Memorandum by the Chief of the Division of European Affairs (Moffat)

Mr. Keith Officer, Counselor of the British Embassy, called with reference to the situation of the Matson Line in the trans-Tasman trade. He said that there seemed to be some misunderstanding somewhere inasmuch as our memorandum3 had dealt with the question of Pacific shipping in general, whereas the Australian approach to date had been on the subsidiary question of the trans-Tasman traffic. He said that Mr. Welles4 and Mr. Dunn5 had agreed to try and find a solution of the latter pending which time the Australian Government would defer its legislation. Mr. Casey6 was on the point of arriving in Sydney (probably August 3) and it would be necessary for him to have a message at Canberra when he arrived. As far as the Tasman trade was concerned, our memorandum did not alter the existing situation in any degree.

I told Mr. Officer that I thought there had been some talking at cross purposes as from the very inception the Tasman question had been dealt with as part and parcel of a broader question and not as an isolated question. Our note registered a considerable advance on the question of subsidies but the Tasman question represented a question of principle on which we had not been able to accept the Australian thesis. He, in effect, was asking for a voluntary withdrawal of the Matson Line from the Tasman trade and this we could not for an instant consider doing.

He expounded at considerable length the Australian thesis, which boiled down to the fact that Australia was faced with such political pressure that it could not much longer forego passing the enabling legislation. I told him that we would regret this on the ground: [Page 104] (1) that it was based on a misconception of law and geography; (2) that it would create an atmosphere in which the settlement of Pacific shipping in general would be most difficult, and (3) that it would create an impression throughout the country, particularly following the trade diversion measures, that Australia did not mind adopting one discriminatory measure after another against us.

After some discussion, Mr. Officer said that while he had gone as far as his instructions permitted he recognized that we could not assent to the voluntary withdrawal of the Line from the Tasman trade and withdrew the suggestion. On the other hand, he was terribly anxious to see if we could not work out some formula that would enable the Government further to postpone action and purely as his own suggestion and without instructions wondered whether negotiations might not be entered into directly between the two Lines with a view either to the allocation of trans-Tasman passenger traffic or to a voluntary acceptance on the part of the Matson Line that they would not book more than a certain number of passengers per month. It might not even be necessary to make an agreement to this effect of a longer term than two or three years when, with the construction of new British ships, the whole situation would be more or less regularized. He said that, of course, this suggestion might not be acceptable to the Australian Government or to the New Zealand authorities but he really was trying to suggest a way out.

I told him that when in 1935 it had been suggested that the Union Line and the Matson Line discuss matters directly, the Matson Line had expressed a willingness to do so provided the Union Line would not suggest its withdrawal from the Tasman trade. That was the last heard of the suggestion, which had made me feel that the Union Line had been playing for the total exclusion of the Matson Line from the Auckland-Sydney run. He asked if I could find out whether, should the suggestion be agreeable at Canberra, the Matson Line would be willing to talk over matters on this basis. I replied that I was naturally without authority to answer that question.

The matter was therefore left as follows:

The State Department would send to Mr. Kennedy an account of my conversation with Mr. Officer as well as a brief memorandum7 which he wrote in reply to Mr. Kennedy’s memorandum. Meanwhile, although recognizing that Mr. Kennedy’s memorandum represented the official American point of view, he would defer his cable for five or six days waiting to see whether his personal suggestion seemed to offer the possibility of a way out. I told him that I would keep in close touch with him and urge that the Maritime Commission give me an answer as soon as possible.

Pierrepont Moffat
  1. Supra.
  2. Sumner Welles, Under Secretary of State.
  3. James Clement Dunn, appointed Chief of the Division of European Affairs, June 16, 1937; Adviser on Political Relations, July 17, 1937.
  4. R. G. Casey, Australian Minister of the Treasury.
  5. Infra.