73 Submission 135 To Cabinet By Spooner

30th September, 1954

Import Licensing of Japanese Goods

[matter omitted]

This recommendation [1] visualises the licensing of at least token quantities of Japanese goods at present not being admitted at all, such as finished rayon piece goods, canvas and duck and cotton drills. There would be no question of admitting quantities sufficient to disrupt Australian production. (When these recommendations were formulated it appeared probable that the restrictions on imports from other non-dollar countries would be substantially eased in the latter half of 1954.)

2. This minute aims to explain the procedures which would be adopted if a proposal to assimilate the special licensing measures now applicable to Japanese goods into the licensing measures applicable to the goods of other countries is adopted, in full or in part.

3. To provide background an outline of import licensing procedures follows:-

(a) Wherever it is necessary to keep total imports, imports of particular goods or imports from a particular country within a target figure the result is achieved by placing quota limits on individual importers, directed to limiting the value of the import licences to be granted to each eligible importer during a quarterly or half-yearly period.

(b) Today, imports into Australia are licensed under three separate administrative procedures depending on the country from which the particular goods are being imported. These separate procedures apply to- (i) imports from Dollar countries;

(ii) imports from Japan; and (iii)imports from the Rest of the World.

(c) In the case of imports from the 'Rest of the World' there are no complete prohibitions on the import of any goods, and importers enjoy a considerable amount of freedom in determining the particular goods to be imported within the limits of their individual quotas. Licences for imports from the Dollar countries and from Japan are, at present, granted only for the particular goods listed in the respective import licensing budgets relating to those areas.

(d) The import licensing budget for Japanese goods for the current quarter lists 130 items for which import licences are granted. The budget also applies a ceiling figure to each item, and licences for each item are distributed pro rata amongst applicants depending on the merits of their respective claims. With a few exceptions the listings include all items of interest to Japan's export trade.

4. A very high proportion of the goods listed in the present Japanese import licensing budget comprise what are known as 'B' Category goods under the import licensing procedures applicable to imports from the 'Rest of the World'.

5. At present the holder of a quota for 'B' Category goods relating to imports from 'the Rest of the World', may use that quota to import any goods of the kind listed in 'B' Category, to the extent of 60% by value of the importer's total imports in the base year, of all the goods listed in Category B. However many special quotas have been granted for textiles, particularly to manufacturers of garments etc.

6. Under the procedures applicable to 'B' Category goods an importer's quota which arises from his imports of (say) gloves, ribbons and tapestries in the base year could be used today to import (say) toys, as all of these goods are in 'B' Category. The same elasticity has not applied to imports from Japan as it has been the practice to allocate licences for each line of Japanese goods separately.

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10. Although textiles are the principal goods licensed for importation from Japan, the current annual licensing rate for those goods is only approximately A10 1/2million (c.i.f.). Other 'B' Category imports account for A2 1/2 million (c.i.f.) The remaining A8 million (c.i.f.) of the current licensing rate of A21 million (c.i.f.) per annum is mainly for essential goods for which licences are granted up to the level of our requirements.

11. Approximately 90% of the total annual value of licences issued for Japanese textiles is for textile materials for further processing in Australia. These licences are issued mainly to textile manufacturers who require the materials for factory purposes.

12. If Japanese goods were assimilated, for licensing purposes, with imports from all other non-dollar sources, the bulk of these quotas would vest in manufacturers who might reasonably be expected to use their quotas to import the same materials as they are now importing.

13. From what is known of Japan's competitive position vis-a-vis other countries and the fact that Japanese goods pay the highest rates of duty (provided under the General Tariff), it appears unlikely that:-

(a) Japanese textiles would displace to any appreciable extent, imports of textiles from other sources;

(b) There would be any significant increase of our total imports of finished textiles (including rayon piecegoods);

(c) There would be any important variation in the present pattern of other 'B' Category imports;

if Japanese goods were accorded the same licensing treatment as imports from other sources.

14. On the other hand, it is quite possible that there could be some increase in our imports from Japan of some consumer-type goods other than textiles. The most likely instances are toys, artificial flowers, pencils and pen and pencil cases, where total import trade is relatively small and Japan is a cheap source of supply. It is in respect of goods of this type that the impact on local industry could be most sharply felt.

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16. Two courses are possible if the Government favours the assimilating principle.

(a) Complete assimilation. This course would enable the real strength of Japanese competition in all lines to be tested. On the other hand it may have severe repercussions on a few Australian industries. However as Australia is not bound by contractual commitments to Japan, ad hoc measures could be taken to deal with the imports of particular goods from Japan should they reach embarrassing proportions and the Government considered special action necessary in particular cases. The fact that duties on most Japanese goods, including almost all textiles, are higher (and in many cases much higher) than the duties on similar goods imported from other countries makes it unlikely that competition from Japan would call for special action on more than a very few items.

(b) Limited assimilation, reserving those items in which competition from Japan is most feared. This course has the disadvantage that if particular goods are initially excluded from the assimilation scheme because of fears of larger imports, the same fears (whether soundly based or not) are likely to persist indefinitely and no opportunity occurs to establish whether the fears are well-founded or not.

1 The reference is to paragraph 62 of Document 61.

[AA : A4906, VOLUME 5]