344 Shaw to Burton

Cablegram 3806 LONDON, 27 October 1948, 5.20 p.m.

CONFIDENTIAL SECRET

United Kingdom Board of Trade officials have informed us that American officials including representatives from the State Department and from G.H.Q. SCAP Tokyo, wish to visit London to discuss with United Kingdom and other Governments of the British Commonwealth [1] the question of M.F.N. treatment for Japan and background of American economic policy for Japan. United Kingdom have advised November 1st would be suitable date and expect talks to last a few days.

2. You will recall that Australia led the opposition to the American suggestion for M. F. N. for Japan and Germany at recent Geneva meeting of GATT [2] and as a result America withdrew the proposal in respect of Japan.

3. In preliminary discussion with British Commonwealth officials Wheeler of Treasury and myself with the advice of Tonkin of Commerce, expressed the view that M.F.N. treatment for Japan would in fact, from the economic point of view, not result in any increase in the flow of trade which was governed by other factors such as Sterling Area balancing agreement [3], exchange rates etc.

From the political point of view it would not be practicable for Australia to extend M.F.N. treatment to Japan while this privilege did not extend to all Allies and neutrals. M.F.N. can only be considered, if at all, in relation to long term proposals for the revival of Japanese trade and industry and in our view are matters ultimately for peace settlement and in the meantime for the Far Eastern Commission.

4. For the United Kingdom M.F.N. treatment for Japan would have some slight political repercussions in textile circles. Their officials agreed that it would have little real effect on trade but if America pressed it they would consider whether it should not be granted in the interests of good relations. In such circumstances Australia may again find itself leading the opposition to United States policy.

5. Canadian official indicated no political difficulty about M.F.N. New Zealand have little direct economic or political interest but would probably follow our lead if pressed. India, Ceylon and Pakistan have an interest in Japanese trade, and probably would not feel political difficulties in M.F.N.

6. Scope and form of American discussions and suggestions are not yet clear but if they relate merely to immediate granting of M.F.N. treatment to Japan our attitude in the absence of further instructions would be based on Cabinet decision [4] on the same subject prior to Geneva meeting. To avoid appearing too uncompromising in contrast to United Kingdom and other Commonwealth countries we could undertake to submit back to the Government for consideration any proposals submitted. If Americans relate M.F.N. to wider picture we should ask fuller details re levels of industry, exchange rates and economic planning with a view to safeguards we feel necessary. One danger which must be watched is the tendency of Americans to by-pass existing organs of consultation such as Far Eastern Commission and Allied Council [for] Japan and their wish to line up Commonwealth support for their unilateral action in Japan.

7. Talks would be on strictly official level without commitment.

From our point of view they may be valuable in clarifying American policy. Tonkin is in London and I have postponed my departure for Tokyo till 4th November. [5]

1 The proposed discussions had been agreed to at the Prime Ministers' Conference held from 11-22 October 1948. The Australian delegation included Shaw, Wheeler and Tonkin.

2 The second session of Contracting Parties to GATT met from in August to 14 September 1948.

3 For the agreement see Document 375, attachment thereto.

4 Cabinet Sub-Committee (on Trade and Employment Conference) decision 287, dated 3 August 1948, decided 'that Australia should continue to oppose agreement on extension of M.F.N. treatment to Japan outside the recognised peace-settlement authorities. . . ' 5 After this cablegram had been dispatched, Evatt directed deletion of second half of paragraph 4 and all of paragraphs 5 and 7 (see cablegram 3836 from Shaw to Burton, dispatched 28 October 1948)

[AA:A1838/278, 479/2/5]