70 Submission 108 To Cabinet By Menzies

14th September, 1954

General Agreement on Tariffs and Trade Attached for consideration of Ministers are the following papers prepared by the Interdepartmental Committee.

(1) Commonwealth Talks and G.A.T.T Review. [1]

I. G.A.T.T II. OTTAWA (2) Trade Talks with Japan.

Attachment

Trade Talks with Japan The following are notes on aspects of trade talks with Japan including negotiations inside or outside GATT, nature and scope of an agreement and timing of talks and negotiations. There is a separate section on import licensing.

Negotiations within GATT as it now stands 2. (a) GATT would require general non-discriminatory treatment including the mutual accord of m.f.n. tariffs and non- discrimination in quantitative restrictions. Australia would have to rely on existing escape clauses.

(b) Negotiations with Japan under GATT may enable Australia to obtain at least part payment by means of concessions in the USA tariff, in accordance with the recent US proposal.

(c) Tariff negotiations within GATT are not likely to start before February next.

(d) Tariff negotiations under the GATT aegis would preclude invoking Article XXXV.

Negotiations outside GATT 3. (a) Negotiations for a bilateral agreement outside GATT but qualifying our GATT commitments could enable Australia to obtain appropriate escape provisions.

(b) This would raise no procedural difficulty for Australia in GATT with or without the proposed United Kingdom amendment of Article XXXV.

(c) This approach also seems to offer prospects of a solution (at least for the time being) of the problem of relations with Japan in the context of GATT.

4. The Canadian Agreement exchanged general m.f.n. obligations, except that Canada reserves the right to establish (for the protection of domestic industry) special values for Japanese goods as the basis for levying ordinary and special duties when imports occur in threatening volume. Canada received undertakings on nondiscriminatory treatment for her main exports to Japan.

5. New Zealand. We understand that New Zealand and Japan have reached agreement in principle on a limited trade agreement involving m.f.n. treatment in tariff and import licensing for a limited range of goods not manufactured in New Zealand. New Zealand has deferred action to implement the tariff side of the agreement until after the forthcoming GATT meetings.

6. The United Kingdom has suggested discriminatory quotas or duties to protect domestic industry or the export interests of other countries against 'disruptive or manifestly unfair' competition from Japan. The proposals would aim to amend the GATT to sanction through bilateral agreements these otherwise non- permissible protective measures.

Australian Approach 7. The Canadian Agreement was negotiated outside the GATT. Canada is applying GATT between herself and Japan subject to this agreement. Its protective value for duty provisions operate only where Canadian industries are affected.

8. The United Kingdom proposal envisages explicit recognition in GATT for bilateral deals with Japan. The UK envisage that the bilateral agreements could allow the trade of other Commonwealth countries to be protected as well as the domestic industry in, say, Australia.

9. Ministers may wish to consider whether an Australian agreement should include provisions safeguarding imports from UK or other Commonwealth countries into Australia as well as Australian domestic industry.

10. If the Agreement contained any provisions inconsistent with GATT an understanding from Japan should be sought that these provisions should continue to apply even if the GATT were applied between Japan and Australia.

Nature and Scope of an Agreement 11. On our exports side we would like to seek from Japan:(a)m.f.n.

tariff treatment, and (b) non-discriminatory import licensing for our exports. Such requests would of course draw similar requests from the Japanese.

12. The nature, scope and general form of any possible agreement affecting tariff cannot be foreseen until broad decisions have been taken as to the kind of commitments Australia is prepared to assume, especially of the kind of commitments on major items viz.

cotton piece goods and rayon piece goods.

13. Possible courses (from a technical aspect) in the customs duties field:

(a) Accord Japan m.f.n. tariff treatment except on cottons, rayons and other items judged to be vulnerable. This course is not likely to provide the basis for an agreement with Japan as it assumes Japan could agree to continued discrimination against her principal export products.

(b) Accord Japan m.f.n. duties on a specified quantity or value of the most troublesome goods while applying the General Tariff rates to importations in excess of the specified amounts (the tariff quota idea).

(c) Accord Japan m.f.n. duties on a specified quantity or value of the most troublesome goods and limit imports to that amount. This would necessitate using special protective import licensing measures against the particular Japanese goods to keep imports from Japan within the specified volume.

(d) Accord Japan general m.f.n. treatment in tariff rates with appropriate escape clauses e.g. the provision in the Canadian- Japanese Agreement whereby Canada reserves the right to establish special values as the basis for levying duties if imports occur in threatening volume. It cannot be foreseen at this stage how far we would be successful in getting agreement to the escape clauses we would find necessary.

14. On balance there appear to be advantages and no great difficulties in saying to the Japanese immediately that we realise there are unsatisfactory aspects of our trading relations with them and we are examining the possibility of bilateral trade talks. It should be made clear that Australia would have to complete certain studies before actually undertaking discussions.

15. As a necessary preliminary to these discussions Departments should be requested to prepare schedules, showing the nature of the tariff or other commitments Australia might contemplate assuming on items in the import trade from Japan and the requests we might make on Japan so that Ministers could see the probable benefits for Australia and the probable effects on Australian industry and UK exports. At the same time an examination should be made of the possible escape clauses we should seek.

Commonwealth Consultation 16. We would, of course, keep Commonwealth countries informed of our action. The UK has asked that no action be taken which would prejudice discussion of the matter in all its aspects at the October meeting. The initial moves proposed would not be inconsistent with this request and no conclusions would in any case be arrived at with Japan before the Commonwealth talks.

Import Licensing 17. An interdepartmental submission has previously been circulated to Ministers on this question. [2]

18. The possible courses (from a technical aspect) in the import licensing field are to assimilate Japan to non-dollar treatment (a) entirely or (b) with exceptions-the excepted items to be licensed as at present, i.e. limited to a specified total amount quarterly.

19. If either of these courses is taken, unilateral action presents fewer complications since bargaining (and the resultant acceptance of contractual obligations) in import licensing matters may lead to complications in administering import restrictions necessitated by the balance of payments.

1 Not published.

2 Presumably Document 61.

[AA : A4906, VOLUME 4]