265 Chifley to Addison

Cablegram 312 CANBERRA, 25 September 1945

SECRET

1. During the war it became necessary to arrange production within Australia of many new types and lines of goods Australian requirements of which were previously met by importations.

Speaking generally these new industries lack tariff protection.

2. The increasing availability of supplies of the same goods from overseas is calculated to result in importations sufficient in volume to destroy some of these new industries which the Government will desire to foster as permanent additions to our industrial development.

3. The Tariff Board has reported that under existing conditions the Board is unable to assess reasonable and adequate duties by the means used before the war. The Board expresses the view that a long period may elapse before prewar methods of dealing with the matter of protecting industry can be resumed. There is also the fact that Tariff Board procedure is such that the number of cases which the Board could thoroughly investigate and report upon during the period of one year is limited so long as it is necessary to observe prewar procedures.

4. The Government has considered the suggestion made through H.M.

Senior Trade Commissioner in Australia [1] that until circumstances are more normal consideration of tariff adjustments might be deferred. Agreement to follow this course would in the opinion of my Government result in the destruction of a number of industries which it would be the policy of my Government to encourage. For that reason we are unable to accept the suggestion as a satisfactory resolution of the problems confronting us.

5. The Tariff Board has recommended the initiation of consultations with the United Kingdom Government with a view to reaching some temporary arrangement under which worthwhile Australian industries may be protected until reviews in accordance with the principles and procedures of the United Kingdom - Australia Trade Agreement [2] again become possible.

6. I repeat below certain recent observations by the Tariff Board outlining the Board's views in the matter of protecting industries developed during the war and in encouraging the establishment of new industries:-

'Although in the next few years it will be impossible to measure the merits of Australian industries by comparisons of their costs with those of other countries, the Tariff Board considers it essential that Australia's postwar reconstruction should be on the lowest cost basis attainable. Such a basis should of course be sought as a means of maintaining and improving living standards and not at their expense. Reduction of waste in industry or, in other words, increased efficiency, offers the only means of doing that. The Tariff Board desires to stress its opinion, based upon long experience in prewar years, that the greatest discrimination should be exercised in dealing with industries developed during the war, that may require abnormally high protection to survive the return to peace conditions. The same care should be taken in the future in encouraging the establishment of new industries.

High levels of protection may be justified temporarily in the cases of industries not fully developed, that show good prospects of reducing their costs to levels that should in a few years make lower protection sufficient. Also it may be necessary to burden the community permanently with high protection for industries that are essential to national security or that promise exceptional social benefits. In all such cases the cost of protection to the community must be kept prominently in mind and every care taken that the expected benefits will be worth the cost.' 7. My Government agrees with the Tariff Board that circumstances exist which necessitate a variation in the terms of the United Kingdom Australia Trade Agreement to the extent necessary to cover the abnormal situation which now obtains.

8. In the circumstances my Government finds it necessary to seek the concurrence of the United Kingdom Government in an interim arrangement whereunder-pending a return to conditions which permit reviews in accordance with the principles and procedures of the Agreement of 1932-those industries which are recommended for protection by the Tariff Board may meanwhile be afforded such degree and form of protection as the Tariff Board considers appropriate as an emergency measure.

9. As the formulation of definite plans with respect to industries is a matter of considerable urgency in connection with rehabilitation we would appreciate a reply as early as possible.

1 Sir Robert Dalton.

2 Signed in Ottawa on 20 August 1932. It provided for a wide range of preferences for Australian goods on the U.K. market. Existing and new duties imposed by Australian legislation were to be submitted to review by the Tariff Board to ensure that preferences were granted to the U.K. goods in accordance with an agreed formula, that protection was granted only to industries 'reasonably assured of sound opportunities for success', and that U.K. producers were given full opportunity of reasonable competition.

[AA : A1066, ER45/1/5]