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to this country has suggested the negotiation of a supplementary trade agreement with the United Kingdom.
At the present time, when our domestic production of commodities likely to be included in such an agreement is at an abnormally high rate, the British are finding it more and more difficult to maintain even the present level of their exports to the United States, owing to the increased British cost of production and other factors.
The supplementary trade agreement envisaged would provide reductions in our duties terminable on short notice at the end of the war, and terminable or adjustable during the war, if unforeseen developments resulted in material harm to any industry affected by the proposed agreement.
Concessions by the British Government, as required under the Trade Agreements Act,36 might take the form of a guarantee of some specific minimum imports of American agricultural products during the war, and reductions of Imperial duty-preferences which would not become fully effective until the end of the war. Such concessions would not impair the value of our duty reductions as a means of helping the British finance their wartime purchases in this country.
I believe that such an agreement would help to implement the general policy of economic assistance to the United Kingdom and also constitute another significant step tending towards the liberalization of world trade.
It would be appreciated if you would inform me as soon as possible whether you approve of our going forward with conversations with the British Government looking towards the immediate negotiation of an agreement along the lines indicated.
The British Ambassador (Halifax) to the Secretary of State
His Majesty's Ambassador presents his compliments to the Secretary of State and has the honour, at the instance of His Majesty's Government in New Zealand, to inform Mr. Hull that the New Zealand Government propose to send two Ministers to the United States in the near future. The Honourable F. Langstone, Minister of Lands, proposes to visit the United States of America for the purpose of initiating and promoting trade negotiations, particularly as regards the sale of dairy products, meat and other primary products. It is proposed that he should travel by air, leaving Auckland
"Approved June 12, 1934; 48 Stat. 943.
on May 17th. He will be accompanied by departmental officers in charge of Customs, supply and marketing matters.
The Right Honourable J. G. Coates, a member of the War Cabinet and former Prime Minister of New Zealand, also proposes to visit the United States at the same time for the purpose of organising and expediting arrangements for the supply of munitions necessary to the defence of New Zealand. Both Ministers will be accompanied by personal secretaries.
His Majesty's Government in New Zealand trust that the proposed action will be fully acceptable to the United States Government. They desire to point out that this mission is not a diplomatic one. It is contemplated that the Prime Minister of New Zealand on his return journey through the United States will have an opportunity for discussing the establishment of a permanent Legation in Washington. Mr. Langstone would also be in a position to discuss this question.
WASHINGTON, May 9, 1941.
Memorandum of Conversation, by the Assistant Secretary of State
[WASHINGTON,] May 12, 1941. Participants: The Right Honorable Robert G. Menzies, Prime Minister of Australia; 37 The Right Honorable Richard G. Casey, Australian Minister; Mr. Acheson
During the course of an evening at the Australian Legation with the Prime Minister I said to him that I hoped before he left Washington we would have an opportunity to discuss the improvement of trade relations between Australia and the United States. Pursuant to that conversation, Mr. Casey made an appointment, and he and the Prime Minister called upon me this afternoon.
I opened the talk by referring to a question which had been asked the Prime Minister at the Press Club luncheon as to whether or not he favored economic collaboration with the United States. The Prime Minister had answered that he not only favored such a policy but suggested that during the war we lay the foundation for closer trade relations by actual experiments.
I said to the Prime Minister that, as he had doubtless learned in conversations with the Secretary, it was the Secretary's view that if nothing were done now there was a serious possibility of the degeneration of trade relations after the war and that only by earnest efforts
The Prime Minister had arrived in Washington on May 9 for a series of conferences with President Roosevelt and other high officials of the Government.
at the present time and a wise handling of the lease-lend arrangements could we avoid a return to extreme nationalism. The Prime Minister stated that he shared this view and believed that the time to undertake discussions was now rather than to wait for the end of the war.
I said that the Department had given considerable thought to the possibility of informally exploring at once by discussions between Australia and the United States, as well as the other British dominions and the United States, whether specific items could be found upon which mutual concessions might be made. I said to him that these discussions ought to be undertaken with the view of having each arrangement stand upon its own feet and that later, and before any formal discussions were announced, the collateral effects upon other members of the British Commonwealth could and should be considered.
The Prime Minister said that he was most interested in this and most sympathetically inclined. He referred to the possibility that as a result of pending election in Australia his term of office might be limited and said that if it were not and he continued in power he would be willing to explore the possibilities immediately and would send to this country responsible people for this purpose, although they might ostensibly come on some other mission.
He asked whether the Department had sufficiently crystallized its ideas to make it possible to give him even the roughest memorandum indicating the direction of our thought, which he might study on the way home. I told him that I would discuss this with the Secretary and that if it were possible we would do so.
He again reiterated his conviction that now was the time to begin such discussions and, if possible, put something practicable into effect, as he shared the fear that at the end of the war it might be very difficult to do so.
The Assistant Secretary of State (Acheson) to the Australian Prime Minister (Menzies)
WASHINGTON, May 14, 1941. MY DEAR MR. PRIME MINISTER: I was very pleased to have the opportunity on May 12 to discuss with you the desirability of utilizing the present favorable situation for placing our commercial relations on a more permanently satisfactory basis.
I feel strongly that every effort should now be made to work out a mutually beneficial plan which, in addition to contributing to the solution of certain wartime economic problems, would also help to
stabilize conditions after the war and avoid the extremes to which proponents of excessive national self-sufficiency, and perhaps of discriminatory policies, may attempt to go. In this connection I mentioned to you the possibility of negotiating a trade agreement. In compliance with your request, I shall briefly outline the possible general scope of such an agreement and some suggestions regarding procedure.
Cooperation between the Governments of the United States, the United Kingdom and Canada made possible the negotiation of the mutually satisfactory agreements signed on November 17, 1938,38 involving, among other things, the modification of certain tariff preferences accorded by Canada to the United Kingdom and certain tariff preferences accorded by the United Kingdom to Canada. We envisage a similar approach at this time. An agreement between the United States and Australia would naturally require schedules of concessions by both parties. The Government of Australia doubtless would be interested in the possibility of obtaining reductions in United States duties on Australia's important export products. My Government would be interested in obtaining reductions in the margins of tariff preferences accorded by Australia to certain products of various parts of the British Empire, and the reduction of the absolute level of the Australian tariff on a few products such as lumber. While it is realized that Australia has made commitments to other British Governments to maintain various margins of preference, it is believed that the United Kingdom Government, for example, might be willing to waive its preferences in Australia to the extent of making possible a satisfactory United States-Australian trade agreement, if Australia likewise agreed to such reductions of preferences accorded its products in the United Kingdom market as would make possible a satisfactory supplementary trade agreement between the United States and the United Kingdom.
In negotiating trade agreements during wartime, account must of course be taken of wartime conditions and the uncertainty regarding the post-war economic situation. However, provision can be made for various contingencies by incorporating suitable "escape" clauses in an agreement. For example, under the "wartime escape clause" in the United States-United Kingdom agreement, the United Kingdom has introduced temporary import restrictions on American products included in the agreement without contravening the terms of the agreement. Any United States-Australian agreement would of course
38 For correspondence regarding reciprocal trade agreement negotiations between the United States and the United Kingdom and the United States and Canada, see Foreign Relations, 1938, vol. II, pp. 1 ff., and ibid., pp. 164 ff., respectively. For texts of agreements, see Department of State Executive Agreement Series No. 164, or 54 Stat. (pt. 2) 1897; and No. 149, or 53 Stat. (pt. 3) 2348
contain a similar clause. As another example, some provision would probably have to be made to permit action necessary in order to meet foreign-exchange emergencies. Possibly the best way to provide for the adjustment of the agreement to changing conditions would be to set up for the purpose a mixed commission on which both governments would be represented.
Preliminary study in the State Department suggests that a basis might be found for the negotiation of a significant trade agreement between our two countries. I believe that the most satisfactory way of verifying this and of making progress toward possible negotiations is for both parties to get together in confidential exploratory conversations and examine together the detailed facts involved. Formal exchanges of views between the two Governments, in the absence of such conversations, probably would be so general that they would not be very helpful. In contrast, a joint factual examination might well result in a fairly simple solution of problems which in the abstract appear to be extremely complex. While informal exploratory talks would naturally have to be on an ad referendum basis so as to insure that the highest quarters in both Governments are in agreement with the possible content of an agreement, I feel certain that both our Governments would be in a better position to judge the situation after exploratory talks had reduced the generalities into comparatively definite terms.
It is therefore suggested that you designate officials of your Government to explore the possibilities of a trade agreement with American officials at Washington. It must be emphasized that such exploratory conversations would have to be highly confidential. It would be extremely unfortunate for there to be any intimation that our Governments are even considering the possibility of a trade agreement, until there is the maximum possible assurance that negotiations for such an agreement would be promptly and successfully concluded. I should also mention that United States trade-agreement procedure requires that public notice be given of intention to negotiate and that an opportunity be given to all interested parties to express their views in writing and at public hearings prior to the undertaking of any definitive negotiations or any definite commitments.
On a previous occasion when similar exploratory discussions of a highly confidential character were undertaken, they were handled for your Government by the Australian Trade Commissioner, Mr. Macgregor, who was already here and whose frequent visits to the Department could easily be accounted for on other grounds. If, however, you consider it preferable to send representatives from