119 Informal Trade Talks: Initial Statement By Uyama [1]

31st October, 1955

CANBERRA

It is gratifying to note that trade between Japan and Australia improved to a certain degree during the last fiscal year. There are various reasons to believe that this tendency of improvement can be further strengthened, and, indeed, there is a common desire on both sides to see trade between our two countries expanded to the greatest possible extent.

We are, therefore, very much pleased to be able to enter into talks with you, Gentlemen, representing the Departments primarily concerned, to examine mutual trade problems.

It has been agreed upon to conduct the present talks on an informal and purely exploratory basis. There are a great number of problems involved in this field of trade. Unfortunately, however, many of them have not been fully discussed between our two Governments so far. Therefore it is appropriate to explore the possibility of expanding trade by means of informal discussions on these problems.

Probably, some of them will be satisfactorily done away with in the course of informal talks, but there may be such problems that require more formal negotiation. At any rate, we wish to cover all the relevant fields so that both Governments will henceforth be able to take effective and constructive steps with a clearer perspective.

I am confident that, through a full and frank exchange of views, we shall be able to achieve a wider range of agreement on measures to be taken for the promotion of our mutual trade. Accordingly, we shall be quite frank in presenting our views and also try to give you as much information as possible as you may wish to have with regard to our trade policies and administrative measures. We hope your side will also be prepared to do the same.

Now, allow me to touch upon, briefly, the items proposed from our side for discussion.

(1) Application of GATT provisions to trade relations between Japan and Australia We are grateful for the support the Australian Government extended to Japan's application for the accession to the General Agreement on Tariffs and Trade. At the same time, however, we have to express our deep disappointment about the fact that the Government of Australia chose to invoke Article XXXV of the Agreement.

I trust the position of the Japanese Government is clearly presented in the statement transmitted to the other member countries, through the GATT Secretariat, on the 7th of this month.

We are not unaware of the apprehensions on the part of the Australian Government with regard to possible undesirable effects to be inflicted on the Australian industries in case of an abnormal influx of Japanese goods in domestic markets.

In this connection there are already the provisions of Article XIX of the General Agreement for protective measures applicable in emergency cases, and in order to supplement these provisions efforts are being made to introduce a new interpretation with regard to Article XXIII, paragraph 1(c) to be established as an 'interpretative note'.

We earnestly hope that the Australian Government will find these as sufficient safeguards to eliminate the above-mentioned apprehensions and cease to invoke Article XXXV in regard to the trading relations with Japan at an early date.

If there are other reasons for further apprehensions, we should like to request that the Australian representatives will be good enough to give us an explanation about them.

(2) Matters to be dealt with usually in a Treaty of Friendship, Commerce and Navigation It has been customary for the Japanese Government to conclude Treaties of Friendship, Commerce and Navigation with other countries, in order to place its international trading relations on a stable basis. This practice has been regarded as very suitable not only by the Japanese Government but also by our business people. It is therefore requested that the policy of the Australian Government will be indicated on this matter in the course of the present talks.

Under a Treaty of Friendship, Commerce and Navigation, the following problems are usually stipulated:

Entry, stay, travelling and residence; Establishment of companies;

Protection of persons and property; Judicial rights; Business activities; Property rights; Internal taxation; Prevention of double taxation; Social security; Foreign exchange control;

Customs tariff; Entry of goods; Customs administration; Internal treatment of goods; Commercial travellers; Freedom of commerce and navigation; Treatment of ships; Consular convention matters;

Transit of persons and goods; Industrial property rights.

At present, there are provisions of Article XII in the Treaty of Peace between Japan and the Allied Powers signed at San Francisco in 1951. However, these provisions will cease to be effective next April. [2] Therefore, it is deemed necessary to enter into a treaty on these matters.

In case the Australian Government is not yet prepared to enter into such a treaty or agreement with Japan, we wish to take up the individual problems mentioned above.

For instance, under the present circumstances, Australian businessmen are allowed to enter, stay, travel and reside, together with their families, in Japan on an equal basis with other foreign nationals. These Australian nationals are being treated without any discrimination. On the other hand, Japanese businessmen are not accorded the same treatment in this country at present. These people are allowed to come to this country to engage in a very limited field of commercial activities for a limited period. Their families are not allowed to accompany them.

Therefore, their status while in this country is uncertain and not suitable for the carrying on of their business in the field of trade between this country and Japan. Accordingly, I should like to request that prompt action be taken to remedy this situation.

(3) Other measures to be taken for the promotion of trade between Japan and Australia

As I mentioned before, the trade between Japan and Australia, since its resumption after the end of the war, has undergone a steady and remarkable expansion, and now Japan is the third best customer for Australian products, her purchase in the past fiscal year being 58.5 million pounds, while Australia's purchases from Japan last year reached 18.4 million pounds.

Nobody can entertain any doubt on the fact that the trade between the two countries is largely complementary, and this trade pattern, we believe, will remain unchanged in the foreseeable future.

International trade, which is essentially a two-way undertaking between the two countries concerned, can be developed more satisfactorily if the trade is carried out on a balanced basis.

Our past experiences clearly indicate that the more balanced it is on a fair and equitable basis, the better the results we can expect from it. Therefore, it is earnestly desired that Australian purchases of Japanese goods be increased so as to make the trade imbalance between the two countries at least much smaller than it is today.

Accordingly, we wish to take up in the present trade talks the discriminatory restrictions on the importation of a certain number of Japanese goods specified in the Reserved List. From the viewpoint of protecting Australian industries, not only Japanese products but also any imports from any country can be equally harmful in case of an abnormal influx in domestic markets. We cannot see the reason, therefore, why such discrimination is being imposed only on Japanese products.

There may be some other problems the Australian representatives wish to take up. We shall be quite ready to discuss those matters also.

And thus, we sincerely hope, the present talks, though informal and purely exploratory, will prove to be most constructive and profitable for the promotion of our mutual trade.

1 See Document 118.

2 See Paragraph 3 of Document 125.

120 INFORMAL TRADE TALKS: AUSTRALIA-JAPAN: RECORD OF DISCUSSION Canberra, 4 November 1955 [1]

DR WESTERMAN said that Australia had a long-term interest in the Japanese sugar market. We understood that as distinct from the policy in regard to grains MITI did not buy sugar or enter into ownership of it at any stage. We should like to know, however, whether and on what basis MITI formulated a policy on sugar-did MITI formulate a budget, allocate currency or establish quotas? Were licences issued mostly to traders or refiners? In the case of refining, we should be interested to know whether Australian sugar was refined in bond for re-export or whether it entered into consumption in Japan. Another question was whether there was any control on prices of sugar in Japan or any other types of internal controls. One aspect of the import duty on import of raw sugar was of interest to us. We accepted the fact that the duty had protective aspects but we noted that the rate of duty for sugar below 98 polarisation was 20% while on sugar 98 polarisation and above it rose to 35%. For Australia this had a particular significance because Australian raw sugar was about 98.5 polarisation. We quite understood the difficulties for Japan; it was possible to produce 'mill whites' with a fair degree of polarisation which, although not fully refined, could compete with refined sugar. It happened that Australian milling machinery was geared to produce raw sugar at a higher degree of polarisation than was usual in Japan. The sugar produced, however, was not a mill white and was not really competitive with refined sugars.

There would seem to be no threat in relation to the protective aspect if the Japanese raised the degree of polarisation to 'under 99' to allow Australian sugar to be imported at the 20% rate of duty. Australia could produce sugar at a lower polarisation than 98.5 but this would create production difficulties which could be avoided if the Japanese limits were raised.

MR HEYES said that Australian sugar was a true raw sugar. Some had been sold locally during the war and in the early postwar period but it was not normally consumed in this form. It was below mill white standard and did not compete with refined sugar. The 98 limit fixed by Japan was a bit hard for Australia to meet since our machinery was geared to produce at a higher degree of polarisation. He wondered whether Japan had an excise duty on sugar and whether the duty was not so much a protective as a revenue duty. It was usual to have in the case of revenue duties an excise duty for the locally produced product and customs duty on the imported product. The difference between the excise duty and the customs duty represented the protective element in the duty. He wondered whether the Japanese delegates could give any information on the incidence of the two duties.

DR WESTERMAN said that the question of the excise duty could be added to the list of questions to be given to the Japanese and this was agreed.

DR WESTERMAN said that we should like to know how Japan arranged the breakdown of foreign exchange for sugar into currency areas and thence to particular countries. In earlier foreign exchange budgets the allocations had been made for Australia and in a later one, allocations had been made for the sterling area and in the latest budget, an allocation for sugar from any source provided payment was made in sterling. Was Japan going to continue this practice of making allocations for sugar from any sources provided payment was made in sterling? We understood that the last allocation in fact went to Cuba. We should like to know whether Cuba was paid in sterling and whether in the future we might assume that Australia would be included in allocations for any source provided payment was made in sterling. In another case, it was understood that sugar could only be imported provided payment was made from an Argentine account. This had implications for the sterling area payments agreement with Japan which, it was understood, was designed to ensure that Japan spent as much sterling as possible within the sterling area.

DR WESTERMAN said that the last section of the questions we wished to ask the Japanese related rather to groups than to specific commodities. We were interested to know in what circumstances, for example, Automatic Approval category applied to particular commodities or particular countries. There appeared to be an opportunity of affording particular countries quotas on a non- commercial basis. Treatment accorded cattle hides under Automatic Approval category seemed to be an example of the non-commercial considerations we had in mind. Automatic Approval, it seemed, might be a commitment given by Japan under a trade agreement. As well as Australia, the GATT was interested in arrangements in which sources of supply were determined by non-commercial considerations and it seemed that some questions on Automatic Approval were necessary to determine the basis on which this was extended to some countries. It would appear that in the case of hoofs, bones, horns, some countries had Automatic Approval and some did not. We would be interested to know what were the reasons for different treatment. In the case of butter, we would be interested to know how Japan determines the level of imports. On these and other commodities we should also need to know whether Japan followed State trading practices or other internal measures which affected the level of imports.

In the case of milk powder, we would appreciate some information on production and consumption trends. It was understood that some milk powder was produced in Japan and we wondered whether the spray or roller processes were in use.

MR UYAMA said that in his experience, these were the usual questions asked and he would be quite happy to provide answers for them. He had received instructions on the procedure for the trade talks and he would rather give answers to the questions altogether instead of one by one. So far we had restricted our questions to commodities now being imported into Japan. He wondered whether we had any questions to ask on commodities not now being imported into Japan. He would be happy to look at the question of other items which were not now being imported into Japan.

DR WESTERMAN said that we had confined ourselves to items in which we had trade. There were a few items other than those mentioned but these were rather sporadic. We felt we could gauge from the replies we got to the present items what would be the reaction of the Japanese Government to other commodities.

MR UYAMA then said that another difficulty concerned the procedure for purchase of Australian barley by Japan. Mr Martin of the Australian Barley Board had been to Japan and discussed arrangements with the Food Agency but they could not reach agreement. The Food Agency had, therefore, asked Mr Uyama to take up the question at the trade talks. He wondered whether we could do something to help matters. He had already raised it with the Department of Commerce and Agriculture but the position did not seem to be quite clear in some respects. He distributed a short paper on the question of barley purchases by Japan.

DR WESTERMAN said he thought this position might have arisen because the Food Agency had misunderstood the status of the Australian Barley Board and concluded it to be similar in status to the Wheat Board. This was not so. The Wheat Board was a Government agency organised on a Commonwealth basis which bought and sold wheat, arranged sales contracts and handled all other matters relating to the overseas marketing of wheat. The Australian Barley Board, however, was not a Commonwealth Government instrumentality nor did it represent all the Australian states. Other Boards exist in Queensland and Western Australia.

The Australian Barley Board was not subject to Commonwealth Government direction but we should be happy to take the matter up with the Australian Barley Board and also with the Western Australian and Queensland Boards.

MR UYAMA said that the Food Agency's problem was that it did not like to see Japan buying Australian barley only through John Darling. [2] The present position was that John Darling's representatives in Japan as agents for the Australian Barley Board had secured all the business to date. The Minister in charge of the Food Agency had made it quite clear that tenders should be open to all firms. It was desirable that more firms should take part in the tenders. Monopoly arrangements tended to keep prices up. There were political implications to the problem.

DR WESTERMAN agreed to take the matter up straight away.

MR UYAMA then said that he had a number of questions to ask on aspects of Australian Customs Policy and Administration and Import Licensing. He presented the two attached papers entitled 'Questions on Customs', and 'Questions on Import Licensing' [3] and requested that answers be given in writing.

MR HEYES explained that, because of the ramifications of the Department of Trade and Customs, he could not answer all the questions immediately. He undertook, however, to have the answers prepared as soon as possible.

After preliminary discussions for the purpose of clarifying the information required in some of the Japanese questions, the talks were adjourned at 12.30 p.m. It was agreed to meet again on Monday 7th November 1955 at 11 a.m.

[AA : A1838/283,759/1/7, iii]

1 Attendance was the same as that recorded in note 1 to Document 118.

2 John Darling & Son Pty Ltd, grain exporters.

3 Not published. Both papers are on file AA : A1838/283, 759/1/7, iii.

[AA : A1838/278, 3103/10/2, iii]