96 Notes By Crawford For Menzies

6th February, 1955

G.A.T.T.-Admission of Japan I understand that the U.K. Ministers were anxious to know your Government's attitude on the question of the admission of Japan to G.A.T.T. [1] Sir Frank Lee [2] told me that the U.K. Government had now decided to apply Article 35.

You will recall that under this Article it is possible to say about a new member of G.A.T.T. that the obligations of G.A.T.T.

will not be assumed towards that new member. Accordingly the U.K.

has decided that so far as Japanese/U.K. trade relations are concerned these will be conducted outside G.A.T.T. Principal importance of this decision is that the U.K. will not be obliged to extend to Japan most favoured nation treatment throughout her tariff.

I understand that the U.K. Ministers reached this decision after rather prolonged debate in which the official point of view was strongly put by the Foreign Office. Their anxiety concerning your view was les[t] an Australian decision might be taken to admit Japan to the obvious embarrassment of U.K. government.

I, of course, gave no indication of any decision by your Cabinet, but did briefly review the factors in the problem before us. These are broadly similar to those operating in the U.K. case with one important difference.

The central problem for Australia is whether or not to grant most favoured nation treatment. Politically and economically this would be extremely difficult on some items of our tariff. The general presumption amongst officials has been that we too must apply Article 35 and conduct our trade relations outside G.A.T.T. unless it were found that the Canadian solution were adaptable to our purposes. Briefly the Canadian approach is to grant most favoured nation treatment to Japan with a major proviso. Under this proviso should Japanese imports threaten Canadian industry by low prices then the Canadian Government is free arbitrarily to assess the value of Japanese goods for duty purposes. The assessment would restore the landed price to that considered not unreasonable for competition with local industry.

We strongly doubt whether this method is in fact legal under the G.A.T.T. rule, but the Japanese are not disposed to challenge it.

However, Customs Department have some real objections to the course and it must be confessed that it still requires the Government to sell the idea that manufacturers are adequately protected by the advice [3] from unfair Japanese competition.

On the whole my expectation is that officials will advise the Government to apply Article 35. Meanwhile no haste is being shown by either side in the bilateral trade talks between Australia and Japan. We are in no hurry and the Japanese are naturally stalling in the hope that we will declare something of our attitude towards her admission in G.A.T.T. [4]

1 Menzies attended the Prime Minister's Conference in London from 31 January to 2 February.

2 Permanent Secretary, UK Board of Trade.

3 The word 'device' was probably intended here.

4 A handwritten note by Crawford to Rattigan, dated 13 February, is attached and reads:'(1) Mr McEwen agreed with this. (2)P.M.

adopted it & conveyed notion (a) we are likely use 35. (b) We expect reciprocation on question protection against third parties (Japan in our market for them; Argentina and/or US subsidies in their market for us).'