229 Letter From Associated Chambers Of Manufactures To Menzies

August 1957

CANBERRA

Agreement on Commerce Between the Commonwealth of Australia and Japan

Widespread apprehension exists throughout our Australian membership of the far reaching implications that are inherent in the terms of the provisional Trade Agreement with Japan recently signed in Tokyo.

In view of such concern, I would respectfully request that you, as Prime Minister of Australia, afford myself, as President of the Associated Chambers of Manufactures of Australia, accompanied by State Chamber Presidents an early interview to discuss certain Provisions of the Agreement.

In the meantime, I set out hereunder for your consideration our observations on the specific sections covered by the text of the Agreement which in our considered opinion threaten the integrity and existence of Australian Industries and their capacity for employment. Also our comments on the assurances by the Minister for Trade of the strength of the Australian Tariff as an important safeguard.

We strongly contest that there exist adequate safeguards to protect Australian manufacturers from the consequences of the Pact for these basic reasons.

1. The present tariff making machinery is not capable of speedily regulating any volume of goods that causes or threatens to cause damage to Industry.

2. Australia's trade obligations under the GATT such as the binding against increase of tariffs and frozen maximum preference margins have weakened our tariff system and it can no longer be relied on as a protective measure capable of being used without long delays and interminable negotiations.

3. The special Emergency duty clauses under the Customs Tariff (Industries Preservation) Act will not stop goods being imported at prices and in quantities that must endanger the welfare of local industries.

4. The Japanese Government's promise of exercising a measure of restraint will prove incapable of controlling either the volume or price of Japanese exports to Australia.

Australian manufacturers have repeatedly emphasised the great danger to which industries are subjected in the absence of an effective, speedy and positive protective policy.

It is only necessary to quote two industries as an example. The Woollen and Worsted Industry and the vitally important Chlorine Chemical Industry.

The first waited nearly three years and the second almost four years for the Tariff Board, the Department, and Cabinet, to consider their request for safeguards against external competition, only to be informed that the Tariff Board's recommendations for an increase in Tariffs on imported Woollens and Chemicals had been rejected. Many other instances could be quoted regarding delays and non-acceptance of Tariff Board recommendations.

Mr McEwen's recent acknowledgment of this danger and final admission-'An early overhaul of Tariff Board machinery is needed'- has proved that we have emphasised it sufficiently well.

Regarding our second reason for concern-whilst not advised of the underlying reasons for the rejections by Cabinet of the increasing number of Tariff Board Reports, it is known that our international obligations and entanglements as a Contracting Party to the General Agreement on Tariffs and Trade are partly, if not wholly, responsible.

Our Tariff obligations and dangerous entanglements have been increased as a result of the Japanese Commerce Agreement. Every item in the Australian Customs Tariff, at present bound against tariff increase or affected by GATT has been given as a concession to Japan. In other words the Government's inability in the past to obtain freedom from GATT entanglements is prima facie evidence that it will not be able to free itself or raise the tariff on items bound against increase or increase preferential margins when danger threatens, as it will from the activities of Japanese exporters.

The Trade Agreement establishes this point-it reads as follows:

'The Australian delegation pointed out that Australia had already bound against increase the rates of duty on a relatively large number of items to other countries which were of export interest to Japan and consequently by extending most-favoured-nation treatment to Japanese goods in the Australian tariff, Australia did in fact assure a stability of tariff treatment of Japanese goods that was of considerable importance.'

It has been stated that the Government can free itself from the obligations of tariff items that are bound against increase and whilst we acknowledge that there has been some easement of the obligations of the GATT, we claim that it is still necessary for adequate compensatory concessions to be offered if bindings are withdrawn and the bound tariff cannot be raised if the Contracting Parties determine that the country wishing to raise the tariff, notwithstanding that it follows a Tariff Board recommendation, has unreasonably failed to offer adequate compensation.

You will no doubt recognise, therefore, that the decision is still in the hands of the Contracting Parties and not in the hands of your Government.

It will be seen that the consequences arising from Japan obtaining the concessions of GATT can have extremely serious consequences and emphasises our lack of confidence in the Tariffs being a positive safeguard against increased Japanese goods which will result from the Pact.

Our comments on the assurance by the Minister that we are safeguarded by the Provision of the Customs Tariff (Industries Preservation) Act, are as follows:-

Section 4 of the Sub Section 11(a) reads- 'The amount of the emergency duty in each case shall be a sum equal to the amount, if any, by which the landed duty-paid cost of the goods is less than a reasonably competitive landed duty-paid cost ascertained as determined by the Minister.'

According to understanding, this particular legislation does not empower the Minister to impose an emergency duty which would stop goods from entering this country in competition with Australian made goods. Powers under the Emergency Duty Provisions of the Act restrict the Minister to imposing an Emergency Duty of a sum equal to the amount by which the cost of the imported goods is less than a reasonably competitive landed duty cost after which the goods in question can then enter Australia. Once the goods were imported they would be sold even if it meant their being sold at a discount.

In addition, however, no emergency action can be taken by the Government until Japan has had the opportunity of proposing an alternative course of action. This course is, indeed, laid down clearly in the express wording of the Agreement under Point C Article 5, which reads:

(i) Such action would not be taken except after consultation. In every case, consultation would be as far in advance as practicable.

(ii) Such action would not be taken lightly; and would be taken only where the consultation process failed to provide a mutually acceptable alternative solution to the problem. In cases where urgency might require action to be taken before the consultation process was completed, consultation would be continued in an endeavour to find a mutually acceptable solution.

(iii) So far as administratively practicable such action would apply only to those specific goods in respect of which the action was necessary to correct the particular situation.

(iv) Such action would apply only for such time as was necessary to correct the particular situation and would be discontinued immediately this was achieved.

(v) Such action would be limited to cases where serious damage was caused or threatened.

It was quite improbable that speedy corrective or preventive measures could be taken under this doubtful 'safeguard' and in any case the emergency can only be taken on a most temporary basis and it could well be that separate action will have to be taken in respect of each shipment of goods.

Lastly, there is a very definite absence of assurances that there will be no vital differences of opinion between those responsible and those affected as to what constitutes 'serious damage' to an Industry and an interpretation of the key word 'threatened'.

Industry would press for an amendment of this clause which would permit immediate action to be taken by the Minister, without consultation whenever the Minister has reason to believe that any articles are being or are practically certain to be imported which could be of detriment to an Australian industry. We would strongly recommend that the Minister be empowered to impose such duties not in excess of 50% ad valorem or impose quantitative limitations in such cases where emergency action was needed. This is precisely the authority vested in the President of U.S.A. under Section 22 of the Agricultural Adjustment Act of 1933.

Our final comments concern the much publicised Japanese undertaking of I voluntary restraint'.

The acceptance by the Japanese Government of the political importance of preventing damage to Australian industry in the early stages of the Pact is not a 'safeguard'.

The main point for consideration is whether the Japanese Government has the power to stop goods being exported to Australia by merchants in quantities and at such prices that would be damaging to Australian industries.

Part C of the Agreement reads:

'The Japanese Delegation pointed out in reply that under Japanese legislation export was free in principle and that the Japanese Government could take only limited measures to deal with these problems. However, the Japanese Delegation indicated that the Japanese Government would use its best endeavours within its constitutional authority to see that exports from Japan to Australia were conducted in such a way as to avoid or remedy the damage or prospect of damage to which the Australian delegation had referred.'

This establishes prima facie evidence why Australian Industry has no faith in the principle of 'voluntary restraint' acting as a safeguard.

We would conclude by stating the manufacturers do not take issue with the Australian Government making a bilateral trade agreement with Japan or, for that matter, any other nation.

Our non-acceptance of the new Japanese Pact is because the agreement lacks the essential safeguards that Australian industry, on behalf of its shareholders and employees, considers to be its historical privilege.

In the circumstances, therefore, we repeat our request that the opportunity be accorded my Organisation to present its views and reasons why the provisional pact should not be ratified in its present text.

F.S. VINE President, ACMA

MR JOHN G. HURLEY President, Chamber of Manufactures of NSW MR DANIEL SCOTT President, Victorian Chamber of Manufactures MR J.R. GIBSON Acting President, Queensland Chamber of Manufactures MR A.M. SIMPSON President, South Australian Chamber of Manufactures MR C.J. CORNISH President, Western Australian Chamber of Manufactures MR A.E. POXON President, Tasmanian Chamber of Manufactures MR E.W. PAULL President, Metal Trades Employers' Association

[NLA : MENZIES PAPERS MS4936/21/439, FOLDER 16]