1061. Your 1316. Japan.
1. Thanks your message.
2. However, our advice from three reputable independent sources suggests that negotiations with Japan far further advanced than State Department indicate.
3. Outcome of United States disposal negotiation with Japan has direct bearing on current Australian-Japanese trade talks. Now apparent that under last P.L.480 deal Japan was obliged to take from United States 750,000 tons of its commercial purchases, in addition to 450,000 tons under Title 1. This meant all Japan's soft wheat requirements were 'tied' to United States and other soft wheat exporters excluded. Our information is that in negotiations for new deal, Title 1 figure is again 450,000 tons.
Critical issue is volume of commercial purchases which Japan will be obliged to purchase from United States. Reports suggest United States urging 750,000 tons, which would again exclude Australian soft wheat from Japanese market and make impossible conclusion of Australian-Japanese Trade Agreement.
4. Crawford on Friday had full discussion on possible new United States deal with Howard Jones , who undertook to inform Walter Robertson  and to take up with State Department. In conveying to Jones our serious concern with implications of potential new deal, Crawford stressed following:-
(a) Principle of tying-up commercial purchases as condition of surplus transaction, particularly when such arrangement excluded all hope of entry to market.
(b) New transaction on lines which we understand are being proposed by United States would wreck chances of establishing liberalised Australian-Japanese trade relations. This would be in conflict with policy of United States which has pressed us to provide improved trading opportunities for Japan.
5. We do not wish further approach to State Department until Jones has had opportunity to report his talk with Crawford. Above points for your information in case State Department should raise with you. Would appreciate prompt advice any reports relating to possible transaction with Japan.