Cablegram IT023 (extract) LONDON, 3 April 1947, 3.30 p.m.
MOST IMMEDIATE SECRET
Reference I.T.O.10 concerning publication of United Kingdom requests.
[matter omitted] [1]
(c) I think there are some grounds for United Kingdom fear that with present tariff rates they will enjoy a smaller share of Australian market than before. With high levels of employment and an expanding market in Australia this might be consistent with a greater absolute quantity of trade but it is unlikely that without reductions in our tariff Australia would make any significant contribution to the 75% increase in the volume which the United Kingdom considers necessary to sustain their effective international purchasing power in which we have an interest because of our dependence on United Kingdom market. Even if we do realise our hopes of obtaining entry into foreign markets United Kingdom will still be of outstanding importance to us for maintenance and expansion of our exports of primary products.
(d) It is my view that at present costs and prices there is room for cuts in present B.P.T. rates without affecting seriously the competitive position of Australian industry. What effect the prospective increases in wage costs and prices will have on this position is more obscure but some improvement from pre-war relative position may well persist. It should be noted however that reductions in the British preferential rates must be accompanied by corresponding reductions in Most Favoured Nation rates though little or nothing is known of relative costs of other possible suppliers e.g. France, Czechoslovakia, furthermore future of Germany, Italy and Japan as possible competitors and nature of their trade practices are unknown.
(e) if we are to make concessions to the United Kingdom on our protective items in B.P.T. the only place for us to seek balancing concessions from United Kingdom is in their agricultural protection. We could reasonably ask for limits to domestic production of commodities of particular concern to us-particularly wheat, beef and butter. United Kingdom would I gather be prepared to consider requests on this basis and provided limits were on commodities of kind referred to they would be consistent with F.A.O. [2] approach of consuming countries concentrating on whole milk and other protective foodstuffs which United Kingdom Government has accepted as basis for its agricultural policy. It is of course uncertain whether they would accept sort of limits we might wish to suggest and it may prove very difficult to formulate precise requests of this kind. McCarthy is examining this aspect.
(f) If we are to conclude an agreement with the United Kingdom on lines in accordance with concepts accepted as basis for Geneva talks it will on the face of it be difficult to justify as ‘mutually advantageous’. Benefits we receive will be general arising from effects of greater economic prosperity in the United Kingdom and from United Kingdom agricultural policy more closely adapted to our exports. These may be too general to be of real value. Against this would be set long list of tariff concessions precise and specific.
My view is that we should maintain at least for present our attitude that we cannot see basis for mutually advantageous agreement but that we should proceed steadily with an examination of the United Kingdom requests giving priority to items which are included in lists presented by other countries and that at same time detailed examination should be made of concessions we might seek in relation to United Kingdom agricultural policy as well as in tariffs. Discussions could continue with United Kingdom on more general aspects e.g. effects of competitive position of foreign suppliers, possibility of Tariff Board review etc. As outcome of talks with foreign countries in Geneva becomes apparent and preliminary work is advanced it may be possible to see this problem more clearly. I should emphasise that this attitude will be unwelcome to United Kingdom who I anticipate will press us strongly on this issue.
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1 The omitted portion reviewed matters treated in Document 88.
2 Food and Agriculture Organization.
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[AA : A1068, ER47/1/12]