the United States.

By far the most important of all recent developments” and so through paragraph 6 to the end of the note as given in the Department’s telegram.

3. As to channels of communication I have long felt that the best hope of an ultimate modification of Australia’s attitude would be in response to pressure from the British Government. Thus far such pressure as has come from British sources has been encouraging [Page 770] to her policy of artificial diversion but this no longer seems consistent with official British pronouncements. If Mr. Bingham when presenting the note makes a vigorous plea for active British support of our thesis and continues this pressure until we know where the British Government stands, then I favor presenting the note to London. If, however, the Department’s idea is merely to hand the note to Mr. Eden for transmission then I feel there would be no gain to counterbalance the resentment that may be felt here at an attempt to circumvent normal channels of communication between Washington and Canberra.