Cablegram E26 WASHINGTON, 11 November 1945, 3.14 a.m.
IMMEDIATE SECRET
Your 1682. [1]
1. Liesching [2], accompanied by Shackle [3] and Cockram [4] of the United Kingdom Delegation, asked to see me this afternoon to discuss your telegram 1682 about Commercial Policy.
2. Liesching said that in the first place he would like to say that the United Kingdom Government were engaged in their present negotiations, both on finance and Commercial Policy, in the hope of reaching a general economic concordat between the United Kingdom and, he hoped, the other countries of the Commonwealth on the one hand and the United States on the other as part of the task of establishing a firm basis for co-operation which would be essential also to good political and security understandings in a dangerous world. On the economic merits of the plan it would be for each country to judge when the United States, who were the sponsors of this scheme, gave it out to the world, but he suggested that for Australia, as for the United Kingdom, a world of expanding trade was a condition necessary for prosperity and full employment. Without such expanding possibilities, and with the alternative of restrictionism which would follow a failure of the present attempt it would, he feared, be inevitable not only that the United Kingdom’s purchasing power with all its effects on the Australian economy would be reduced but that in the absence of leadership from the two most powerful trading nations other countries now in a desperate plight would raise even higher barriers around themselves behind which vested interests of the most dangerous kind, damaging alike to producers of primary and manufactured products, would take root and thrive. If this process gained headway, it would take many years to reverse it.
3. In dealing with specific points in paragraph 4 of your telegram he made the following observations:-
(I) On 4-A (Preferences) he drew attention to the fact that (b) and (c) of paragraph 2 of formula in telegram D.2070 [5] are in fact unchanged from (b) and (a) respectively in D.1909 [6] except for the introduction of the word ‘negotiated’ in (b) of the latter version. This word was in fact introduced in order to take care of the very point about which you express concern with regard to revenue duties. As now worded, the sentence makes clear that it is only when reductions of most favoured nation rates are negotiated that the reductions will operate to reduce or eliminate margins of preference. Where a reduction is made not as the result of negotiation but by the autonomous action of the Government concerned, the preferential margin can be maintained. On the criticism that there was no corresponding undertaking from the United States he emphasised that the abandonment of the earlier proposals for uniform horizontal rates or a tariff ceiling in favour of selective treatment of tariffs and preferences meant that both sides entered the bargaining prices of negotiations on an equal basis. He said that the commitment to negotiate on this basis in no way prejudiced the results. In this connection he called special attention also to the way in which this point would be made clear by United Kingdom Ministers in the House of Commons in an explanation on the lines of the commentary quoted in telegram D.2070. The point is made repeatedly that there will be no unilateral surrender of preference, see in particular paragraph 4 (1) of the commentary. He suggested that there was little difference between paragraph 4 (1) of the commentary and paragraph 1 of your telegram 1682.
(II) On 4-B (Quantitive Regulation) he explained that it had been made perfectly clear in the present discussions that where there was a product on which no duty had hitherto existed the product being subject to quota with a preference it would be open to the country concerned to negotiate the establishment of a duty in lieu of the quota arrangement and where a preference had been granted under quota to negotiate also the establishment of a preferential margin. He added that he thought it highly probable that the products of particular interest to Australia under this head would be brought under State trading arrangements by the United Kingdom and said that it had also been made very clear in the negotiations that preference would be applied under State Trading in accordance with the principles agreed upon with regard to preferences in general. (III) On 4-C (Balance of Payments) he said that the full passage of the final text of Quantitive Restrictions had now been telegraphed from London in telegram D.2090. [7] The use of quotas to correct disequilibrium in the balance of payments was, he said, of vital interest to the United Kingdom, and the United Kingdom negotiators had, as would be clear from a perusal of the text, been most careful to secure the necessary liberty in this respect.
The unacceptable version in Dominions Office despatch No. D.148 [8] to which you refer has been entirely superseded. (IV) On 4-D (Export Subsidies) he suggested that there was nothing more dangerous to primary producers competitive with the United States than the use by the latter of their long purse in order to force others out of their markets. Apart from this there was the grave element of instability produced for importing countries when others used export subsidies. No-one, he said, would suggest that Australia had indulged in an unrestrained use of this weapon and the object was to curb its abuse by the United States. He explained that the provisions suggested in the document were designed to prevent a country with a long purse from invading markets disproportionately to its share of previous trade. There would be nothing, he suggested, to prevent Australia or any country from explaining and justifying at the Conference practices which had a resemblance to export subsidies.
4. Liesching admitted that the final process of consultation had inevitably been very rushed and that it was very understandable that misapprehensions as to the exact effect of various passages should have arisen. If, however, as stated in paragraph 5 of your telegram, it was for these reasons that hesitations were felt in Australia, he hoped that these anxieties would have been eased or removed by the explanations he had given.
5. He drew attention to the important passage in the American document which would deal with employment and handed to me the text which I am sending in a following telegram.
6. In conclusion, there was some discussion between us on what would be said by the United Kingdom Government in the event of its deciding to accept the American invitation as regards the attitude of Australia and other countries of the Commonwealth. Liesching said that this would undoubtedly be settled in London as the result of this final stage of urgent consultation now being conducted from London. He said, however, that if the anxieties under paragraph 4 and other paragraphs of your 1682 had as he hoped been allayed, he felt that the first paragraph of your telegram was so close to being the kind of acceptance which Australia might see fit to give to the American invitation foreshadowed in their document COMM/TRADE/4 [9] (see following telegram) that he wondered whether, perhaps, the difficulties were less great than had been thought, bearing in mind especially the terms of the commentary contained in D.2070.
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1 Document 374 was repeated to Washington as no. 1682.
2 Second Secretary, U.K. Board of Trade.
3 Principal Assistant Secretary, U.K. Board of Trade.
4 Counsellor, U.K. Embassy in the United States.
5 See Document 374, note 4.
6 See Document 316, note 3.
7 Dispatched 11 November. On file AA : A1066, ER45/1/5.
8 Not located.
9 See cablegram 1016 from Washington, dispatched 11 November, on the file cited in note 7.
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[AA : A1066, A45/2/5/4]