Foreign Relations of the United States: Diplomatic Papers, 1942, General; the British Commonwealth; the Far East, Volume I

847.24/79½

Memorandum of Conversation, Prepared in the Division of European Affairs

[Washington,] June 1, 1942.

Participants:	Mr. J. B. Brigden, Financial Counselor, Australian Legation;
	Mr. McCarthy, Australian War Supplies Procurement Organization;
	Mr. Stewart;45
	Mr. Achilles.

Mr. Brigden and Mr. McCarthy were asked to call this morning to receive the draft exchange of notes on Australian Reverse Lend-Lease.

After reading the draft Mr. Brigden remarked that it was general in terms and did not mention certain matters such as shipping. He was advised that the question of shipping had been deliberately omitted for the present and that it was desired to keep the agreement in simple and broad terms. The general reaction of Mr. Brigden and Mr. McCarthy to the draft as a whole was that it contained specific and sweeping obligations which Australia might with difficulty fulfill or, if she did fulfill them, it would involve a greater proportionate sacrifice than that being made by the United States, the United Kingdom or New Zealand. Mr. McCarthy said that under this agreement Australia would be compelled to provide food for a million men, if we should have that number in Australia and adjacent areas, as Australia could as a matter of fact provide food for that number of men. That, however, would mean a reduction in exports to the United Kingdom and a worsening of Australia’s sterling exchange position. In other words, they believed that some arrangement should be made to safeguard Australia’s external balance position. Mr. Brigden said that Australia did not wish to undertake commitments which it might not be able to fulfill. He inquired as to whether his Government would have the ultimate decision as to what should be furnished and was advised that this was, of course, the intention.

Mr. Brigden said that Sir Frederick Phillips’ reaction to the draft relating to Australia would probably be that Australia was being generous at the expense of the United Kingdom, which was obligated to maintain Australia’s sterling position. He was advised that this Government was also interested in the foreign exchange position of both the United Kingdom and Australia and that it had no thought of asking either to undertake obligations which could not be fulfilled without imperiling their exchange or budgetary position. The idea was that each Government should contribute its maximum and make roughly a proportionately equal contribution.

In response to questioning Mr. Brigden and Mr. McCarthy said that roughly 40 percent of Australia’s national income was now devoted to the war effort (specifically 360 million Australian pounds out of the total national income of one billion Australian pounds). He was advised that the British estimated they were now expending on the war 60 per cent of their national income and we estimated that we would be expending roughly 60 per cent on it in the impending fiscal year. Mr. Brigden referred to the difficulty of calculating accurately what expenditures were directly or indirectly related to the war effort and also suggested that the severity of restrictions on civilian consumption was an indication of proportionate sacrifice. He thought that restrictions on civilian consumption in the United States would have to be carried considerably further in order to equal those now in effect in Australia.

It was noted that the draft exchange of notes was based on the assumption that a Lend-Lease agreement similar to the United Kingdom agreement would be concluded prior to the signature to the exchange of notes on Reverse Lend-Lease. Mr. Brigden inquired as to our wishes on the form which such an agreement should take. He was advised that we were proposing to conclude substantially identical Lend-Lease agreements with most of the United Nations and accordingly thought that Australia might prefer such a separate agreement rather than to be blanketed in to the United Kingdom Agreement. He asked whether we wished to make a specific request that the agreement be in that form. He was advised that while there appeared to be certain advantages in that form we did not wish to make such a specific request. It appeared to be basically a matter for Australia’s preference to govern, provided that whatever form Australia wished was agreeable to the United Kingdom and to this Government.

45. Robert B. Stewart of the Division of European Affairs.