The submission  by the Australian delegation of Departmental representatives (including External Affairs) shows that agreement on matters affecting Australia's trade relations with Japan is very close. So far as Australia is concerned we have, of course, made it clear to the Japanese delegation that on all questions the proposals provisionally agreed or still under discussion are subject to Ministerial approval.
2. For their part, the Japanese have obviously gone out of their way to meet the Australian requests for import quotas for wool, wheat, etc. In return, of course, they stand to benefit considerably by gaining admission for their exports to Australia under the lower m.f.n. tariff rates, which they do not at present enjoy, and by securing non-discriminatory import licensing treatment in Australia, which has up to now been withheld on some items of importance to them. The conciliatory attitude of Japan on these and other trade issues shows the importance they attach to regaining their trading position in the world. Agreement with Australia would probably open the way to similar negotiations by Japan with other 'hard' countries.
3. The Departments of Trade and Primary Industry seem satisfied with the import quotas promised by Japan for wool, wheat, barley, dried fruits, sugar, skim milk, beef tallow and hides.
4. Somewhat more complex is the position regarding duty free entry for Australian wool. Japan has agreed to continue this for the three years' duration of the agreement, but, understandably, has linked this to an undertaking on our part to enter into discussions with Japan in that period on the application of the G.A.T.T. between Australia and Japan. It will be recalled that when Japan became a party to the General Agreement on Tariffs and Trade we invoked Article XXXV, which meant that we did not have to extend m.f.n. tariff treatment to Japanese goods or undertake the other G.A.T.T. obligations to consult on mutual trade problems, accept decisions by the contracting parties on points at issue, and so on.
5. The promise to discuss the application of the G.A.T.T. between Australia and Japan does not constitute a commitment to withdraw our invocation of Article XXXV and is not an unreasonable concession. There is a strong possibility that, if the proposed Agreement with Japan works well enough, present objections to applying the G.A.T.T. to Japan will be at least considerably diminished. The duty on Australian wool would of course be Japan's strongest card in bargaining under the G.A.T.T.
6. The principal undecided issue in the trade talks is that of the measures necessary to safeguard Australian industry against Japanese competition. Japan would be willing to accept Australia's right to impose special duties for this purpose (and also to safeguard the markets in Australia of the United Kingdom, Canada, New Zealand, etc.). However the Department of Trade now considers that the Special Duties Legislation  may not be effective or rapid enough and wants the right to impose quotas. If this is insisted upon, Japan may then insist upon the right to take retaliatory action to redress the loss of her exports by imposing restrictions on Australian goods.
7. Paragraph 5(a) and recommendation 4 propose that the Australian delegation endeavour to induce Japan to drop her proposal to take counter measures by strictly delimiting the circumstances under which Australia would impose special duties or import quotas, and undertaking to consult in each case beforehand. Paragraph 5(b) is an alternative, under which Japan might be permitted to take 'equivalent' counter measures in cases where Australia imposed import quotas, but not against special duties.
8. It is recommended that the recommendations 1-4 in the delegation's submission be supported.