1. The Australian Delegation has considered the submission of 5th October, 1956 conveying the initial reactions of the Japanese Government to the original Australian requests.  It is appreciated by the Australian Delegation that, until the details of some of the Australian requests are made available to the Japanese Delegation, it is impossible to indicate the extent to which these requests can be met. However, pending the arrival from Tokyo of the other members of the Japanese Delegation, it is considered preferable to concern ourselves with principles rather than points of detail.
2. As stated in the paper conveying the Australian Delegation's reactions to the Japanese requests,  we are endeavouring to find ways and means of according most-favoured-nation tariff and licensing treatment to imports from Japan. For our part we have also requested most-favoured-nation treatment but we have found it necessary to define our request in some detail due to complications arising from State-trading practices, the exchange allocation system and U.S. surplus disposal activity in Japan.
3. It is for these reasons that (i)(d) and (iii) of paragraph 4 were included in the Australian request list.  In other words the accord of most-favoured-nation treatment can only be made effective under these special conditions if the type of assurances requested can be given. Similarly the present item in the Japanese Customs Tariff relating to sugar discriminates in effect against the Australian product in favour of other suppliers thereby providing something less than most-favoured-nation treatment.
4. In paragraph 6 of the Australian request list it is suggested that the proposed trade agreement should contain balance of payments escape clauses. This would appear to cover the type of problem envisaged by the Japanese Delegation should Japan's balance of payments position necessitate some de-liberalisation of her import control policies.