Foreign Relations of the United States, 1964–1968, Volume XXVII, Mainland Southeast Asia; Regional Affairs

24. Memorandum From the Assistant Secretary of State for East Asian and Pacific Affairs (Bundy) to President Johnson¹

Washington, June 1, 1967.

SUBJECT

• Conversation Between Prime Minister Holt and Secretary Rusk

The following was covered this afternoon,² for your reference before you see the Prime Minister this evening.³

1. Middle East. The Secretary gave a full recital of our efforts to get a declaration by the maritime nations. Holt was in agreement.

2. Bombing. Holt expressed his clear view that bombing should not be suspended, and said that he would take this line strongly with Pearson.

3. East of Suez. The Secretary called Holtʼs attention to a cable just received today from London, from a source within the British Government (who must be protected). This source stated that the British Cabinet had reached a decision on a formula providing that “Britain would maintain, for the foreseeable future, a military capability for use in the area.” The source further reported that the British Cabinet was split as to whether there should be a formal announcement in these terms.

The Secretary told Holt that we saw grave danger in this formula, since it might be taken to mean that the UK would keep no bases in the area but only an ear-marked force with some air transport, in the UK. Holt agreed that this interpretation would probably be made, and would amount to much the same thing as outright British withdrawal from the bases.

Holt went on to say that he would see Wilson on June 13, and that Wilson had promised to make no decision until after he had seen him. Holt said that he would stay away from the detail on reductions and focus on: (a) knocking down the British argument that “white faces” were no longer welcome in Asia; (b) getting the British to agree to make no firm statement on complete withdrawal.

The Secretary pointed out that focusing on not having any firm statement might miss the point. If a decision were reached, it would certainly leak. The Secretary noted that his own latest message to George Brown had urged the British not to reach a decision, for this very reason. Holt expressed understanding of this distinction and seemed prepared to talk to Wilson in the same sense as the Secretaryʼs message.

Holt dwelt at length on the theme that any British decision or announcement on withdrawal would be a gross breach of faith in view of repeated assurances the British had given the Australians. He repeated that he would not be too forceful about the reductions with Wilson, but would focus on withdrawal. The Secretary responded by noting the importance of what others were doing in terms of Congressional sentiment here.

4. Australian Wheat Sales to China. Holt reported in confidence that the British—because of the Hong Kong riots—had asked the Australians to stall on current wheat negotiation. Holt had checked and found that a firm offer had already been made. However, the Australians had sent an additional message, to the effect that the sale would not necessarily go forward if there was a continuing threat to the security of Hong Kong. The British had much appreciated this Australian action, and Holt regarded it as Australian support for a British position, comparable to the support that we were all asking the British to give us by not making a decision on a withdrawal East of Suez.

5. Economic Issues. At the close, Holt raised a number of economic issues:

(a) a $50 million exemption for Australia from our interest equalization tax;

(b) getting a cut in our wool tariff in return for an Australian concession on tobacco;

(c) various dairy products problems;

(d) an increased sugar quota particularly if the British got into the Common Market and the present British-Australian sugar deal fails;

(e) the disastrous effect on Australian exports of lead and zinc to the US, if pending US proposals for an annual quota variable quarterly were adopted;

(f) US restrictions on Australian meat, particularly lower grade varieties, which Holt argued did not hurt US producers.

Holt argued points (a) and (b) at some length. The Secretary responded that we would look into all of these points before Holtʼs return. He did point out, on the wool tariff, that it was our impression that the Australian concession on tobacco had not been substantial enough.

WP Bundy

1. Source: Johnson Library, National Security File, Country File, Australia, Visits of Prime Minister Holt, June 1–2 and 17–19, 1967. Secret.
2. Rusk, Bundy, and Clark met with Holt and Waller from 4:10 to 5:02 p.m. (Ibid., Rusk Appointment Book)
3. Prime Minister and Mrs. Holt attended a State dinner at the White House preceded by drinks and exchange of gifts on the second floor of the White House. (Ibid., Presidentʼs Daily Diary)