Reference my telegram No. 30, January 7th,† International Wheat Council. Admission of Germany and Japan.

Following from McNamara, Begins: [Frank] Hollins, United Kingdom delegate to the Council, called an informal meeting yesterday at which United States and Australian representatives as well as ourselves were present, to outline United Kingdom position on the accession of Germany and Japan. He said that Ministers had decided that since the USSR and Argentina did not appear willing to join the International Wheat Agreement, the accession of two such large importers would tip the present balance of the agreement in favour of the exporters. Their membership would mean increased competition for agreement wheat which would tend to keep the price up. In addition, if either or both of the new countries took more than five million bushels of Australian wheat (the figure now under consideration for Australia) it would decrease the present supply of non dollar wheat for other importers. Hollins indicated that the United Kingdom and other importers were seriously concerned with the present working of the Agreement. Prices, he said, were being held at the maximum, irrespective of the laws of supply and demand. He concluded by stating that while the United Kingdom in principle favoured the admission of Germany and Japan to international technical agreements, including the IWA their position at Thursday's meeting would be to endeavour to have the Council recognize that accession of the two countries at the present time would present a real economic problem to the United Kingdom, and that it would, therefore, not be possible to support their membership until a real attempt had been made to meet the economic difficulties foreseen. The suggestion was that before voting on accession, the Council should try to negotiate some sort of arrangement which would assist the United Kingdom in its economic problem. The United Kingdom said it would only be prepared to vote for accession if its own position was not worsened by the entry of the two new members. Questioned as to what they had in mind that might assist their position, Hollins had no positive proposal to put forward, but expressed the hope that some other country would come up with a solution.

2. We are not sure at this stage how serious the United Kingdom is in stating that they will oppose admission, nor are we clear what quid pro quo is expected from the exporters. It may be that what they have in mind is agreement 'by Canada and Australia to restrict sales to the two countries concerned, or agreement to reduce prices below the maximum. Subject to your judgment, we propose to await further developments after [Stanley] Andrews, the Chief United States delegate, arrives today. On the whole, we consider that to agree either to reduce prices below the maximum at this time, or to restrict sales to any signatory importer, is not a proper matter for discussion by the Council meeting, and that accession of Germany and Japan should be considered on their merits.

3. We understand that the United Kingdom also met yesterday with other importers, presumably to concert the line to be taken on Thursday. Ends.