I refer to the Japanese Note Verbale of 12th May, 1953 , delivered to the Australian Ambassador in Tokyo, and copy of a translation of which has been forwarded to your Department.
You will no doubt have had brought to your attention, the action taken by the Japanese to reduce imports on Indian coal because of her shortages of sterling and their reported intention to switch purchases of rubber from Malaya to Indonesia.
I am, of course, very concerned that we should not let the position in trade relations with Japan deteriorate to such an extent that the Japanese take action to reduce imports of Australian Wool. It is appreciated that that action would cause difficulties in Japan, but for that very reason, if it were decided on by the Japanese, it could seriously affect our balance of payments position and could do permanent damage to Australia's trade in wool.
I note that in the sterling area review of Japanese trade, the United Kingdom indicated that there is some latitude for an increase in sterling area purchases above the estimated current level, and I note also that New Zealand has announced some relaxation on imports from Japan.
I appreciate, of course, that Australia needs to examine the question in the light of our own special position and I do not suggest that because any other sterling country has or has not taken action to liberalise trade with Japan that Australia has necessarily to follow suit with a similar measure or to a similar extent. Australian requirements differ from the requirements of other sterling area countries for imports in Japan, and any action to accord better licensing treatment of Japanese goods will have to be taken in the light of Australia's special circumstances.
The peculiar nature of our exports needs, however, to be treated as one of the special circumstances in our trading relations with Japan and in order to cover this aspect fully, I should be glad if you would arrange for the question to be considered by officers of your Department in conference with officers of my Department and other Departments concerned and in order to arrive at an agreed reply to the Japanese Note.
In order to assist Departmental officers in considering the question, it may be helpful if I set down my view that a study of Japan's import trade in wool makes me believe that Japan could take reprisals against Australian trade. Moreover, if action is once taken to restrict imports from Australia, I would fear that our trade might receive some permanent injury. I therefore wish to stress that we should examine the possibility of offering some concessions to the Japanese with a view to forestalling any Japanese action to reduce imports from Australia.
I incline to the view that the general payments position should permit some relaxation, but I appreciate that you may have some difficulties on other counts. I would therefore propose that the matter should be brought up for Cabinet decision before the reply is sent and, to this end, I shall arrange for copies of this letter to be addressed to Ministers for other interested Departments.
In the light of the findings of Departmental officers, consideration should be given as to whether informal talks should be held with the Japanese and, if so, where.