Trade with Japan Cabinet decided on Tuesday not to accept the conclusions of the Interdepartmental GATT Committee that Japan might be informed immediately that Australia was prepared to commence talks with a view to negotiating a bilateral trade agreement and that Ministers should give further consideration to the merits of a possible agreement based on either (a) the quota principle, or (b) the Canadian example. 
2. Instead Cabinet accepted a submission  by the Acting Minister for Trade and Customs which concluded:
'The most practical course appears to be one of informing Japan that the Government proposes to examine, with goodwill, ways and means of affording Japan greater opportunities to expand her export trade to Australia, and to follow a policy of progressively easing import restrictions on Japanese goods (especially discriminatory import restrictions) whenever developments under the proposed more liberal licensing arrangements reveal that special protection against Japan is unnecessary on particular products. In addition Japan could be accorded, on a non- contractual basis, m.f.n. tariff rates on as wide a range of goods as protective considerations (and possibly preference considerations) permit. After Australia has had actual experience in trading under the more liberal conditions, experience may show that a basis exists for a formal Tariff Agreement with Japan.'
3. It was agreed that a small committee of Ministers would look immediately into the individual items concerned. We understand that the Committee, which is composed of [Sir Eric] Harrison, Senator Spooner and Senator McLeay, will meet early next week.
4. In our view the course of action agreed on by Cabinet will be unsatisfactory to Japan and is unlikely to contribute in any substantial way to an increased trade with Japan. The agreed course of action, especially since any easing of licensing or tariff restrictions will be carried out unilaterally by Australia, may be expected to result in undue weight being given to fears of Japanese competition with Australian products and imports from established overseas suppliers.
5. The Department of Commerce and Agriculture share our concern and in addition consider that no scope is permitted under the agreed course of action for increasing Australian exports to Japan. They propose to recommend to the Acting Minister for Commerce and Agriculture that he press in the Committee of Ministers for further examination of the Canadian agreement with Japan. Commerce still consider that an agreement of this type could provide adequate safeguards for Australian industry and are not convinced about the Department of Trade and Customs view that it would be administratively unworkable. We share this opinion.
Until the views of Mr McEwen and Senator O'Sullivan have been obtained and the Committee of Ministers has made some progress it is considered that no initiative should be taken in discussing trade matters with the Japanese. Should they themselves raise the question they could be told little more than that we were not unaware of their trade problems, that ways of assisting them were still under review and were in fact under consideration by Ministers.
It is, however, our view that the Japanese Embassy should be informed as soon as possible of the course of action agreed to by Cabinet to afford Japan greater opportunities to expand its exports to Australia. The question of when and how much could be conveyed to the Japanese will substantially depend on the comments of Mr McEwen and Senator O'Sullivan and the work of the Committee of Ministers. We consider, however, that no opportunity should be overlooked by this Department to press for the earliest possible advice to the Japanese on as forthcoming a basis as possible. We should also continue to work for eventual conclusion of a bilateral agreement on a mutually satisfactory basis.