MR PHILLIPS stressed the need for placing before Ministers some reaction from the Japanese on Australian requests. He suggested that a resume of the requests in full might be worthwhile at this stage and briefly summarized the requests already made.
[This was done with the object of ensuring that the Japanese had not lost sight of any of the requests, and to prevent any 'innocent surprise' on any subsequent mention of our specific requests on individual items.]
MR USHIBA gave his views on the possible reaction to Australia's requests as follows:
Wool. A.A. does not appear possible but probable solution will be global quota for all imports of wool into Japan with the exception of 10% reserved for bilateral deals.
Wheat: If US surpluses are taken then Japan will have to consider Australia's request and would probably agree to some commitment.
However, the agreement with Canada covered hard wheat and this would include Australian higher protein wheats making it difficult to give Australia any commitment on this.
MR PHILLIPS said that possibly the Ministers would be prepared to negotiate some less firm position on hard wheat.
Barley: presented a similar difficulty in relation to the agreement with Canada. Although purchase of 35% of imports from Australia would not be difficult in fact, it would be difficult, in principle and in presentation, to give any commitment.
Sugar About 60% of allocation must go to Indonesia and Formosa because of trade imbalance. The rest is allocated on a global basis. The reservation for open a/c agreements is recognised internationally by bodies such as G.A.T.T. and I.M.F. and although it does in fact mean only qualified m.f.n. treatment, it is unlikely Japan can meet Australia on sugar.
Tallow & Cattle Hides: may be able to give Australia A.A. although the Australian estimates of possible exports to Japan in these lines seem a little unrealistic.
Dried Skim Milk. Apart from School Lunch Programmes only 4,000 tons are imported by Food Agency under a global tender for which the C.C.C. would be eligible to compete.
Dried Grapes: This presents a similar problem to the request on sugar but is on a smaller scale. Japan has a sterling allocation for dried grapes and Australia could probably be included in this.
MR PHILLIPS introduced two additional instances where Japan's treatment of Australian goods appeared to be discriminatory.
(i) Confectionery: we understood that whereas UK confectionery entered Japan, Australian confectionery could not obtain a licence.
(ii) Films: the basis for licensing films into Japan had the effect of excluding Australian films.
MR USHIBA indicated that confectionery was on an exchange of quota basis with the UK. On both confectionery and films he would report to Tokyo. He explained the difficulty faced in reporting Australia's requests to Tokyo. Japan understood that Australia wished m.f.n. treatment and yet specific requests for special treatment were made on some items. Tokyo is under the impression that wheat is the only item where special treatment is required to give m.f.n. meaning. With the exception of sugar, the requests on other items should not give much practical difficulty but the principle involved is important. Mr Ushiba said that the delegation understood that Australia has two difficulties with m.f.n.:-
(i) open a/c agreements (ii) surpluses, and will try to make this view clear to Tokyo.
MR PHILLIPS introduced the draft article on M.F.N. (Annex A)  prepared in the Department and explained that the paper was intended purely as an indication of the way in which the idea might be included in any agreement. The paper had no official status and it would be extremely embarrassing if any reference to it should appear in the press. For this reason we would like the paper restricted to the respective delegations.
MR USHIBA mentioned the reservations to m.f.n. application by Japan made in the agreement with Canada in relation to territories named in Article 3 of the peace treaty with Japan.  He also enquired where the treatment to be afforded individual commodities would come in.
MR ROBERTSON suggested under Restrictions or State Trading.
MR PHILLIPS introduced the draft on the application of special duties to Japanese goods (Annex B) with the same provisos as had been mentioned in relation to the draft on m.f.n. He confirmed that the duties could be applied only to Japan or to individual shipments.
MR ROBERTSON said that we could not apply the duty to all countries where Japan was the sole threat since G.A.T.T. countries could complain that the emergency had not arisen out of the action of a G.A.T.T. country.
MR USHIBA asked what would happen if consultations were not effective.
MR ROBERTSON explained that we would then make up our mind on the action to be taken, keeping the Japanese views in mind. We would hope that the situation would not arise but must reserve the right to take action.
MR PHILLIPS introduced the draft on Prohibitions and Restrictions (Annex C). Australia would want anything on wheat to be in a form that could be published. Perhaps the Japanese might like to suggest drafts on the various points.
MR ROBERTSON mentioned that from a point of presentation he assumed the Japanese would have no objection to treating the Australian Territories such as New Guinea, as part of Australia.
They do not in fact discriminate against Japan in import licensing and have a single column tariff.
MR USHIBA thought that the wheat undertaking could be put in a published form. He did not think there would be any objection to including N[ew] G[uinea] etc. as Australia and would check this point with Tokyo.