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Catalogue Reference:CAB/65/25/14 Image Reference:0001

THIS DOCUMENT IS THE PROPERTY OF HIS BRITANNIC MAJESTY'S GOVERNMENT

Printed for the War Cabinet. February 1942.

S E C R E T . Copy No.

W . M . (42)

14th Conclusions.

T O B E K E P T U N D E R L O C K A N D K E Y .

I t is requested t ha t special care may be t aken to ensure the secrecy of this document .

W A R C A B I N E T 14 (42) .

CONCLUSIONS of a Meeting of the War Cabinet held at 10 Downing Street, S.W. 1, on Monday, February 2, 1942, at 5 P.M.

Presen t :

The R i g h t Hon. W I N S T O N S . CHURCHILL , M . P . , P r i m e Min i s t e r (in the Chair).

The R i g h t Hon . C. R. ATTLEE , M.P . , The R i g h t Hon . Sir J O H N ANDERSON, L o r d P r i v y Seal. M . P . , Lord P r e s i d e n t of the Council .

The R i g h t Hon . ANTHONY E D E N , M.P . , The R i g h t Hon . A . GREENWOOD , M . P . , Secre ta ry of S t a t e for Fore ign Min i s t e r w i t h o u t Por t fo l io . Affairs.

The R i g h t Hon. LORD BEAVERBROOK, The R i g h t Hon . S i r KINGSLEY W O O D , Min i s t e r of Supply . M . P . , Chancellor of the Exchequer .

The R i g h t Hon . E R N E S T B E V I N , M .P . , M i n i s t e r of Labour a n d Na t iona l Service.

T h e following were also p r e s e n t :

The R i g h t Hon . Sir EARLE PAGE, Specia l Envoy from the Government of t he Commonweal th of Aus t r a l i a .

The R i g h t Hon . HERBERT MORRISON, The R i g h t Hon. VISCOUNT CRANBORNE, M . P . , Secretary of S t a t e for the Secre ta ry of S ta t e for Dominion H o m e D e p a r t m e n t a n d Min i s t e r of Affairs. H o m e Securi ty .

The R i g h t Hon . L. S. A M E R Y , M.P . , The R i g h t Hon. LORD MOYNE , Secre-Secre ta ry of S t a t e for I n d i a and t a r y of S ta te for the Colonies. Secre tary of S ta t e for B u r m a .

The R i g h t Hon . A . V . ALEXANDER, C a p t a i n the R i g h t H o n . H . D . M A R -M.P. , F i r s t Lord of the A d m i r a l t y . GESSON, M . P . , Secre ta ry of S ta te for

W a r .

The R i g h t Hon . S i r A N D R E W DUNCAN, The R i g h t Hon . S i r ARCHIBALD M . P . , P r e s i d e n t of the Board of

SINCLAIR , Bt. , M . P . , Secre tary of T r a d e (Item 8). S t a t e for A i r .

[23425]

T h e H o n . S i r A L E X A N D E R CADOGAN, A d m i r a l of the Flee t S i r D U D L E Y P e r m a n e n t U n d e r - S e c r e t a r y of S t a t e P O U N D , F i r s t Sea L o r d a n d Chief of for Fo re ign Affairs. Nava l Staff.

A i r Chief M a r s h a l S i r CHARLES F . A . Gene ra l S i r A L A N BROOKE , Chief of the PORTAL , Chief of t h e A i r Staff. I m p e r i a l Genera l Staff.

Secretariat. S i r E D W A R D B R I D G E S . M a j o r - G e n e r a l S i r H A S T I N G S ISMAY. Mr. W . D . W I L K I N S O N . Mr. L . F . B U R G I S .

W A R C A B I N E T 14 ( 4 2 ) .

CONTENTS. M inute

No. Subject. Page

1 Nava l , Mi l i t a ry a n d Ai r Ope ra t i ons . . . . ... 71 Air Operations. Naval Operations:

Shipping losses. Military Operations:

Fa r East—Malaya. Burma. Netherlands E a s t Indies. Pacific Islands.

Libya. Russia.

2 P a r E a s t .... 72 Allied Co-ordination. China.

3 C h i n a 73 Loans from United States and Great Britain.

4 E g y p t 73 5 Ai r P o l i c y 74

Occupied France.

6 M a n - P o w e r 74 Beveridge Committee on Skilled Men in the Services.

tion of Second Report (Part IV Publica­

7 E v a c u a t i o n of Civil Officials fromE n e m y O c c u p a t i o n ....

T e r r i t o r y in d a n g e r of .... .... .... .... 75

8 C o n s i d e r a t i o n u n d e r L e a s e - L e n d .... .... .... .... 75

Military 1. The Chiefs of Staff gave the following informat ion in amplif icat ion of Cabinet W a r Room Records Nos. 877-883. s. Summary of A i r c r a f t Losses since the 26th J a n u a r y :—

I n the Home Theatre we h a d lost 13 bombers in over 500 sort ies . (42) 11th

I n the Middle East w e h a d lost 15 a i r c r a f t to 8 of the asions, enemy. Most of our losses h a d occurred as a resul t of low-flying a t t acks on g round troops.

Malta h a d been subject to constant a t tacks , bu t they had erations. not been pressed home so s t rongly recently.

I n the Far East we had lost 35 a i r c ra f t to 31 of the enemy destroyed.

I n Burma 26 enemy a i r c r a f t h a d been destroyed to 5 of our own.

The a t t ack on the J a p a n e s e convoy in the Malacca S t r a i t s by U n i t e d S ta tes a n d Du tch a i r forces h a d resulted in 5 t r anspor t s being sunk, 2 probably sunk and 10 damaged. I n add i t ion , 4 J a p a n e s e cruisers a n d 2 destroyers had been damaged by a i r a t tack .

The Prime Minister said t h a t he h a d te legraphed to General Wavel l a sk ing the reasons for the decision to remove a la rge propor­t ion of our a i r c r a f t from Singapore I s l and to Sumat ra . H e would inform Sir E a r l e P a g e of the answer received.

The Chief of the Air Staff under took to inform the Home Secretary arid the Min i s t e r of Home Securi ty , so t h a t he could w a r n the N o r t h e r n I r e l a n d Government , should the A i r Staff an t i c ipa te a i r a t tacks in s t r eng th in Nor the rn I r e l and .

The Chief of the A i r Staff said t h a t he w a s propos ing to c i rcula te a Memorandum for the considerat ion of the Defence Commit tee a s to the policy to be pursued in regard to a i r a t t acks on the German w a r s h i p s a t Brest .

D u r i n g the previous week 36,000 tons of sh ipp ing had been lost by enemy action, a n d 12,000 by m a r i n e casual t ies . Belated repor ts

Losses, m i g h t account for ano ther 51,000 tons. December s h i p p i n g losses, af ter including all doubtful cases,

amounted t o 442,000 t o n s : 352,000 tons by enemy act ion and 90,000 tons by m a r i n e casual t ies .

A U-boa t ha,d been sunk off the Azores and 39 pr i soners taken. The Prime Minister said tha t , if the A d m i r a l t y could not

ob ta in a sa t i s fac tory answer from the U n i t e d Sta tes Nava l A u t h o r i t i e s w i t h r e g a r d to the scheme for convoys in the At l an t i c , the m a t t e r should be repor ted to him.

D u r i n g the n i g h t the 30th-31s t J a n u a r y our forces on the m a i n l a n d of Johore , w i t h ce r t a in except ions which h a d been cut off. h a d w i t h d r a w n to S ingapore Is land . D u r i n g the previous five n i g h t s the Navy h a d evacuated some 2,000 men from the west coast of Johore .

The ga r r i son of S ingapore amounted to the equivalent of about four divis ions. Food supplies, t he w a t e r supply a n d ammuni t ion stocks were considered sufficient.

I n answer to a quest ion by S i r Ear le P a g e , the Prime Minister sa id t h a t i t would be for Genera l Wavel l to decide the des t ina t ion of fu r the r re inforcements now on the i r way to Singapore .

Our t roops h a d evacuated Moulmein a n d were now in posi t ion west of the R ive r Salween. F u r t h e r re inforcements h a d a r r ived in B u r m a d u r i n g the previous week and negot ia t ions were in progress w i t h the Chinese w i t h a view to the i r t a k i n g over cer ta in areas .

T h e J a p a n e s e were e x p a n d i n g their hold in nor th-west Borneo a n d a t B a l i k p a p a n . L a n d i n g s h a d occurred on Ambon.

[23425] B 2

Pacific Islands.

Libya.

Russia.

Far East. Allied Co-ordination. (Previous Reference: W.M. (42) 13th Conclusions, Minute 2.)

Rabou l h a d been occupied by the J a p a n e s e . T h e r e w a s n o news of o u r ga r r i son , w h i c h consis ted of one A u s t r a l i a n ba t t a l i on a n d a few other t roops .

The enemy advance from A g e d a b i a h a d been in two columns, one t o w a r d s M s u s a n d the o ther t o w a r d s Benghaz i . D u r i n g a heavy t a n k engagemen t between the G e r m a n s and ourselves, our 2nd A r m o u r e d B r i g a d e h a d suffered cons iderable losses. T h e I n d i a n B r i g a d e a t B e n g h a z i h a d successfully fought i ts w a y back t h r o u g h the G e r m a n lines, w i t h the except ion of the sapper s engaged on demoli t ions .

The W a r Cab ine t h a d some discussion on the a r r a n g e m e n t s for r e p a i r i n g a n d ref i t t ing our t a n k s , which a p p e a r e d to compare un favourab ly w i t h the enemy's o rgan i s a t i on in t h i s respect .

The news f rom R u s s i a con t inued to be sa t i s fac tory . I n the L a k e I l m e n - L a k e Sel iger sector they h a d m a d e considerable advance, a n d in the cen t ra l sector the i r forces were now n e a r to Vel izh, some 50 miles no r th -eas t of Vitebsk. W e s t of V y a s m a the R u s s i a n s h a d succeeded in p u s h i n g de t achmen t s a s t r i de t he m a i n G e r m a n l ine of w i t h d r a w a l to Smolensk. South-wes t of Moscow the R u s s i a n s h a d advanced to w i t h i n 20 miles of V y a s m a .

On the Done tz f ront the R u s s i a n s con t inued to m a k e excellent p rogress a n d h a d probably reached the ne ighbourhood of P a v l o g r a d . T h i s advance w a s most significant.

I n the C r i m e a the G e r m a n c la im to have r e c a p t u r e d Feodosia h a d been confirmed.

The Chief of the I m p e r i a l Gene ra l Staff was inv i ted to c i rcu la te to t h e W a r Cab ine t t h e recent r e p o r t s f rom R u s s i a w h i c h h a d been received f rom Genera l Mason M a c f a r l a n e .

T h e W a r Cab ine t took note of t he above s ta tements .

2. The Prime Minister sa id t h a t he h a d now received a reply f rom the P r e s i d e n t as to the a r r a n g e m e n t s for Al l i ed Co-ord ina t ion in the F a r E a s t . T h e P r e s i d e n t p roposed t h a t a l l po l i t i ca l and governmenta l m a t t e r s concerning N e w Zea land , A u s t r a l i a a n d the N e t h e r l a n d s E a s t I n d i e s should con t inue to be h a n d l e d in L o n d o n ; a n d t h a t m i l i t a r y m a t t e r s should be resolved in W a s h i n g t o n . If, however, a l l these count r ies were each to be represented by th ree men on the j o i n t staff cons ider ing the A .B .D .A . problems, the resul t would be a n unwie ldy body. H e there fore proposed t h a t t he present o r g a n i s a t i o n for the col laborat ion of B r i t i s h and U n i t e d S ta tes staffs should con t inue as a t p resen t , b u t t ha t , where t he Dutch , A u s t r a l i a n s a n d N e w Zea l ande r s were concerned, t he Combined Staffs should inv i t e t he i r p a r t i c i p a t i o n in the d iscuss ion of ma t t e r s which involved the i r na t i ona l in teres t a n d col laborat ion.

The P r i m e Min i s t e r sa id t h a t he h a d fo rwarded t h i s communi­ca t ion to t he P r i m e Min i s t e r of A u s t r a l i a a n d h a d asked whe ther t h e a r r a n g e m e n t proposed by the P r e s i d e n t w a s sa t i s fac to ry to him.

The Secretary of State for Foreign Affairs r e a d a t e legram from the N e t h e r l a n d s Government to t h e U n i t e d S ta tes Government se t t ing o u t the reasons which, in t h e i r view, m a d e the es tabl ishment of a F a r E a s t e r n Counci l in London , r a t h e r t h a n in W a s h i n g t o n , a m a t t e r of v i t a l impor tance to them.

I n discussion, the view w a s genera l ly expressed t h a t t h e estab­l i shment of a F a r E a s t e r n Counci l , i n London would be f a r more advan tageous to t h e N e t h e r l a n d s , A u s t r a l i a n a n d N e w Zea land Governments . T h e suggest ion w a s m a d e tha t , if a F a r E a s t e r n Counci l we re set u p in London, these th ree Governments m i g h t also have m i l i t a r y a t t a ches or r epresen ta t ives in W a s h i n g t o n , w h o migh t be consul ted w h e n F a r E a s t e r n m a t t e r s were u n d e r d iscuss ion there . I t would, however , be of v i t a l impor t ance t h a t these m i l i t a r y repre ­senta t ives should speak w i t h the same voice as t h e represen ta t ives of t he i r Gove rnmen t s in London . O the rwi se confusion wou ld ensue.

China. Loans from United States and Great Britain. (Previous Reference: W.M. (42) 13th Conclusions, Minute 1.)

Egypt.(PreviousReference:WiM. (42) 10thConclusions,Minute 6.)

The ques t ion w a s r a i s ed w h e t h e r the Chinese Government wou ld be inv i t ed to t ake p a r t in t he del ibera t ions of t he F a r E a s t e r n Counci l i n London, or, a l te rna t ive ly , of the Pacif ic Counci l i n W a s h i n g t o n .

The Prime Minister s a i d t h a t t he U n i t e d S t a t e s Government would a lmost ce r t a in ly wish t o see the Chinese aspect of F a r E a s t e r n co-ord ina t ion h a n d l e d in W a s h i n g t o n .

T h e W a r C a b i n e t ­(1) I n v i t e d the Secre ta ry of S t a t e for F o r e i g n Affairs a n d the

Secre ta ry of S ta t e for Domin ion Affairs t o a r r a n g e for the t ex t of the t e l eg ram from the N e t h e r l a n d s Govern­men t to the U n i t e d S ta t e s Government to be communi­ca ted to the Governments of A u s t r a l i a a n d N e w Zealand.

(2) Took note t h a t S i r E a r l e P a g e would communica te to h i s Government the sugges t ion ou t l ined a t " X . "

3. The Chancellor of the Exchequer said t h a t t he U n i t e d S ta t e s Government h a d informed u s on the previous d a y t h a t they were a p p r o a c h i n g Congress for approva l for a loan u p to 500 mil l ion dol lars t o Ch ina , to be advanced a t such t ime or t imes and upon such t e rms as were deemed to be in the in teres ts of the U . S . A . ; the news h a d now come in t h a t i t h a d been decided in W a s h i n g t o n to p resen t th i s Resolut ion to Congress a t once and t o make a publ ic announcement on the proposal . The Resolut ion was being publ ished t h a t day, a t about 7 P .M . B r i t i s h t ime.

I t was u n c e r t a i n to w h a t ex ten t the new Amer i can loan would, in fact, be d r a w n upon. T h e U n i t e d S ta tes Government were p roduc ing t h e psychological effect w h i c h Genera l C h i a n g Kai -shek des i red w i t h o u t commi t t ing themselves to any specific advances .

I t seemed desi rable t h a t H i s M a j e s t y ' s Government should take pa ra l l e l ac t ion. O u r cont r ibu t ion , wh i l e l a rge enough to achieve the des i red pol i t ica l effect, ough t n o t t o be equa l to t h e U n i t e d S ta tes cont r ibu t ion , in v iew of the i r much g rea te r financial resources. T h i s i nd ica t ed a loan of say, £50,000,000. W i t h i n t h i s l imi t we m i g h t advance s t e r l ing as and w h e n r e q u i r e d for w a r purposes . I t should not cons t i tu te a n uncondi t iona l cash loan.

T h e Chancel lor suggested t h a t we should issue a communique t h a t n i g h t (i.e., s imul taneously w i t h the A m e r i c a n announcement) say ing , first, t h a t we were offering to m a k e avai lable to C h i n a unde r a lend-lease a r r a n g e m e n t al l the mun i t ions a n d m i l i t a r y equ ipment w h i c h i t w a s in ou r power to supply , and , secondly, t h a t we were offering to l end to C h i n a a n amoun t u p to £ 5 0 mil l ions a t such t imes a n d for such w a r purposes as may be agreed u p o n between H i s M a j e s t y ' s Government a n d the Chinese Government .

T h e W a r C a b i n e t -A p p r o v e d the issue t h a t evening of a communique on the l ines proposed by the Chancel lor of the Exchequer . T h e Fo re ign Secre ta ry was inv i ted to t e l eg raph a t the same t ime to H i s Ma je s ty ' s Ambassador a t Chungk ing , i n s t r u c t i n g h im to convey th i s offer to Gene ra l C h i a n g Kai -shek . ;

4 The Foreign Secretary sa id t h a t the W a r Cab ine t would have seen C a i r o t e legrams Nos. 441 , 442 a n d 443, which r epor t ed a po l i t i ca l c r i s i s in E g y p t . The P r i m e Min is te r , Husse in S i r ry , w a s

obviously t i r e d of a s i tua t ion in w h i c h he w a s exposed to con t inua l p i n - p r i c k s f rom K i n g Fa rouk . H e w a s about to res ign, a n d h a d

advised K i n g FaroUk t o send for N a h a s . [23425] B 3

Air Policy. Occupied France. (Previous Reference: W.M. (42) 3rd Conclusions, Minute 3.)

Man Power. Beveridge Committee on Skilled Men in the Services. Publication of Second Eeport (Part I ) .

T h e Fore ign Secre ta ry sa id t h a t he h a d t e l eg raphed t o S i r Miles Lampson (Fore ign Office t e l eg ram No. 572 to Cai ro) recommending h i m to establ ish d i rec t communica t ion w i t h N a h a s , if possible before H u s s e i n S i r r y ' s r e s igna t ion w a s announced , a n d t o make i t clear t h a t we should expect h im, if he took office, to a d o p t a n a t t i t u d e favourable to t h e p rosecu t ion of the w a r effort. W h i l e we h a d no in ten t ion of d e p a r t i n g from the T r e a t y , every p o i n t w h i c h arose wou ld not be capable of be ing measu red by the ya rd - s t i ck of the T r e a t y s igned s ix y e a r s previously. W e should also expect N a h a s to e l imina te c e r t a i n undes i rab le e lements in K i n g F a r o u k ' s * household.

The Prime Minister e n q u i r e d w h e t h e r the adven t of N a h a s to power would mean a genera l election.

The Foreign Secretary t hough t t h a t N a h a s m i g h t not ins is t upon an elect ion if, a s we an t i c ipa t ed , he were f o r m i n g a pure ly W a f d i s t Government .

The W a r C a b i n e t -Approved the Fore ign S e c r e t a r y ' s in s t ruc t ions to S i r Miles L a m p s o n (Fore ign Office t e l eg ram to Ca i ro , No. 572).

5. The War Cabinet a g a i n h a d u n d e r cons ide ra t ion a Memo­r a n d u m by the Sec re t a ry of S t a t e for A i r ( W . P . (41) 260) in r e g a r d to the bombing of c e r t a i n factor ies i n occupied F r a n c e which were m a k i n g mun i t i ons for the enemy.

The W a r C a b i n e t -Confirmed the decision t h a t s teps should now be t aken to bomb these factor ies .

6. The W a r Cab ine t had before them—-

A M e m o r a n d u m by the M i n i s t e r of L a b o u r a n d N a t i o n a l Service ( W . P . (42) 45) c i r cu l a t i ng P a r t I of t h e second r epo r t of the Bever idge Commi t t ee on Ski l l ed M e n in the Services.

A M e m o r a n d u m by the Sec re t a ry of S t a t e for W a r rep ly ing to ce r t a in c r i t i c i sms of t he A r m y ' s use of i t s skilled men, con ta ined in the second r e p o r t ( W . P . (42) 44).

A N o t e by t h e M i n i s t e r of L a b o u r a n d N a t i o n a l Service c i r cu l a t ing a f u r t h e r M e m o r a n d u m by S i r W i l l i a m Bever idge ( W . P . (42) 56).

The Secretary of State for War s a i d t h a t h e h a d satisfied h imsel f t h a t t he two documents a t t a c h e d to his M e m o r a n d u m were su i t ab le for pub l ica t ion , a n d con ta ined the a p p r o p r i a t e reply to the c r i t i c i sms in the r e p o r t of the Beve r idge Commit tee .

H e d i d not consider himself as p rec luded from coming fo rward l a t e r on, if c i rcumstances should make i t necessary, w i t h proposa ls t h a t the A r m y should r e c r u i t t h e r a n k s of i t s ski l led personnel from i n d u s t r y to a much g r e a t e r ex ten t t h a n the Bever idge Commit tee recommended.

The Secre ta ry of S t a t e hoped t h a t i t would be unnecessary to have two A r m y debates i n t he H o u s e of Commons in close succession, one on the Bever idge r e p o r t a n d the second on A r m y Es t ima te s . I f t h e pub l i ca t ion of t h e r e p o r t could be he ld u p unt i l , say, t he .12th Februa ry , i t w o u l d be possible t o deal w i t h i t when A r m y E s t i m a t e s w e r e t a k e n on the 19 th F e b r u a r y .

Evacuation ofCivilian Officialsfrom Territoryin Danger ofEnemyOccupation.

.

ConsiderationunderLease-Lend.( l r e v i o u s

Reference:W.M. (42) 2ndConclusions,Mmute l i . )

The W a r C a b i n e t -I n v i t e d the Min i s t e r of Labour a n d N a t i o n a l Service a n d the Secre ta ry of S t a t e for W a r to a r r a n g e for the publ ica­t ion as one document, about the 12th Februa ry , of the second r e p o r t of t h e Bever idge Commit tee together w i t h the W a r Office reply.

7. T h e W a r Cabinet h a d before them a J o i n t M e m o r a n d u m by the Sec re ta ry of S t a t e for B u r m a and the Secre ta ry of S t a t e for

the Colonies ( W . P . (42) 52). A t t ached to the M e m o r a n d u m w a s a d r a f t t e l egram to the Governor of Burma . T h e d r a f t proposed tha t ,

while , in genera l , E u r o p e a n officials should be w i t h d r a w n when the occupat ion of t e r r i t o r y by the enemy w a s imminent , a l imited

number of officers on the a d m i n i s t r a t i v e staff should s tand fast . T h i s course w a s proposed on the g round tha t , if all the Eu ropean officers were w i t h d r a w n , we should suffer a g r e a t loss of pres t ige .

I n discussion, i t w a s u rged tha t , while the w i t h d r a w a l of these officers would lead to some loss of prest ige, th is would necessari ly follow o u r w i t h d r a w a l in the face of super ior enemy forces. F u r t h e r , the officers left behind would almost ce r t a in ly be t aken pr i soner a n d m i g h t well be subjected to humi l i a t i ng t r ea tmen t . No

useful purpose would, therefore , be served by the i r r ema in ing behind.

I t w a s po in ted out t ha t the w i t h d r a w a l of all wh i t e officers m i g h t lead to some difficulties w i t h the Nat ive staff. Th is , however, m i g h t be overcome if the ins t ruc t ions were so d r a f t ed as to ensure t h a t all officers in p a r t i c u l a r g rades , whether E u r o p e a n or Nat ive, were ins t ruc ted to w i t h d r a w a n d no d i sc r imina t ion w a s made on g rounds of colour.

The m a i n p u r p o r t of the te legram to the Governor of B u r m a should, however, be t h a t all E u r o p e a n staff should be w i t h d r a w n , when they h a d ca r r i ed out al l the du t ies r equ i r ed of them, before enemy occupat ion.

The W a r C a b i n e t -I n v i t e d the Secre ta ry of S t a t e for B u r m a to modify the d r a f t t e l egram in the above sense.

8. T h e W a r Cabine t h a d before them the following documents :—

^ M e m o r a n d a bv the M i n i s t e r w i thou t Por t fo l io , t he Secre­ t a r y of S t a t e for I n d i a , the Chancellor of the Exchequer

fa Secre ta ry of S ta t e for Dominion Affairs a n d

( W . P . (42) 2 1 , 23, 2 5 and 32). (&) Messages from the U n i t e d S ta tes D e p a r t m e n t of S ta te , c i rcu la ted by d i rec t ion of the Fore ign Secretary

( W . P . (42) 58). (c) Te legram No. 542 from our Ambassador a t Wash ing ton . (d) Te leg ram No. 89 from the H i g h Commissioner in A u s t r a l i a ,

t o the effect t ha t t he Commonweal th Government were l ikely to press for acquiescence in Ar t i c l e V I I .

Discussion t u rned , no t on the mer i t s of the economic policy embodied in A r t i c l e V I I , bu t on the more l imi ted issue whe the r we should sign a n A g r e e m e n t embodying Ar t i c le V I I a t t h i s j u n c t u r e . T h e fol lowing were the ma in po in t s in favour of t h i s course :—

(1) The Foreign Secretary s a i d t h a t the Cons t i tu t iona l pos i t ion w a s t h a t the P r e s i d e n t could p u t h i s own i n t e r p r e t a t i o n o n the Lease-Lend Ac t . If, however, w e d i d no t reach

ag reemen t w i t h the P re s iden t , w e m i g h t have to have nego t i a t ions w i th Congress.

(2) H e wished i t to be on record t h a t he t h o u g h t tha t , if we d id not accept t he te rms now offered, we m i g h t have to agree to much less favourable t e rms la te r on.

(3) I f we d i d not agree to the revised d r a f t of A r t i c l e V I I now p u t f o r w a r d , he feared a worsen ing of o u r re la t ions w i t h t he S t a t e D e p a r t m e n t .

(4) E m p h a s i s w a s la id on the fact t h a t the A m e r i c a n A m b a s s a d o r and L o r d H a l i f a x h a d consis tent ly repre ­sented to u s the impor tance of r each ing agreement on th i s topic .

(5) The Secretary of State for Air expressed agreement w i t h these views. H a v i n g r e g a r d to the reduc t ion in our fore ign inves tments a n d o ther adverse factors , and to the p robab i l i t y t ha t ou r balance of p a y m e n t a f te r the w a r wou ld be seriously adverse, he t h o u g h t i t would be necessary to ensure, by negot ia t ion w i t h t he U n i t e d S ta tes , t h a t they would ease our difficulties by a real ly subs t an t i a l lowering of thei r tariffs and by other measures if we agreed to abolish I m p e r i a l Pre fe rence . A t t h e same t ime, i t would be well w o r t h whi le to accept the la tes t d ra f t of Ar t i c l e V I I , if possible, w i t h sui table i n t e rp re t a t i ons , in order to solve th i s difficult quest ion a n d to improve the prospects of pos t -war economic co-operat ion between G r e a t B r i t a i n and the U n i t e d S ta tes .

(6) The Dominions Secretary sa id t h a t i t should be on record t h a t the present Governments in the Dominions were p r e p a r e d to accept the revised d r a f t of A r t i c l e V I I . The Secretary of State for Air a t t a ched g r e a t impor tance to t h e Dominions being consulted for thwi th .

The m a i n a r g u m e n t s aga in s t the s i gna tu re a t this j u n c t u r e of a n Agreemen t embodying Ar t i c l e V I I were as follows :—

(i) The re w a s no evidence t h a t opinion in t h e U n i t e d S ta tes w a s in teres ted in t he subject, or t h a t Congress would not acquiesce in wha tever l ine t he P r e s i d e n t m i g h t t ake on t h i s subject.

(ii) The whole posi t ion h a d been a l te red by the fact t h a t A m e r i c a w a s now in the war . The d r a f t had , indeed, been p r e p a r e d before Amer i ca h a d come in to the war , a n d before the two count r ies h a d agreed to pool the i r resources.

(iii) W h i l e the re was much to be said in favour of the l ine of policy out l ined in A r t i c l e V I I , the re was no inheren t connect ion between th i s policy a n d the benefits received u n d e r the Lease-Lend Act .

(iv) I n any case, before we en te red in to a commitment t h a t we would w o r k towards " t he e l imina t ion of a l l forms of d i s c r imina to ry t r e a t m e n t in i n t e rna t iona l commerce a n d the reduc t ion of tariffs a n d o the r t r a d e b a r r i e r s , " we ough t to know w h a t we should receive i n r e tu rn .

(v) Object ion w a s seen, from the Cons t i tu t iona l p o i n t of view, to s i g n i n g an Agreemen t which would tie ou r h a n d s on m a t t e r s which members of the B r i t i s h Commonweal th should set t le among themselves. Fu r the r , s i g n a t u r e a t t h i s moment would be r e g a r d e d by ce r t a in sections of publ ic opin ion as a n a t t e m p t to b reak u p the B r i t i s h E m p i r e .

I t seemed t h a t the p roper course would be to d r a f t a rep ly on the lines t h a t we were ready t h a t conversat ions should be s t a r t ed , between t h e two Governments a t a n ear ly d a t e on the issues of economic re la t ions between our two countr ies , a n d t h a t we d id not exclude f rom discussion any of the m a t t e r s fa l l ing w i t h i n the scope of Ar t i c le V I I . A t the same t ime, we felt t h a t i t would be inappro ­p r i a t e t h a t we should s ign a n Agreemen t embodying an Ar t ic le deal ing w i t h these ma t t e r s u n t i l such discussions h a d t aken place.

The W a r C a b i n e t —

Pos tponed decision o n the ma in issue, a n d meanwhi le inv i ted the Secre tary of S t a t e for Fo re ign Affairs a n d the Chancel lor of the Exchequer to p r e p a r e a d r a f t reply on these l ines, which should be submit ted t o the W a r Cabinet for a l t e rna t ive cons idera t ion a t an ear ly Meet ing .

Great George Street, S.W. 1, February 2, 1942.