379 Peterson  to Pollard
Minute [CANBERRA], 28 October 1949
TRADE WITH JAPAN
Renewal of trade arrangement with Japan for the year 1949/50
Negotiations at Tokyo between the representatives of the Supreme Commander for the Allied Powers on behalf of occupied Japan and of the Sterling Area participants which have been proceeding since August, have led to agreement upon a renewal for 1949/50 of the trade arrangement with Japan on lines similar to the earlier plan.
 It covers both private and Government trade.
The Sterling Area participants comprise the United Kingdom and Colonies (excluding Hong Kong), Australia, India, South Africa, New Zealand and Ceylon. There are also several bilateral agreements between S.C.A.P. and other countries in the Sterling group. These are known as non-participants.
The arrangement aims at trade between Japan and the Sterling Area participants being balanced between sales and purchases at the highest practicable level.
At 30th June 1949, however, there was a balance of trade in favour of occupied Japan to the extent of about A 12.5 million. This caused an imbalance which, under the Overall Payments Agreement, could be converted into dollars to the detriment of the Sterling Area. However, this difficulty has been overcome by such amount being used by S.C.A.P. as a working capital fund.
The new arrangement has been strengthened with a view to preventing future imbalances and so avoiding the possibility of loss of dollars.
Trade during the past year 1948/49, so far as Australia is concerned, showed a sterling credit of A4.6 minion, thus assisting in reducing the imbalance. Our sales to Japan amounted to A6.2 million as against purchases therefrom of A1.5 minion.
The main items of our sales consisted of wool A4.5 million;
cereals 1.4 million; dried milk A133,000; hides and skins A132,000; trochus and pearl shell A37,900; lanolin A3,750;
horns and hooves A1,250.
Under the new trade plan for 1949/50 it is estimated that Japan win purchase goods to the value of A68.75 million from the Sterling Area participants. For 1948/49 trade had been estimated at A35 minion each way.
On the basis of last year's trade, we have estimated Australian sales to Japan this year at about A7.5 million, consisting mostly of wool A6.5 million; with cereals A500,000; dried milk A200,000; hides and skins A200,000; other A100,000.
Australia's requirements from Japan were estimated at a similar amount in two categories-'essentials' and 'desirables'. Owing to the necessity of the overall balancing of sales and purchases and the demand for many of Japan's products, particularly cotton textiles, Sterling Area requirements have had to be confined to 'essentials', which leaves Australia's share as A6.2 million comprising mostly metals and metal products, the other items being rayon, timber, silk, machinery, insulators, etc. However, in addition, there will be a considerable number of contracts which were not fulfilled by the end of the last yearly period to be carried over into this year.
The estimated purchases by the other participants are United Kingdom and Colonies A39.45 million; India A6.8 million; Ceylon A1.56 million; New Zealand 1.04 million; South Africa A341,250.
Total new purchases from Japan by the Sterling Area participants during 1949/50 are estimated at 56.9 million.
Submitted for approval.