7. Mr Yamamoto referred to the recent Trade Agreement between Japan and Canada and said that he hoped similar satisfactory arrangements could be made with Australia. He mentioned the large unfavourable balance of trade with Australia, and said that this was causing concern in Japan. The licensing system employed by Australia singled out Japan for what appeared to be discriminatory treatment. Australian trade officials had pointed out that this individual position accorded Japan could have advantages insofar as Japan was not required to face competition. Nevertheless the fact that Japan appeared to be discriminated against was causing public resentment and the Japanese Government wanted Japan included in the same group as O.E.E.C.  countries. Mr Yamamoto said he felt that some gesture by Australia would be most useful in helping to dampen the feeling which the present lop-sided trade balance was creating in Japan. He admitted that Japan would have to continue to import from Australia, but pointed out that Japan was now importing wool from the Argentine, with whom she enjoyed a balance of trade. Mr Yamamoto also emphasised that Japan would like to negotiate with Australia within the framework of GATT. In concluding Mr Yamamoto said that he personally felt that trade negotiations should only take place if there was good prospect of a reasonable settlement. He said it might be preferable not to negotiate at all if no agreement was likely.