189 Note From Suzuki To Australian Delegation

8th February, 1957

CANBERRA

1. Under her fundamental policy on the importation of foreign goods and in view of her trade relations with certain wheat- exporting countries, Japan cannot but give foreign wheat, in principle, equal treatment, irrespective of the source of supply, with respect to its importation.

(It is therefore impossible for Japan to give a special import quota for Australian wheat unless she grants similar commitments to other countries. We think that the Australian Government had a general idea of such situation in the course of the trade talks in recent months.)

2. a) Japan has imported practically no soft wheat from Australia.

It is therefore very difficult for her to assess what quantity will be a 'fair share' to be allocated to Australian wheat in the Japanese market, in case Australian soft wheat is to be imported on a competitive basis. Particularly, it must yet be ascertained whether Australian wheat will meet the requirements currently set forth by the Food Agency with respect to quality and other specifications. The Japanese Government is therefore planning to have a sample import of Australian wheat and also to send a technical expert of the Food Agency to Australia in order to make researches on the spot. Even if satisfactory results were obtained from these steps, it has still to be found out whether and to what extent Australian wheat would satisfy the requirements of Japanese flour mills and meet the tastes of general consumers in Japan, and how successful the Food Agency will be in selling it in Japan.

This cannot satisfactorily be ascertained until after sufficient experience has been gained by the importation of Australian wheat for a few years.

Under these circumstances, we cannot form a reliable concept of the 'fair share'. We would hope very much that the Australian Government will agree, at least for the time being, to the formula that Japan import wheat from foreign countries on an equal basis.

b) The Australian Government suggests that a 'fair share' for Australian soft wheat in the Japanese market is 400,000 tons a year or one-sixth of Japan's total wheat imports. We cannot understand what is the basis of calculation for these figures.

These figures-namely, 400,000 tons or one-sixth of the total import-seem to be too high in view of the proportions of wheat imported into the major wheat importing countries, such as the United Kingdom and Germany from Australia, Canada and the United States.

3. The Japanese Government has decided not to enter into a surplus agricultural products agreement with the American Government this year. However, we cannot be definite about whether or not we would conclude similar agreements with the United States during the next few years. Such agreements will not become necessary as long as the situation, which has led to the above-mentioned decision by the Japanese Government, continues to exist.

It may sound slightly unrealistic to discuss on such uncertain premises the quantity of wheat to be imported from Australia in case Japan takes surplus wheat from America. However, we can assume that if a 'surplus' agreement is to be negotiated upon after a trade agreement has been concluded between Japan and Australia, the quantity of Australian wheat actually imported into Japan will naturally be included in the so-called 'normal imports' to be set forth in the P.L.480 agreement.

In the past, Japan purchased the 'surplus' wheat on the premises that the 'normal import' from America was 750,000 tons a year.

However, this quantity will probably be reduced by the quantity of Australian wheat imported on an equal and competitive basis.

(It will be clear from what I have so far stated, that our Food Agency has no intention of arbitrarily trying to reduce the quantity of wheat imports from Australia after an agreement with Australia is concluded, but rather it is more inclined to think it advisable to import as much Australian wheat as possible on a competitive basis.) c) However, after careful analysis, we have arrived at a tentative conclusion that it might be possible for Japan to import at least 200,000 tons of wheat a year from this country. It is possible that Japan import more wheat from Australia, but we just cannot make a reliable estimate. [1]

4. Taking all these factors into consideration, I think it essential for us to conclude a trade agreement as soon as possible so that we shall start importing Australian soft wheat on a commercial basis and ascertain how much can be commercially imported into Japan in a year.

By so doing, we shall be able to estimate what will be the 'fair share' for Australian soft wheat in the Japanese market when Japan enters into a 'surplus' agreement with the United States.

5. At the same time, I should not be frank with you if I did not tell you that some of my colleagues in the Japanese Government still doubt the advisability of according equal treatment to Australian wheat, which could further aggravate the already large trade deficit with this country. Furthermore, others argue that it is politically unwise to shift the source of wheat supply, to Australia from the United States, which is a very promising market for Japan, taking nearly half of Japan's exports if the 'special procurements' are taken into account.

It is therefore essential that we should be shown a very clear prospect of Japan's exports to this country being greatly increased after a trade agreement has been concluded.

6. It might be difficult for the Australian Government to make any commitment as to how much Japan's exports to this country will increase after Australia has started to accord most-favoured- nation treatment to Japanese goods. It is just as difficult for Japan to make any commitment on the quantity of soft wheat she might import from this country.

7. During my brief stay in Tokyo, I made my best efforts in an attempt to solve this matter. However, I obtained an impression that, at the moment, it was impossible for them to go further than what I have just told you.

I also think that from your point of view it is extremely important to start selling Australian soft wheat in Japan and to firmly establish your market there, now that American soft wheat is not given special priority. [2] In order to do so, I very much hope that you will be able to agree to the views of the Japanese Government I have just told you and to enter into a trade agreement along these lines. [3]

1 A marginal note probably in Crawford's hand reads' 'Not enough.

Does this include hard wheat?' 2 A marginal note against this sentence reads: 'We can accept this point at least.' 3 Crawford wrote to Phillips on 11 January: 'I have read the Japanese Ambassador's note and do not need to indicate to you that we could not settle on the basis of it ... I have spoken to Mr Moroney about the last paragraph. I think it highly important that, regardless of any domestic difficulties through short stocks in some areas, the Wheat Board should make every effort to establish a stronghold in the Japanese market this year...Mr Moroney agrees...He and I both take the view that the agreement with Japan might not be terribly important this year but that it is extremely difficult to argue a firm case with Japan for an expanded market if we do not take every chance to develop it.'

[NLA : CRAWFORD PAPERS MS4514/9/33, JAPAN-AUSTRALIA TRADE TALKS Pt ii]