198 Minute From Durie To Brown

Trade Negotiations with Japan

Trade produced a Submission on the Japanese Trade negotiations [1] in the hope that, at the Prime Minister's briefing meeting this afternoon, there will be an opportunity for consideration of some of the critical issues which are emerging.

It would be useful to get some lead from Ministers at this stage since the negotiations have reached a point where some finer determination of negotiating limits is needed.

The Submission is, I think, too long and takes in too much to expect full consideration of all the points raised at this afternoon's meeting, if the meeting is to be of the kind which was envisaged.

Following your discussions yesterday, you will have some ideas yourself about what is needed at the moment, but I would guess that the negotiating processes would be assisted if Ministers this afternoon could give particular thought to two only of the critical issues listed in the final page of the Submission. These are the wool, or more widely, the tariff negotiating issue and the provision for emergency action.

Wool Wool is now regarded by both Trade and Primary Industry as the major commodity issue, and wheat has receded somewhat into the background. What is sought is an obligation from Japan to bind the existing duty-free entry of wool.

This concession is considered important not in our immediate trade context, but as a possible protection in the event of some considerable change in Japan's textile consumption habits if the use of synthetics becomes more widespread. It is also considered important that, since wool is our major commodity, any trade arrangements should recognise that point.

The immediate issue is not whether or not a wool duty is to be bound, but whether these negotiations are to go into the tariff duty field. The Japanese say this should not be the case, and any question of duty negotiations is a matter for a subsequent arrangement. They give the same answer to our request for a revision of the sugar duty.

There is some logic in this attitude of the Japanese. Their position is that, almost alone of nations with which we trade, they are excluded from m.f.n. treatment in both duties and import licensing, and the purpose of the current negotiations is to remove the special disabilities and put them on a par with other trading countries. If the positions were reversed I think I would be arguing very strongly on the same lines as the Japanese.

Although there are special historical and emotional reasons for treating Japanese trade as being in a special category our normal practice is to apply m.f.n. treatment to all and sundry. (I am excluding the dollar issue on import licensing.)

Therefore, whilst it would be good if the Japanese were prepared to make these special duty concessions, I am disposed to suggest that, if they are adamant in their attitude, we should set our requests aside. I would not greatly object to a declaration by Australia as suggested in paragraph 14(i).

On the other hand the Japanese may attach so much importance to achieving general m.f.n. treatment that they will be prepared to make this special exception. We should continue our efforts for the moment but I would recommend that this particular request need not be regarded as an essential feature for the new agreement.

Provision for Emergency Action When Cabinet authorised negotiations, it required that any agreement should enable us to take special action to protect our own industries or the interests of other trading partners. The draft article on this section, which has I believe now gone to the Japanese, says that Australia or Japan 'may take measures' to prevent or correct such a situation. This, of course, confers unlimited powers, but specifically it is envisaged that such measures would be either special duties or quantitative import restrictions.

In their earlier discussions the Japanese indicated that they would not find any difficulty with a special duties provision modelled on the Canadian Agreement. This enables the Canadians to impose at their own discretion special duties to bring Japanese prices up to a fair price.

I would expect that the Japanese would react quite firmly to the unlimited provision which we have suggested, and we might find this point a stumbling block. My recollection is that it was accepted in the Canadian/Japanese negotiations that this special provision was there for presentational purposes and if the agreement was to remain in existence, there was an obligation on both parties to see that this particular provision did not have to be used. This attitude is also accepted by the Australian negotiating team. If a situation arose in which emergency action had to be taken, it would mean virtually that an agreement was not practicable. If this is a reasonable understanding then it may well be unnecessary to ask for such an unlimited power. It would need to be understood by the Japanese that they have to take steps to see that their merchants do not do anything which would make emergency action necessary.

I am, therefore, disposed to recommend in this particular case that we do not regard an unlimited provision for emergency action as necessary. We certainly wait for the Japanese reaction and gauge the intensity of it if they do reject our suggestion.

I recognise that this is largely a question of political presentation and Ministers alone can decide whether such a course is acceptable.

1 Document 197.

[AA : A1209/23, 57/5475]