423 Cabinet Submission by Evatt, Pollard and Courtice

Agendum 1343A 15 August 1947 [1],

RESUMPTION OF PRIVATE TRADE WITH JAPAN

On 26th May, 1947, Cabinet approved of recommendations contained in Agendum Number 1343 regarding the resumption of private trade with Japan but directed that the question was to be re-submitted to Cabinet before actual trading commenced.

2. In accordance with Cabinet approval action has been taken- (a) to issue a licence under the Trading with the Enemy Act permitting private commercial transactions with residents in the territories controlled by Japan on the entry of that country into the war;

(b) to select a party of businessmen representative of importing, exporting and banking interests to visit Japan;

(c) to lay down the licensing policy which will be followed in connection with imports of Japanese goods;

(d) to make representations regarding the establishment of a yen exchange rate.

3. The first Australian party of businessmen to visit Japan will leave Australia on 23rd August by H.M.A.S. Kanimbla and will arrive in Japan about 12th September. The occupation authorities in Japan will permit the signing of contracts for the supply of goods from 1st September and although the Australian party will arrive subsequent to this date, it is not considered that the members will be placed at a serious disadvantage, in view of the fact that the range of goods which are available for export from Japan and which will be permitted importation into Australia is limited. The majority of the party is anxious to make the visit to Japan to renew pre-war commercial contacts and to arrange for purchases from future production rather than to make immediate purchases.

4. Initially, dollars will be required in payment for all goods exported from Japan and it is therefore proposed that imports of Japanese goods into Australia be accorded the same treatment as imports from hard currency areas. In the early stages of the resumption of private trade, raw silk, cotton yarn and textiles and tea will not be available for purchase by private traders.

Rayon yarn which Australia is anxious to purchase might be available later and importation will be permitted but licences will not be granted for fancy goods, toys, crockery and other non- essential commodities which featured in pre-war trade with Japan.

Import licences are not at present being issued for rayon and silk textiles from any non-sterling country and in the event of any relaxation at a later date it is thought that only limited quantities could be permitted importation from Japan.

5. Under existing circumstances exports to Japan will be chiefly confined to wool and a few minor commodities such as hoofs, horns, trochus shell, etc. A small party of officials from the Australian Wool Realisation Commission has already gone to Japan to explain the Australian requirements in the wool trade to S.C.A.P. and the Japanese interests concerned. It is proposed that a limited percentage, namely 25 per cent, of the total purchases will comprise higher counts of wool than were previously offered to Japan but this will not include the top grades of Australian wool.

The Japanese importing interests will arrange their purchases through reputable Australian firms who will be obliged to observe the restrictions on types and qualities.

6. Despite representations by the Commonwealth and the United Kingdom Governments, no action has yet been taken to establish a yen exchange rate. The information concerning the basis on which payment for goods will be made is still indefinite but it is anticipated that the occupation authorities in Japan will fix the price of goods to be exported on an arbitrary basis. Payment will be made in dollars until such time as a sterling payments agreement can be negotiated by the United Kingdom Government.

Latest confidential advice is that a partial sterling arrangement which excludes Japanese sales of cotton textiles is likely to be concluded in the near future.

7. It is recommended that the Commonwealth Government- (a) permit merchant-to-merchant trading in goods of an essential character which the occupation authorities are permitting private traders to purchase and that import licences be granted only for essential goods which are not available in adequate quantities from local, sterling or easy currency sources of supply;

(b) continue to procure by Government cash purchase raw silk and cotton textiles of the utility type until those goods are made available for purchase by private traders;

(c) authorise within the limits of the quota allocated to Australia visits of Australian businessmen to Japan;

(d) make further representations for the establishment of a satisfactory basis of payment for goods in which trade with Japan is permitted;

(e) permit commercial exports of wool, subject to a moderate restriction on types and qualities, and other commodities which may be readily available for sale to Japan.

H.V. EVATT Minister for External Affairs

R. T. POLLARD Minister for Commerce and Agriculture

BEN COURTICE Minister for Trade and Customs

1 The cited copy is undated, but the recommendations in the submission received Cabinet approval on 15 August.

[AA : A2700, VOL. 34]