30 Cablegram From Walker To Watt

9th June, 1953

324. CONFIDENTIAL. Personal for the Secretary from the Ambassador.

Reference my telegram 294 and memorandum 598 of 15th May. [1] Japanese Note Verbale on trade.

I have been giving this question careful consideration and feel strongly that an early positive response to Japanese representation is needed, both on economic and on political grounds.

2. Recent trade figures reveal exceptional lack of balance following the virtual collapse of Japanese exports to Australia.

According to Japanese statistics imports were (Stg.)47 million and exports (Stg.)l3 million in calender 1952 leaving an adverse balance of (Stg.)34 million. In the first four months of 1953 the Japanese imported (Stg.)24,600,000 and exported only (Stg.)675,000 leaving an adverse balance of nearly (Stg.)24 million. Unless the trend is modified this year, the adverse balance will be so dramatic that the Japanese Government, being short of sterling, will be under great pressure to reduce purchases from Australia. There are already some signs of this in the purchase of 18,000 bales of wool from Brazil and earmarking of dollars [2] 20 million for wool purchases in the Argentine.

Moreover, a reduction in exchange allocations for food imports has been forecast which might affect our barley exports, despite existing arrangements.

3. There is already some feeling over this situation in the Ministry of International Trade, and the Foreign Ministry, and in the absence of any reply from us to their latest Note Verbale it will be increasingly difficult to maintain the friendly cooperation of Japanese Officials with the Embassy on the commercial and economic sides.

4. Australia's trade policy in relation to Japan should take account of the broad political objective of keeping Japan in the non-Communist bloc as well as purely economic considerations. Most observers here agree that future political trends in Japan are bound to be influenced by attitude of non-Communist countries towards their trade with Japan.

5. I should like to suggest for consideration by the Government that we might agree to hold informal talks of an exploratory nature directed towards establishing in the first place the particular commodities which the Japanese feel should have a larger place in the Australian market, the prices at which they are offered, and the extent to which existing restrictions are a serious obstacle to their exportation. Before the beginning of such talks it should of course be made clear that we would not expect our trade account to balance bilaterally and that any subsequent steps to facilitate Japanese exports must take account of the sterling area's exchange position as well as the needs of our own industries. But to put off the Japanese request for talks indefinitely would be short-sighted from both the political and trade viewpoints.

1 Both referred to Document 24,Cablegram 294 reporting its receipt and the memorandum sent with it as a covering note.

2 A sign here indicates 'corrupt group'.

[AA : CP553/1/1, 194/13/10/35]