426 Shaw to Evatt

Ministerial Dispatch 6/1947 TOKYO, 12 December 1947

Australian Wool Exports to Japan

1. I have the honour to report that there have recently been made to me by both GHQ, SCAP officials and Japanese Government officials, adverse comments over Australia's alleged unwillingness to facilitate exports of wool to Japan. As you are aware, one of the main present concerns of General MacArthur is the rehabilitation of Japanese industry with a view to restoring some export trade which would lighten the burden of the Occupation costs on the United States Treasury. In SCAP's industrial programme wool imports to Japan are important and the Japanese industrialists and SCAP economic experts concerned have drawn up detailed lists of the types of wool required for a partial re- establishment of the woollen textile industry. So far, however, only 7,000 bales of Australian wool have been imported into Japan since the end of the war. As I understand it, the difficulty is primarily, if not solely, one of finance in that Australian wool brokers are able to dispose of their stocks readily and for cash on a good market. SCAP has no cash available for financing wool imports and neither Australian wool brokers nor the Commonwealth Government has been interested in considering a credit arrangement.

2. At the moment therefore there is a stalemate which, as I see it, can be broken only by one of two methods. Firstly, SCAP might succeed in establishing a revolving export-import fund based on the Japanese 'gold pot' and apply from this some twenty or thirty million U.S. dollars for the purchase of wool from Australia. The Far Eastern Commission are, however, still considering technical aspects regarding the use of the 'gold pot' as collateral for credit in the way suggested. The other method might be for the Commonwealth Government, through perhaps the Commonwealth Bank, to arrange informal credits to an 'open account' with SCAP which would be used to finance certain wool firms and enable some start at least to be made in the sale of wool exports to Japan. Details would, of course, have to be worked out between the Department of Commerce and the Commonwealth Bank, and the background has been reported fully by the Commercial Counsellor to this Mission, Mr.

H. Wrigley, and the Commonwealth Bank's recent representative in Tokyo, Mr. McWatters.

3. From a short term point of view, it is important that the stalemate be broken so as to overcome what is really an important criticism of Australia in GHQ, SCAP on the score of lack of co- operation in helping their industrial rehabilitation programme.

There is also an erroneous belief that the Australian Government, perhaps at the instance of the United Kingdom Government, is disinterested in seeing the Japanese woollen textile industry restored. From a long term point of view, I would assume that Australia's main interest lies in restoring her former important market for raw wool in Japan. In this connection I would report the plans which are being made by GHQ, SCAP for the importation of as much wool as possible from the Argentine and South Africa and also their encouragement of the local production of alternative fibres, such as ramie. I am aware that the present world demand for Australian wool is at a high peak, but it may still be wise to take some steps to encourage the maintenance of the former important market in Japan. I would suggest, therefore, that consideration be given to the arrangement which I have put forward above, namely the making of some informal credit arrangements between the Commonwealth Bank and some wool export firms. Full details of SCAP's immediate wool requirements are already in the hands of the Department of Commerce and of the Wool Realisation Commission.

PATRICK SHAW Head of the Australian Mission in Japan

[AA ; A4231, TOKYO, 1947, 1-6]