165 Minute From Jones To Durie

2nd November, 1956

CANBERRA

Japanese Trade Negotiations On Wednesday afternoon I attended a short meeting at Trade chaired by Phillips to put interested Departments in touch with the proposed line for the trade negotiations with Japan which commenced the following morning. Trade, Primary Industry, Treasury, External Affairs and ourselves were represented.

Reference was made to the terms of the Cabinet submission [1] and to the introduction into Parliament of an amendment to the Customs Tariff (Industries Preservation) Act [2] to enable emergency action to be taken in the event of imports causing a threat to Australian industry or to established suppliers overseas.

Trade have prepared a list of sensitive items [3] all of which appear in the present restricted list of goods from Japan but the list is much shorter than the existing list. The principal items are sheeting, canvas and duck, china and glassware, toys and fountain pens.

Because of the State trading activities in Japan and their reception of U.S. surplus commodities it was not considered that m.f.n. tariff and licensing treatment would be sufficient and that Australia should seek specific commitments on individual commodities.

Briefly, the targets would be- WHEAT 8m. bushels of hard wheat. 15m. bushels f.a.q. wheat-or 1/6th of total. i.e. 23m. bushels compared with sales last year of 11.4m. hard.

BARLEY 35% of imports, about 350,000 tons which is in line with our present trade. This has increased greatly in the last year or so.

WOOL 900,000 bales or 90% of total purchases and perhaps with a binding of free entry. (This is hardly necessary and would not want to be treated as a substantial concession demanding compensation elsewhere.) SUGAR An amendment to the tariff classification so that Australian sugar which has slightly higher polarization value than others can qualify for the lower rate of duty. A quota of 100,000 tons.

The present thinking is that these quotas would need to be for a period of five years but would be subject to the marketing arrangements in Japan and should be considered as a guaranteed minimum opportunity for Australia without us being obliged in a period of shortage to meet these targets.

The Japanese have allowed themselves about one month in Australia but want an opportunity to attend the Olympic Games so it was expected that at the most the negotiations would extend over three weeks with possibly a short resumption after the Games break.

Trade were hoping to go to the Ministerial Committee as soon as the negotiating lines of both parties became reasonably clear.

Negotiations with Japanese Delegation The first formal meeting with the Japanese delegation took place at 10.30 a.m. on Thursday, 1st November. A list of the members of both delegations is attached. Mr. Kurahachi, Consul-General in Sydney, was not present and will be called upon only when required.

It was agreed that meetings in plenary session would be from 10am.

to 12 noon each day and meetings in committee which would be purely fact-finding between 3-3.30pm. and 5.30pm. each day. There would be no verbatim minutes of the meetings but a summary record would be made available by the Australian secretariat as soon as possible. There would be no press announcements during the progress of the negotiations unless these became absolutely necessary and in any case there would be agreement about what was to be said.

Dr. Westerman outlined Australia's attitude towards the negotiations. The Japanese were in fact asking us for m.f.n.

tariff and licensing treatment and we were doing the same but because of the particular nature of Japanese import controls and certain State trading arrangements we would want our m.f.n.

treatment from them to be directly related to the practical situation.

He listed the following points:-

88% of Japanese imports now qualify at higher rates of duty than m.f.n.

The m.f.n. we would give is already bound largely to other countries. We might find it necessary to increase bound duties and would then need to pay the price elsewhere. Australia has contractual preferences which under the G.A.T.T. arrangement would need to be raised also if m.f.n. were raised. We have a rather long drawn out procedure for tariff enquiries.

A bill for an Act to be allowed emergency action in the terms of Article XIX of G.A.T.T. has been introduced to Parliament.

The Government's general attitude towards the negotiations must be conditioned by public opinion and there would need to be off- setting benefits for the granting of m.f.n. to Japan.

Dr. Westerman emphasised that Australia approached the negotiations with the desire to give m.f.n. to Japan, pointed out that we are now talking with the U.K. about reducing preferences and this would enable us to increase benefits to m.f.n. countries but we must have m.f.n. in the real sense. He added that our import licensing system was plainly discriminatory against Japan because of the fear that tariff protection would be inadequate. It was necessary therefore to have some reserve power which it was hoped would not need to be used. In fact we would look for co- operation from the Japanese possibly along the lines of the Canadian experience.

Dr. Westerman outlined briefly his understanding of the workings of the Japanese tariff and licensing system and referred to the different treatment of goods, on automatic approval, State trading and allocations which discriminated by countries. He then referred generally to what we would require of the particular commodities (this followed the line discussed at the meeting the day before though without going into detailed figures although some were mentioned). Minor items were beef tallow cattle and cattle hides (Australia would seek automatic approval now given to some sterling area countries) dried skim milk (we are not completely sure of the position-understand the bulk is purchased from C.C.C.

surpluses at a price we could meet); dried fruits was also mentioned but not very enthusiastically.

Mr. Ushiba read from a prepared statement the Japanese general position in these negotiations. They were seeking general non- discriminatory treatment under G.A.T.T.; were disappointed at our invocation of Article XXXV and would like G.A.T.T. relationship with us. If this were not possible they would like to see what could be done to remove the disabilities to it. They sought the removal of licensing discrimination and the granting of m.f.n.

tariff. He referred to the figures of overall trade between our countries over the past four years and emphasised the growing imbalance in our favour. He mentioned the general non- discrimination in licensing we had accorded since 1954 against which had to be off-set the intensifications in 1955. If no solution to the problem could be found Japan would have to consider reducing imports from Australia which was the main source of the deterioration in their sterling area position. In fact in their talks about a trade and payments arrangement with the United Kingdom they are now seeking greater export opportunities in the sterling area.

As to the fear of flooding Australian markets by Japan the Japanese felt that the present system of import quotas would be sufficient safeguard and in effect they asked 'give us a chance to prove that your fears are groundless?'. In this regard they were concerned to know what interpretation and modus operandi would be applied to the newly introduced emergency legislation. In spite of the imbalance of trade Japan had not discriminated against Australian imports and in fact had treated us not at all badly.

Some of our requests appeared to go beyond m.f.n. and the Japanese would be prepared to look at those closely after m.f.n. had been given.

Mr. Ushiba's statement was to be made available to the Australian delegation.

Dr. Westerman then suggested that working committees should be set up to establish the factual position; for instance, on our emergency legislation and on commodities. The Japanese appeared anxious to get our commodity demands promptly (this is probably because they have not a State trading man with them and would need to refer them to Japan for comment). It was agreed that a committee should meet that afternoon consisting of Phillips, McPherson and Campbell on our side and Takashima, Kawanami and Ushiba. There would be a later meeting about the emergency legislation which at the Australian end would be handled by Robertson and Farrell.

[The Committees would all report back to the plenary session] [4]

Mr. Ushiba pointed out that our present reserve list of imports would be important to the Japanese and they were anxious for us to tell them our fears on particular commodities. Dr. Westerman replied that it was our intention to abandon this reserve list though we would still have a shorter list of sensitive items about which we would talk to them later.

After the meeting Dr. Westerman mentioned to me that he was hoping to arrange a meeting of the Ministers Committee perhaps some time next week at a stage when there would be something definite to report. He appreciated that with Mr. Casey away [5] there would only be Sir Arthur Fadden and Sir Philip McBride in addition to Mr. McMahon. I did not mention it to him but I wondered whether the Prime Minister might care to nominate somebody else during Mr.

Casey's absence. Perhaps this could be Senator Spooner or Mr.

Townley if it is appropriate in view of his new position. [6]

1 Document 130.

2 See Document 153.

3 Annex A to Document 164 4 Words in square brackets were handwritten.

5 Casey left Australia on 23 October to attend the UN General Assembly in New York, the ANZUS Council in Washington and the Colombo Plan conference in Wellington.

6 Townley was appointed Minister for Immigration on 24 October. A marginal note stated that Spooner's department (National Development) was 'not involved'.

[AA : A1209/23, 57/5473]