The British Embassy to the Department of State

His Majesty’s Government in the Commonwealth of Australia is prepared to accept the “general provisions” set out in the draft supplied to them by the United States Consul-General in Sydney as a suitable basis for an agreement although, as the State Department has itself pointed out, certain particular articles will need modification before they could be incorporated in an agreement between the Commonwealth and the United States. The details of such modifications could be discussed in the course of the actual negotiations.

The Commonwealth Government consider that the requests contained in the State Department’s list of 17th February, 1938 provide scope for effective negotiation on these items generally, although the extent of the concessions which the Commonwealth Government will [Page 139] be able to grant on certain items necessarily will be limited by their obligations to Australian manufacturers, whilst, as regards the items as to which other members of the British Commonwealth enjoy at present preferential treatment, the extent of the concessions will depend on the result of consultations with them.

The Commonwealth Government is prepared to consider the request for a reduction in primage duty on a limited list of commodities of special interest to the United States of America, although the question of revenue, particularly in view of expenditure on defence, will have to be considered.

The Commonwealth Government hopes that the United States of America Government will agree that there exists a basis for the negotiation of a commercial agreement and announce at an early date that the negotiation of such an agreement with Australia is contemplated.