Tokyo, 8 May 1952
Enclosed herewith for your information is copy of a Note Verbale addressed from the Japanese Foreign Office (The Gaimusho) to the Australian Embassy in connection with future commercial relations with Japan. This Note was referred to in the Embassy's telegram No. 384 addressed to External Affairs, and the Department of External Affairs in reply (No. 269), instructed the Embassy in Tokyo to make purely a formal acknowledgment.
I have from time to time in despatches referred to the certainty of the Japanese desiring to discuss the question of trading, maritime and other commercial relations with Japan as provided for in the San Francisco Peace Treaty.
It is realised that the Most Favoured Nation Treatment in Australia is a very moot point and would involve much political dissension. However, the Japanese Government have asked for information on this point and no doubt some reply will have to be forwarded. Irrespective of this, there remains the question of the conclusion of the Treaty regulating relationships between Japan and Australia on even the most formal basis so far as commerce and navigation are concerned. These will involve consideration by our Department as well as the other Departments involved.
I have undertaken no investigation in regard to information which you may require but would appreciate advice as to whether there are particular aspects on which you would desire me to elaborate as a prerequisite to the Commonwealth's consideration of this rather delicate question.
NOTE VERBALE 21/TI The Japanese Ministry of Foreign Affairs presents its compliments to the Australian Mission in Japan and has the honour to invite the latter's attention to the trading, maritime and other commercial relations to be maintained between Japan and Australia as from the first coming into force of the Treaty of Peace with Japan signed at San Francisco on September 8, 1951.
With reference to the trading, maritime and other commercial relations between Japan and the Allied Powers, Article 12 of the Peace Treaty provides:
(a) Japan declares its readiness promptly to enter into negotiations for the conclusion with each of the Allied powers of treaties or agreements to place their trading, maritime and other commercial relations on a stable and friendly basis;
(b) Pending the conclusion of the relevant treaty or agreement, Japan will, during a period of four years from the first coming into force of the present Treaty:
(1) accord to each of the Allied Powers, its nationals, products and vessels;
(i) most-favoured-nation treatment with respect to customs duties, charges, restrictions and other regulations on or in connection with the importation and exportation of goods;
(ii) national treatment with respect to shipping, navigation and imported goods, and with respect to natural and juridical persons and their interests-such treatment to include all matters pertaining to the levying and collection of taxes, access to the courts, the making and performance of contracts, rights to property (tangible and intangible), participation in juridical entities constituted under Japanese law, and generally the conduct of all kinds of business and professional activities;
(2) ensure that external purchases and sales of Japanese state trading enterprises shall be based solely on commercial considerations;
(c) In respect to any matter, however, Japan shall be obliged to accord to an Allied Power national treatment, or most-favoured- nation treatment, only to the extent that the Allied Power concerned accords Japan national treatment or most-favoured-nation treatment, as the case may be, in respect of the same matter. The reciprocity envisaged in the foregoing sentence shall be determined, in the case of products, vessels and juridical entities of, and persons domiciled in, any non-metropolitan territory of an Allied Power, and in the case of juridical entities of, and persons domiciled in, any state or province of an Allied Power having a federal government, by reference to the treatment accorded to Japan in such territory, state or province;
(d) In the application of this Article, a discriminatory measure shall not be considered to derogate from the grant of national or most-favoured-nation treatment, as the case may be, if such measure is based on an exception customarily provided for in the commercial treaties of the party applying it, or on the need to safeguard that party's external financial position or balance of payments (except in respect to shipping and navigation), or on the need to maintain its essential security interests, and provided such measure is proportionate to the circumstances and not applied in an arbitrary or unreasonable manner;
(e) Japan's obligations under this Article shall not be affected by the exercise of any Allied rights under Article 14 of the present Treaty, nor shall the provisions of this Article be understood as limiting the undertakings assumed by Japan by virtue of Article 15 of the Treaty. 
In consideration of the foregoing provisions, the Japanese Government desires to be clarified on what basis the trading maritime and other commercial relations between Japan and Australia are to be placed upon the first coming into force of the Peace Treaty to preclude any possible question which might arise thereupon, and therefore wishes to be informed of the intention of the Government of Australia at the earliest possible date on the following point:
To what extent does the Government of Australia intend to accord Japan the national or most-favoured-nation treatment provided for in Article 12 of the Peace Treaty pending the conclusion of a new treaty or agreement? Unequivocal information on this point appears to be prerequisite to the fulfilment of Japan's obligations under Article 12(c) of the Peace Treaty. The Japanese Government is confident that the friendship and commercial relations between the two countries can certainly be promoted if national or most- favoured-nation treatment, on as comprehensive a scale as possible, is accorded to each other on the matters envisaged in Article 12(b)(1), except where a discriminatory measure is adopted under (d) of the same Article.