62 Minute From Shaw To Tange

16 July, 1954

CANBERRA

Australia's Trade Relations with Japan The question of Australia's future trading relations with Japan has arisen in two ways, viz:-

(i) through representations made by the Japanese for trade discussions, either formal or informal; and for relaxations in Australian licensing treatment of Japanese goods.

The Japanese presented notes on 5th November, 1953, and 14 January 1954 [2] which have not been answered, although information concerning the relaxations made and the present level of licensing was given verbally and confidentially to Mr Kakitsubo on 5th April. [3]

On the matter of trade discussions you will recall that on 12th March you confirmed to the Japanese Ambassador advice previously given him by the Minister that that time was inappropriate to open discussions on contentious issues. [4]

(ii) through Japanese attempts to initiate tariff negotiations under the GATT with a view to accession to that Agreement.

2. This was overcome for the time being at the last session of the contracting parties in October, 1953, by adoption of a procedure under which contracting parties, who wished to do so, could sign a Declaration agreeing to apply the GATT between themselves and Japan. Australia abstained on the vote along with the UK, New Zealand, South Africa, the Federation of Southern Rhodesia and Nyasaland, and Czechoslovakia. These six countries, and France, Indonesia, Cuba and Peru, have not signed the Declaration-24 countries have signed.

3. Japan with the support of the USA has again asked I.C.I.T.0.

[5] to arrange tariff negotiations, with a view to accession to the GATT. The US has offered to consider requests for tariff concessions from countries which agree to negotiate with Japan.

4. An expert committee, composed of the Departments of Commerce and Agriculture, Trade and Customs, Treasury and National Development, set up under the direction of Cabinet, has produced a report on Australia's trading relations with Japan (see attached submission of 29th June). [6] The only recommendations in the report are 'short-term' measures in relation to import licensing controls (para. 62). It considers that the present is not the time for long-term decisions on our trade relations with Japan; nor, the report says, is it appropriate to decide immediately such questions as:

(i) the application of the GATT to Japan;

(ii) the grant of m.f.n. tariff treatment to all, or some, imports from Japan;

and (iii) the Australian attitude to Japan's request for trade discussions.

5. This report is in the hands of the Minister for Trade and Customs, who will presumably submit it to Cabinet. We have not been able to ascertain when this will be done.

6. The Interdepartmental Committee on the GATT has discussed in a preliminary way Japan's renewed request for tariff negotiations under the GATT but, since the question of scheduling the negotiations can only be decided by the contracting parties at their session in October, it is unlikely that concrete recommendations on the matter will be put to Cabinet for some time.

7. The Minister for Commerce and Agriculture has suggested to the Prime Minister that informal discussions be held soon between Ministers on a number of matters, including the revision of the GATT, trade with Japan and the provisions of the Ottawa Agreement.

As we understand it, Commerce officers feel that by this means Departments will be able to clarify lines of policy they can work to with the objective of putting concrete recommendations to Ministers later.

8. It is possible that such discussions will be held in the newly created Prime Minister's Committee on 21-23 July.

9. The interests of the Department of External Affairs and Commerce and Agriculture run together on the general question of trade with Japan. It would be well to concert a common line of action on procedures and policy if this is possible. Our objectives to some extent conflict with the concern of Trade and Customs to protect Australian industry through the import licensing controls and through retention, at least, of the present tariff treatment accorded to Japan (General Tariff-the highest level). Treasury appears to be in rather a dilemma at the moment, since admittedly there is no ground for discrimination against Japan, in exchange control policy, on balance of payments grounds.

(See attached cable 685 from the Australian alternate representative on the Executive Board of the I.M.F.) [7]. National Development's interest presumably runs parallel to Trade and Customs.

10. It would seem that in whatever form the question comes before Ministers it will be desirable to brief our respective Ministers with a view to securing some broader concession than that recommended in the Export Report referred to above. External Affairs would cover the international political issues and Commerce the commercial export considerations.

11. The principal problem lies in the measures which could be advocated:

Association with Japan under the GATT is a remote possibility, unless adequately safeguarded (but see Canadian example mentioned below).

Extension of m.f.n. tariff treatment to all imports from Japan likewise appears to be impractical, because of Australian manufacturing interest, and Ministers' previously expressed concern over the protection of the U.K. market in Australia.

M.f.n. tariff treatment on a limited range of goods (which it is understood New Zealand has agreed to) would appear a possibility, but it is not possible for us to make a selection of goods without the cooperation of Trade and Customs. Moreover, it is understood that Commerce and Agriculture have examined this and do not consider it presents any solution.

On the import licensing aspect, the interdepartmental Expert Report recommends removal of discriminatory licensing in respect of those Japanese goods which offer no detriment to Australian industries; this process to be spread over several licensing periods. It may be possible to broaden this. Although the Government has not committed itself specifically in relation to Japanese goods, it has reiterated many times that import restrictions generally are not intended for protection purposes.

The non-protection principle is the best answer to opponents of the admission of Japanese goods, together with the ancillary argument that they should look to the Tariff Board for protection.

The Japanese have expressed dissatisfaction with the system of 'administrative' licensing control applicable to all Japanese goods. It would appear that no change could be made within the recommendations of the Expert Report.

Approval to conduct trade discussions with Japan on a bilateral basis would be helpful, but presumably we should need to know the limits within which Ministers consider we could negotiate.

12. The Department of Commerce and Agriculture feel that the agreement concluded by Canada with Japan provides the key to a possible resolution of Australian difficulties. (A note prepared on this by Commerce and Agriculture is attached.) [8] Under the Agreement, Canada extended liberal treatment to Japanese goods, in return for similar treatment by Japan to Canadian goods, but has protected herself against conditions likely to cause injury to domestic producers, by reserving the right to establish values for ordinary or special duty on imports from Japan. Whilst agreeing to apply the GATT to Japan, Canada has made this subject to the provisions of her bilateral agreement [with] Japan.

13. If agreed by Mr Crawford, it is considered, we should endeavour to secure the agreement of Ministers to the opening of trade discussions with Japan, within the overall limits of achieving agreement along the lines of the Canadian-Japanese Agreement.

1 This is the date typed at the top of the file copy. 15 July is handwritten with the signature.

2 Documents 46 and 48.

3 Document 60.

4 Document 55.

5 The Interim Commission for the international Trade Organisation, which acted as secretariat for the Contracting Parties.

6 See Document 61.

7 Not published.

8 Not published.

[AA : A1838/283, 759/1/7, i]