611.4731/388
Memorandum of Conversation, by the Chief of the Division of Trade Agreements (Hawkins)
| Participants: | The Right Honorable Stanley Bruce, |
| Mr. Keith Officer, | |
| Mr. Sayre, | |
| Mr. Hawkins. |
The discussion began with some general comments by Mr. Bruce and Mr. Sayre on the gravity of the international political situation. In the course of this discussion Mr. Sayre took occasion to [Page 161] point out that economic policy has a definite significance in this connection. He said that the bilateralistic system of trade, such as is pursued by Germany, is a phase of Germany’s general foreign policy and is, of course, definitely opposed to our own policy and he understood also to the policy of Australia. It is largely for this reason that we are anxious in pursuance of the trade-agreements program to go forward with negotiations with Australia as soon as possible. He said that we want to do this despite the very serious domestic political difficulties which this entails. He illustrated these difficulties by reading a letter just received from a Western Senator objecting to any reduction in the duty on raw wool, and pointed out that the attitude reflected in this letter is shared by a good in any other Senators—eighteen to be exact. He explained the latter figure by saying there are nine states largely devoted to the production of raw wool, each of which has two Senators.
Mr. Sayre pointed out in this connection that certain action recently taken by Australia tends to complicate our problem of going forward with these negotiations. He referred to the recent duty increases in Australia and to the action taken by certain Australian states against American moving pictures. He said that he mentioned these things in the interest of obtaining a clear understanding at the outset. He mentioned in this connection one further factor which has caused us some misgivings—namely, the reference to the bilateral trade balance in the recent Australian memorandum. He stated at some length the American theory of multilateral balancing of accounts and pointed out the Australian interest in supporting commercial relations on such a basis. He said further that it should be clearly understood that the matter of the bilateral trade balance would be irrelevant in connection with the negotiation of this agreement.
Mr. Bruce referred to the various points made by Mr. Sayre, as follows:
With reference to the matter of the bilateral trade balance he pointed out that Australia is as much opposed to the German system of barter and clearing as we are. He said that the Hull trade-agreements policy has the full support of himself and his Government. In this connection he commented upon Mr. Hull’s remarkable persistence in carrying forward a task beset with so many obstacles. He pointed out that the Australian economic situation is such as to make it sound policy for Australia to subscribe to the multilateral trade methods which we advocate.
In regard to Mr. Sayre’s remarks concerning the recent increases in the Australian tariff, he pointed out that we should not consider this to be the mere padding of rates for bargaining purposes; that he was familiar with the European practice during the Twenties in [Page 162] raising rates to towering heights so as to provide basis for easy tariff reductions; that this was not at all what Australia had recently done. In regard to the moving picture legislation, he stated that this was not a matter within the control of the Commonwealth Government at all but was one entirely within the competence of the several states. He felt, however, that we possibly exaggerate the seriousness of these measures.
In regard to the relation of the bilateral trade balance to these negotiations, he stated that Australia would not take an exaggerated position on this subject. He said that while it is true that the state of the trade balance with us is a matter of concern to the Australian Government, it would not, of course, insist upon any fixed ratio being determined by the trade agreement or that the agreement contain any reference at all to this subject. He did say, however, that he felt that Australia’s situation is such that the negotiations should be primarily on the basis of a stabilization by Australia of our position in that market; i. e., largely the binding of present treatment. He pointed out that this would prevent any further diversion schemes and assure us that our situation there would not become worse. In response to Mr. Sayre’s inquiry whether he meant that the agreement would consist largely of bindings on both sides, he indicated that a reduction in the raw wool duty would be expected from us.
Mr. Bruce explained the need of maintaining protection for Australian secondary industries by pointing out the difficulties of supporting Australian economy on the basis of the exportation of primary products alone. He said that Australia can not count on continued expansion of exports of those products to the United Kingdom since it can not expect that as a need for more exports arises the United Kingdom will be ready to shut out Argentine meat, Danish butter and United States dried and canned fruits so that Australia can come in. This means that Australia must develop secondary industries, and for this purpose tariff protection is necessary. In these circumstances, he said, it is very hard for Australia even to bind rates, but his Government has come to recognize this necessity if they are going to carry on trade-agreement negotiations with foreign countries.
Mr. Sayre stated that substantial reductions on some of our products would be absolutely indispensable.
Mr. Bruce replied that the assurances we mainly need are for safeguarding our position.
Mr. Sayre then said that he assumed Australia would want something more than a binding on some products and we must have reductions on some items such as lumber and automobiles; that such reductions are absolutely necessary if we are to obtain political support for the agreement. In regard to automobiles Mr. Bruce stated [Page 163] that that is not an industry which Australia has committed itself to building up in Australia, but that Australia is committed to the United Kingdom and to Canada on preferential margins and would not want to take up the matter with those two countries until there was real prospect of an agreement.
In the course of the discussion of specific concessions of interest to Australia Mr. Sayre made it clear that a concession on butter could not be considered as Australia is not the chief source of this product.
Mr. Sayre raised the question whether the best procedure is not to get both lists spread out and when the position is clear any release from bound preferential margins could then be taken up with other Empire countries. He stated that it is highly important, as recognized in the recent Australian memorandum, that, both for international and domestic political reasons, no public announcement be made until we are certain that an agreement will materialize and can be concluded rapidly. Mr. Bruce assented to this and summarized the situation by saying that the way it now stands is that both sides want an agreement and technical conversations without commitments on either side can proceed in order to find out whether it is possible to have one.