3 Submission 32 To Cabinet By O'sullivan

16th June, 1951

Trade with Japan

In the post-war period the issue of import licences for Japanese goods has been confined to raw materials and semi-manufactured and manufactured goods of an essential nature. No licences have been issued for finished consumer goods, such as crockery, which would reach the Australian public stamped with the country of origin.

2. Payments for Japanese goods are governed by the terms of a Sterling Area Payments Arrangement between Sterling Area countries, including Australia, on the one hand, and SCAP, representing Japan, on the other. This arrangement contains a provision that SCAP may convert his sterling balances into dollars when they exceed Japan's requirements and our restrictive licensing policy in regard to Japanese goods has been designed to assist in avoiding the loss of dollars to Japan.

3. Recent trends in the level of trade and payments between the Sterling Area and Japan have greatly reduced the possibility of the loss of dollars to Japan and for the present at least there is no need on financial grounds to limit the issue of licences for Japanese goods to those of an essential nature.

4. The continued receipt of applications for licences for consumer goods of Japanese origin indicates that there is an unsatisfied demand in Australia for goods of that type and an easing of the present licensing restrictions would:-

(a) Permit increased importations from Japan which would tend to dampen down inflationary pressures; and (b) Make larger credits available to Japan which could be used for the purchase of Sterling Area goods. Japan is a traditionally important market for Australian exports and any action which restricts purchases from Japan tends to restrict the ability of Japan to purchase Australian goods as well as those from other Sterling Area countries. Since the war the value of Australian exports to Japan (mainly wool) has substantially exceeded the value of Australia's imports from Japan.

5. It is recognised that there are important political considerations involved in the licensing of consumer goods of Japanese origin. On the other hand there are sound economic and financial reasons for increasing the scope and volume of our imports from Japan and it is recommended that:-

(i) As an initial step, licences be issued for the importation of limited quantities of consumer goods of Japanese origin, and (ii) The quantities be increased at the discretion of the Minister for Trade and Customs in the light of subsequent relevant considerations.

[AA : A4905, VOLUME 2]