On 14th December 1956, the Rayon and Cotton Weavers' Association submitted a detailed statement regarding their attitude towards trading relationships between Australia and Japan. The statement was principally concerned with the dangers with which, in the opinion of the Association, the Australian textile and clothing industry would be faced if most-favoured-nation tariff and non- discriminatory import licensing treatment were accorded to imports from Japan.
In the statement, the Association requested that the importation from Japan of all textiles and clothing (which are made or are capable of being made in Australia) be restricted to the level of imports of those goods from Japan during the year 1955/56.
The Association also requested an interview with the Minister to discuss the points raised in its statement. This interview took place at the offices of the Department of Trade, Queen's Gate, St Kilda on 5th March, 1957. The following were present at the discussion:
Mr J. McEwen Minister for Trade Dr W. Westerman Deputy Secretary Department of Trade Mr R. Robertson Department of Trade Mr A.M. Flanders (of Bruck Mills), President of the Rayon and Cotton Weavers' Association Mr Vine, President of A.C.M.A.
Mr T.A.W. Furphey (of Davies, Coop), representing Australian cotton textile manufacturers Mr R.W.C. Anderson Assistant Director, A.C.M.A.
Mr A.J. Burgess Executive Director, R.C.W.A.
MR ANDERSON opened the discussion by asking the Minister if he would give some outline of the discussions which had taken place with the Japanese and the attitude of the Government in the matter.
MR McEWEN said he wished to make it clear at the outset that the Japanese had not asked for any special privileges for their trade.
All they want is the same tariff and import licensing treatment for their goods as other countries. At no time had the Japanese suggested that any duties in our Tariff be reduced. The issue, as far as they are concerned, is simply the accord of most-favoured- nation tariff and nondiscriminatory import licensing treatment.
If the Japanese request were granted, we would remain completely free to take emergency action against their exports to prevent any serious damage to our industries. The right to resort to emergency action would be part and parcel of any trade deal which we might make with Japan. Any agreement with Japan must clearly reserve to us the right to use this emergency power with which we have already equipped ourselves by inserting an appropriate provision in the Customs Tariff (Industries Preservation) Act.  It was essential, therefore, when thinking of m.f.n. for Japanese goods to think, at the same time, of the existence of the reserve power.
The first was qualified by the second.
MR McEWEN said that our export interests in the Japanese market were so important that it was essential that our trading relationships with Japan should be placed on a more permanent and satisfactory basis than at present. Vital export interests were at stake and although we were not unmindful of the important diplomatic issues concerning our relations with Japan, the line which we had followed in the trade discussions had been determined primarily by trade considerations. The following points must be emphasized:
(a) Japan is now our second largest market and it is a growing market for our goods.
(b) The very imbalance in trade would be sufficient grounds for irritation on the part of the Japanese. This year Japan will buy something over 100 million worth of our goods and we will buy something under 15 million from Japan. This large balance is due in some part to special discriminatory restrictions against imports from our second best customer.
(c) Japan is our second largest market for wool and wheat, our largest market for barley and our fourth market for sugar. It is in the power of the Japanese Government to do us grave damage in these sectors of our export trade. If the Japanese were to reduce the exchange allocation for Australian wool by some 20 m.-we would no doubt sell the wool elsewhere-but the absence of Japanese bidding in that portion of the market could bring down quite severely the value of our entire clip. By withholding or curtailing exchange allocations they could do great damage to our wheat, barley and sugar exports. We are in a very vulnerable position and we cannot expect the Japanese to put up much longer with the way we are treating their interests. We must put ourselves in a position where the Japanese cannot suddenly resort to retaliatory action and do us great damage. To reach this position we must remove most of Japan's legitimate grievances.
(d) Although we have no obligations to Japan under the G.A.T.T. we are open to attack in the G.A.T.T. forum every year. If Japan took retaliatory action against our exports she would not have much difficulty in convincing G.A.T.T. countries that her action was justified. No other country treats imports from her second best export market as we treat imports from Japan.
Mr McEwen said that, despite all of these considerations, Australia had the obligation to protect her industries from damaging competition from Japan and other low-cost suppliers. He believed, however, that we could do this as well as protect our export interests. We had passed the necessary legislation, we had made it abundantly clear to the Japanese that we would use this legislation if necessary and it was up to the Japanese, in their own interests, to see that a situation did not arise which would necessitate our using the emergency power.
MR VINE said that he appreciated the magnitude of the issues involved in the negotiations but his concern was the great damage which could be done to the Australian textile industry by imports from Japan. That country was now making the finest quality textiles in the world and her prices were ruinously low. It was only necessary to look at what had happened in Canada to realise what could happen here. Canada had a trade agreement with Japan but that did not prevent the Canadian market being flooded with Japanese shirts and other clothing. The same thing had happened in the U.S.A. The U.S.A. had corrected the position by putting a quantitative limitation on imports from Japan. We must do the same or our industries would be ruined.
MR McEWEN said that, late last year, he had discussed the Canadian position in Ottawa with Mr D.D. Howe (Minister for Commerce and Industry). He had gone to special pains to get a full appreciation of the situation. Mr Howe had assured him that nothing serious had happened in Canada.
DR WESTERMAN said that the same opinion had been expressed by Canadian officials. In only one case had Japanese imports threatened to reach dangerous proportions and when the facts had been brought to the attention of the Japanese, prompt and effective remedial action had been taken in Japan.
MR VINE disputed these views. He said the whole Canadian textile industry was in the doldrums and the garment industry had been torn to shreds. The U.S. market was being swamped with low priced Japanese goods of excellent quality.
MR McEWEN said that there was no basis for an agreement with Japan which excluded garments and some other goods from m.f.n. The Japanese just would not accept such a proposition. If garments were to present a particular problem they could be dealt with through the Tariff as could any other item.
MR VINE, in disagreeing, said that the Tariff was not an effective protective instrument in such cases. The Canadians had not been able to handle the matter through their Tariff.
DR WESTERMAN said that a single tariff duty was not the only way these matters could be handled through the Tariff. The Americans have the tariff quota principle as their disposal. The South Africans have special tariff provisions.
MR VINE said that the Americans had not dealt with the Japanese textile and garment problem that way. Imports from Japan had been quantitatively controlled.
DR WESTERMAN said that while it was quite true that the U.S. had not curtailed imports from Japan by special tariff measures that did not dispose of the fact that there were special appropriate and effective tariff measures (such as sliding scale duties, etc.) which could be adopted. He was well aware that the Japanese had voluntarily imposed a restriction on their exports.
MR ANDERSON said that he felt it was extremely relevant to point out that the U.S.A. had realized it could not deal with the problem of imports from Japan through tariffs and had considered that the only effective way was to persuade the Japanese to restrict their exports.
MR McEWEN said he could see no reason why the garment trade could not be protected by tariffs.
MR FLANDERS replied that tariffs were no effective protection.
MR ANDERSON sought to illustrate the point by reference to ribbons. The Tariff Board, he said, would have been obliged to recommend a duty of some 300% to protect our ribbon industry against Japan, so great was the disparity between wage levels in the two countries. The Board had taken the line that import licensing was protecting the industry and had left it at that.
Nothing would stand between the ribbon industry and annihilation if quantitative restrictions were removed.
MR FLANDERS said that Japan was now permitted to supply a fairly substantial part of our imports. If that were increased still further or if Japan were put on the same footing as other countries we would be thrown back on the emergency power, i.e., on the dumping legislation and we could never prove dumping.
DR WESTERMAN explained that the emergency power had nothing to do with dumping. The only affinity it had with dumping was that it was included in an Act whose other provisions related to dumping.
MR VINE said that the textile industry was reconciled to the fact that the global import restrictions were not permanent. He asked if quantitative restrictions could not be applied to Japanese textiles on a permanent basis-did the industry have to wait until the dangerous import run was underway before any action could be taken. If so, disaster was inevitable.
MR McEWEN said he wished to repeat that there was no room in any treaty with Japan for quantitative restrictions. Perhaps he had not elaborated this matter sufficiently. It came down to this-to write quantitative restrictions on Japanese exports into any treaty would be to invite quantitative restrictions on wool at the Japanese end. There is no answer to this logic.