Trade Talks with Japan [matter omitted]
2. Today I had lunch with Mr Udo, who is acting Chief of the First
Overseas Market (i.e. Sterling Area) Section of the International Trade Bureau of MITI. The normal Chief, Mr Shima, is at present in London with the delegation to the U.K. talks. Mr Udo has recently returned from Canada where he spent about three years.
3. Mr Udo had spent the morning at an inter-departmental conference dealing with the forthcoming talks with Australia. He told me that one of the points which worried Japan was what he described as 'the Australian request for safeguards'. On my asking exactly what he meant by this, he said that it was our request for the right to take unilateral action to protect Australian industry from being damaged by excessive Japanese imports. (Although I am well aware of our feelings along these lines and of our interest in what has been called 'the Canadian approach', I have since lunch been unable to locate any reference to safeguards in a quick examination of the papers exchanged on 29th August.  Perhaps the matter arose at an earlier stage.)
4. Mr Udo said that there were a number of interests who objected to our request for safeguards and that the most vociferous of these was the Textile Bureau of MITI, i.e. the group concerned with the promotion of Japan's textile exports. He further went on to say that he could not understand Australia making such a request because we already had a very tight import licensing system and this should provide completely for the protection of Australian industry.
5. Emphasising that I was expressing my own personal opinion only and that I could not in any way commit the Government, I said that Japan should appreciate that the Government did not regard import licensing as a permanent feature of the Australian economy. It disliked the system and wished to abolish it as soon as the balance of payments situation made that practicable. Against this background, therefore, the Australian Government contemplated that points of principle which might be agreed in the present trade talks should be such as were capable of being carried forward and working effectively in a situation where Australia had abolished import licensing. I agreed that the question of safeguards to Australia's domestic industry might be of little practical significance at the moment but that we regarded it as a matter of great potential importance in the future.
6. I further expressed by own personal opinion that even against an import licensing background Australia might consider it necessary and desirable to wish to retain some safeguards against Japan capturing (e.g. in the case of textiles) the whole of the import market to the serious detriment of other suppliers who were good customers for Australian exports.
7. In relation to these two points Mr Udo said that he fully understood the first, that the fact that it was the Government's aim to abolish import licensing clarified a number of points which had hitherto seemed to them to be obscure and that Japan had no desire to attain a situation which would result in damage to a significant Australian domestic industry. On the other hand, however, he emphasised that Japan had no such feelings in relation to other countries supplying the Australian import market. Japan believed in free international competition and felt that it should not be hampered by quantitative restrictions on its competition with other countries for the Australian market.
8. He went on to emphasise that Japan could not regard the talks as being satisfactory if we insisted upon limiting Japan's share of the imported textiles. As against this, however, he realises that we cannot, for instance, make concessions on the import of rayon yam which would affect Courtaulds  and he fully understands and appreciates the reason for this.
9. Four Japanese delegates are leaving here tomorrow week(26th October) by Qantas for the talks. They are Mr Ushiba and Mr Takashima, whose names I have already reported to you, together with Mr Kawanami of the Foreign Office. The fourth man has not yet been selected but he will be a Customs man from the Ministry of Finance. Mr Udo told me that they did not expect the talks to last very long and that the finance approved covers a stay of one month only.
10. In my memorandum of 9th October, I mentioned that I was having lunch with Mr Ushiba the following day. This, however, did not eventuate because he was 'tied up'. However, I am endeavouring to arrange a luncheon with the delegation early next week.