611.4731/229
Memorandum by the Chief of the Division of European Affairs (Dunn)
On Thursday, July 1, Mr. Casey, accompanied by Mr. Keith Officer, Counselor of the British Embassy,17 called upon the Secretary at 11 [Page 145] a.m. After a conversation which was more or less general on subjects connected with American-Australian relations, Mr. Casey proceeded to the office of the Under Secretary accompanied by Mr. Officer. The Under Secretary18 called in Mr. Dunn.
Mr. Casey stated that he had explained to the Secretary the reasons which had brought about the restriction against American imports in Australia. He went on to describe in terms with which we were already familiar the gradually falling balance to the credit of the Australian Government for the payment of amortization and interest on its foreign debt largely held in England and for its importations also largely from England. He said that in 1934, this unfavorable balance had reached a point when it was clear to the Australian Government that it was of the highest importance not to permit this situation to develop to a point where the value of the Australian pound in the international market would be undermined, thus possibly necessitating a further devaluation with respect to the pound sterling. Devaluation of the Australian pound would very likely result in a corresponding devaluation in the so-called sterling group and would probably, also include Argentina in this general reduction. Mr. Casey stated that it was the requirements of his own Department, the Treasury, which when laid before the Cabinet, resulted in the decision to curtail imports from those countries with which Australia had an unfavorable balance.
Mr. Casey went on to explain that as a result of the restrictions against American importations, there had been a diversion of trade, but that if the Australian Government had been able to foresee the general improvement of the world situation which resulted in higher world prices for Australian products, the Australian Government might not have gone so far as they did in restricting American importations. They might have achieved the measure of protection they desired by increasing tariffs on the commodities on which they wanted to divert trade from the United States.
Mr. Casey then went on to describe the situation which arose at the Imperial Conference just held in London. He said that Mr. Chamberlain had made an earnest plea to the representatives of the Dominions for a general survey of the Ottawa preference system. Mr. Chamberlain had stated frankly to the Dominions that the United Kingdom Government was bending every effort in its studies of the trade situation between it and the United States to find a basis for [Page 146] negotiation of a trade agreement with this country. The United Kingdom found that they were hampered in the negotiation of such a trade agreement by preferences on certain commodities, upon which we would want reductions in their existing agreements with the Dominions. A disposition had become apparent at the Imperial Conference to reconsider the preference agreements with a view to allowing the United Kingdom more latitude in consideration of its trade agreement with the United States.
At this juncture Mr. Casey explained that the present Government in Australia headed by Mr. Lyons was coming to the end of its Parliamentary term and that an election must be held between now and the first of December next. He said that, in his opinion, the election would be some time before December and probably very soon. He said, of course, the Lyons Government facing an electoral campaign was not able to commit itself to any specific arrangements with regard to its trade agreement with Great Britain as there was a strong feeling in Australia that the existing trade agreement had conserved to Australia a considerable and secure market for its principal exportable products and in an electoral campaign the present Australian Government felt that it would not be politic to create an uncertainty in the minds of a large portion of the Australian voters with regard to its future trade position.
Mr. Casey then brought up the possibilities of discussions with this Government for a trade agreement between Australia and the United States. He said that if the Australian Government could be sure of supplying through trade with the United States any loss it might incur by reason of a readjustment of its preference position in Great Britain, it would make easier a consideration of a re-adjustment of its present trade agreement with Great Britain. He said, at this point, that he felt it would be possible to make certain readjustments in the Australian-United Kingdom preference agreement,19 but that, of course, the Australian Government would want to know what arrangements might possibly be made with the United States in the way of trade concessions in order to know how far they could go in any re-adjustment with Great Britain.
Mr. Welles then stated that as far as discussions of trade agreements between Australia and the United States were concerned, it would not be possible for us to consider the matter while the Australian Government was pursuing its policy of discrimination against American trade. He explained that this was a matter of principle with us as we did not in our negotiations of reciprocal trade agreements act on the basis of negotiating the removal of discriminations. It was necessary [Page 147] before discussions for any trade agreement could be initiated for the foreign nation concerned voluntarily to grant to the United States equality of treatment under whatever system of treatment of foreign trade might be in force in that country. Mr. Casey then asked whether a change-over from a system of licensing of imports to a revision of the tariff upward would be acceptable to this Government. He was informed that the system of treatment accorded by any other Government was a matter for that Government to decide, but our concern in the matter was that American trade be placed on equality with that of any other nation; if a licensing system, that licenses for American imports be granted as freely as to other countries and that no discriminatory or arbitrary withholding of licenses for the importation of American products be applied. Mr. Welles further remarked that if a change-over from the import licensing system to a higher range of tariffs were to be considered, we would naturally expect that the tariff rates would not be raised in excess of the range absolutely needed for internal considerations, and that the rates would not be padded for the purpose of having them negotiated downward by means of a trade agreement.
With regard to Mr. Casey’s reference to compensation by the United States for Australian agreement to reduction of differentials now favoring Australian products, Mr. Welles said that it would not be possible for us to enter into discussions of a trade agreement with the Australian Government until we had reached a satisfactory basis of negotiation for a trade agreement with the United Kingdom. Mr. Welles asked whether the British Government had informed the Australian delegation as to the general lines of the possibilities of a trade agreement between the United Kingdom and the United States. Mr. Casey said that this matter, while it had not been the subject of official discussions between the delegates and the British Government, had come up in an informal and informatory manner in general talks with the British Board of Trade. Mr. Casey went on to say that he was very anxious that some exploratory conversations be carried on between the Australian Government and the American Government with regard to the possibilities of a trade agreement between the two countries in order that the Australian Government might be in a better position to reconsider its situation as far as concerned the United Kingdom-Australian trade position. Mr. Welles explained that we were precluded from carrying on any discussions having to do with trade agreements which might be considered negotiations, as under the law there must be previous public announcement before negotiation for trade agreements can be initiated. Mr. Welles did say, however, that the moment we had arrived at a point where we could decide there was a reasonable basis for the negotiation of a trade agreement [Page 148] with the United Kingdom, we would be very glad to give a close and comprehensive study to the Australian trade situation and would be glad to have informal talks with them with a view to the preparation of or the seeking of a basis for the negotiation of a trade agreement with them.
The interview was ended at this point by reason of appointments both Mr. Welles and Mr. Casey had previously made and it was agreed to meet again in the afternoon.
Mr. Casey, accompanied by Mr. Officer, returned to Mr. Welles’ office at five o’clock. Mr. Dunn was also present.
At the beginning of this interview, Mr. Casey asked if he could speak a few moments about the situation created by the legislation contemplated in Australia, the effect of which would be to prohibit the existing American shipping line from trading between Australia and New Zealand. The discussion of this matter is made the subject of a separate memorandum.20
Mr. Casey reverted to the possibility of discussions being initiated now or shortly for a trade agreement between Australia and the United States. Mr. Welles repeated to him our feeling that it would be necessary for us first to see whether we will be able to arrive at a basis of negotiation for a trade agreement with Great Britain.
Mr. Welles then stated that he greatly appreciated the frankness and candor with which Mr. Casey had discussed the various phases of the situation with regard to Australian-American, Australian-British and British-American trade and that he would like to put to Mr. Casey a question which he wanted him to feel perfectly free to say whether he felt in a position to answer or not. Mr. Welles said that Mr. Casey no doubt knew that the British Government expected to give us a communication next week21 on the general subject of the possibilities of a trade agreement with this Government and that it would be extremely helpful to us in the consideration of this forthcoming communication if we were in a position to know what the attitude of the Lyons Government would be if it were successful in the elections which it was facing. Mr. Casey replied that, without consulting his colleagues in the Cabinet, he would be unable to give any definite indication of what it would be possible to do, and that furthermore issues which might arise in the election may have an influence on the policies they would have to pursue. He said that he himself, however, felt very hopeful that his Government, if returned to power, would be able to make certain concessions in its relations with Great Britain with a view to facilitating a trade agreement between the United Kingdom [Page 149] and ourselves. He then said that he could tell us in all confidence, as he felt that all of these conversations would be viewed by us, that the Australian delegation realizing that this very question would arise upon its return to Australia, had worked out in collaboration with the British Government the sense of a declaration of his Government’s position in the matter which could be made upon the return of the Delegation to Australia for use in the election campaign. He then read from a draft of the declaration. The sense of the statement was: At the Imperial Conference the British Government had informed the Dominions that in studying methods of expansion of international trade, it became advisable to reconsider the attitude of the various members of the Empire toward the existing trade arrangements between themselves. The Australian delegation had taken note of this presentation of the situation as brought up by the United Kingdom Government and stated that upon its return to Australia, a study would be made of its existing trade policies with a view to finding possible increased markets for its products through a general increase in world trade.
While on the subject of the general possibilities with regard to the trade agreement situation, Mr. Casey asked whether there would be any possibility of Australia’s obtaining a reduction on wool in a trade agreement with the United States. Mr. Welles said that he felt certain that Mr. Casey realized that the purchase of Australian wool by the United States had increased greatly during last season over previous seasons and that furthermore the United States was already in a progressive stage of increased purchasing and consumptive power. He went on to say that Mr. Casey no doubt realized that there were often many elements which entered into the consideration of a reduction on any particular item, but that he could rest assured that in making our studies of commodities upon which reductions could be granted to Australia, we would as we always did make every effort to provide for an increased market in those commodities to as great an extent as we possibly could. Mr. Casey said that, of course, a substantial reduction in the wool duty would be of great importance to them. Mr. Casey then went on to speak of items he understood were under consideration for treatment in the United Kingdom-United States trade agreement negotiations. With regard to raisins, he explained that it would be very difficult for Australia to make any change in the British preference now enjoyed by Australia for that product as large numbers of war veterans have been induced and assisted to engage in the growing and preparation of raisins. He said, however, that he was not certain that the exact extent of the preference now enjoyed by them in the British market was necessary and that the same reflection applied to the matter of [Page 150] dried fruits which had been also greatly assisted and encouraged by the Government. At this point Mr. Casey was informed that in dealing with the question of preferences, this Government was not seeking to arrive at a position by which the United States exportations to Great Britain would supplant those from Australia or other Dominions enjoying specific preferences, but our objective was rather to arrest the tendency of Dominion and Colonial producers eventually to supplant entirely United States producers in the British market through the agency of excessive preferences. Mr. Welles said that we, of course, were not in any position to discuss details or specific commodities at this time and Mr. Casey agreed that it was impractical to do so. Mr. Casey mentioned, however, that an Australian official, Mr. McCarty, was passing through here shortly on his way home from the Imperial Conference and would be glad to talk with any persons we might designate in an exchange of information with regard to the general picture of Australian-American trade.
- On January 22, 1937, the British Ambassador informed the Department of State that the Australian Government had arranged with the British Foreign Office to have a Counselor who would he an Australian and a member of the Australian Department of External Affairs appointed to the British Embassy at Washington, and that the appointment would be considered merely as a convenience for handling Australian subjects (701.4111/930).↩
- Sumner Welles.↩
- British and Foreign State Papers, vol. cxxxv, p. 183.↩
- Not found in Department files; for other correspondence on this subject, see pp. 95 ff.↩
- Memorandum of July 10 from the British Embassy, p. 49.↩