348 Embassy in Washington to Australian Government

Cablegram 216 WASHINGTON, 5 March 1949, 1.22 p.m.

RESTRICTED

F.E.C. 45.

Most favoured nation treatment for Japan

Your telegram No. 109 of 18th February. [1]

United States would not accept the contention that a policy decision of F.E.C. would be necessary before SCAP could be authorised to negotiate with other countries concerning most favoured nation treatment to Japan. The interpretation of the terms of reference which the United States has been forcing on F.E.C. for some time now is that SCAP can exercise his Administrative authority except in cases where he is specifically limited by Far Eastern Commission policies. The United States would argue that in negotiating most favoured nation treatment SCAP would not be acting contrary to any existing F.E.C. policy decisions. The United States could also point to the fact that SCAP has already negotiated on behalf of Japan several Bilateral Trade Agreements of one sort or another, e.g., sterling payments agreement.

We have informally sounded out Barnett [2], State Department, who was at London talks on M.F.N. He says that the only type of F.E.C.

action on M.F.N. which the State Department could envisage would be an F.E.C. recommendation that member countries apply M. F. N.

treatment to Japan.

The only type of binding policy decision which F.E.C. can pass is one which states what S.C.A.P. must require the Japanese to do.

F.E.C. has already laid down certain policies concerning the principles which Japan must follow in its import and export policies e.g., 'sources of Japanese imports' and 'destination of Japanese exports' of 8th May, 1947, any trading principles which F.E.C. countries should apply to Japan could only be in the form of a recommendation. While nothing would please the United States better than if F.E.C. passed a recommendation that member countries apply M.F.N. to Japan such a recommendation could have no legal binding force. For the foregoing reasons the United States has found it necessary to discuss M.F.N. to Japan outside of F.E.C.

We are continuing to sound out other Delegations informally and will advise further.

1 Document 347.

2 Robert W. Barnett, Acting Adviser, Division of Occupied Areas Economic Affairs, US Department of State.

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