75 Cablegram From Mcewen And O'sullivan To Menzies

7th October, 1954

GATT 2 SECRET PRIORITY

LONDON

Japanese problem.

The courses open to the Australian Government:

(1) Refuse any talk with Japan and apply Article XXXV when the time comes. For reasons we will not repeat Cabinet has already decided it must talk bilaterally with Japan.

(2) Let Japan in and apply XXXV if she offends our interests-the American proposal. This has no merits for reasons given in official cable. [1]

(3) Talk bilaterally with Japan outside GATT ignoring completely the GATT position.

(4) Try to get a bilateral agreement with Japan not inconsistent with GATT. Canadians believe they have done this but such a treaty involves giving m.f.n. on all lines relying on arbitrary valuation for duty purposes if trouble arises.

(5) Support British proposal amounting to admitting Japan to GATT after concluding a bilateral agreement provided admission to GATT does not require us to give up any discrimination embodied in agreement. Americans will oppose this. If we are to support it we must decide by middle or early November since an amendment to Article XXXV is required.

2. Of these numbers (3), (4) and (5) are worth examination.

Support of course (5) does not deter a final result in terms of (3) or (4). Even if a bilateral agreement were made with the blessing of GATT there may develop, however, pressures in GATT later on to weaken or terminate such an agreement and we would need to weigh up the value of negotiating a bilateral agreement completely outside GATT as against a bilateral agreement having recognition by GATT and enabling us to accept Japan as a GATT partner. Officers here and in Canberra can further examine the British proposal to enable the Government to define its attitude at the latest by the time the proposal is formally presented at Geneva. The urgent matter at present is the question of opening talks with Japan.

3. We stress very strongly the urgency of opening these talks for the following reasons:

(a) Having taken decision to talk and having regard to the economic and political position of our relation with Japan we should not weaken our strength in bargaining by being the last in the queue for talks. New Zealand and Canada have acted and United Kingdom bound to start some communication soon.

(b) The recommendation of the Intersessional Committee that arrangements be made for tariff negotiations between the contracting parties and Japan commencing 1st February, 1955 with a view to Japan's accession to GATT means in effect that a decision in principle on Japanese accession to full membership of GATT will be made at the ninth session commencing 28th October. It is certain in our view that the decision will be in favour of Japanese admission. If we wait it may appear that we are finally agreeable to try and reach agreement with Japan on a bilateral basis because it is obvious to us that every other country will shortly have regulated their trade relations with Japan through GATT or bilaterally.

(c) The fact that we have commenced negotiations with Japan would make more urgent the United Kingdom desire to get some assurance that a provision will be written into Japanese/Australia bilateral agreement which will protect the interests of Lancashire industries in the Australian market. This will give us a stronger bargaining counter in our talks here aiming to get an understanding with United Kingdom to protect Australian exports in the United Kingdom markets.

1 Cablegram 2558, dispatched from the High Commission in London on 6 October, reported a US proposal to amend Article XXXV to permit its application against Japan by contracting parties if difficulties arose at some time after Japanese accession. The United Kingdom opposed the idea on grounds that it could involve unnecessarily drastic action against Japan even in the case of difficulties with one minor commodity, that it would require any current discrimination against Japanese goods to be dropped immediately, and that it would not solve UK domestic political problems. On file AA : A1838/283, 759/1/7, i.

[AA : A1838/278, 3103/10/2, iii]