Current tariff negotiations are being confused because of doubts
about the continuance of restrictive Import Control systems. We
believe that an Australian decision during the progress of these
negotiations to issue licences freely for currently [1] available
goods from all countries other than those with especially 'hard'
currencies' e.g. United States, Switzerland, would be advantageous
to Australia. [2] It would-
(A) Demonstrate our good faith in the matter of removing trade
barriers.

(B) Lessen the difficulties of obtaining tariff concessions from
other countries in our efforts to obtain better marketing
opportunities for Australian products in the countries with which
we are negotiating. It will be obvious that reduction in a tariff
rate can bring little (if any) benefit in terms of opportunities
for extending trade if the country reducing the tariff continues
to maintain licensing restrictions or prohibitions against the
imports of the particular goods. Clearly we are not in a position
to press other countries to give us assurances against import
restrictions on products on which they grant tariff concessions
unless we are prepared to give them assurances of similar nature
on the products on which we grant them tariff concessions.

(C) Strengthen the attitude we have taken re justification for
quantitative restriction for balance of payments purposes.

(D) Strengthen attitude which the United Kingdom and other
countries are taking in relation to the possible need for
discrimination in application of quantitative restrictions for
balance of payments reasons.

(E) Earn goodwill which may well prove valuable if difficulties
with United States develop.

We recognise that the decision on the above question cannot be
based solely on the considerations referred to above. From the
general economic point of view there are other factors which would
tend to support an casing of import restrictions viz-
(A) While purchasing power continues to press on the [a]va[i]lable
supplies of goods in Australia extra imports are the only
significant means of increasing the flow of goods without bringing
about a substantially corresponding increase in expendable incomes
thus maintaining that pressure.

(B) While our export income remains high we can avoid steadily
increasing lending funds (which may in practice become
substantially frozen except for limited purposes) only by spending
more freely on imports. In view of our insistence in the Charter
discussions on the obligation of members to use their current
international resources to the full it would be wise for us to
avoid unduly large accumulations.

(C) Provided relaxation is not extended to hard currency countries
it would not be contrary to United Kingdom interests. Insofar as
it contributed to the restoration of European economies it would
be helpful. Delay in the restoration of these economies is the
major factor in United Kingdom difficulties and the general dollar
shortage.

It is possible that you have already been examining this problem
in relation to the possible coming into force of Article 25 [3] of
the Draft Charter. We recommend however that early consideration
be given to relaxation of import restrictions on goods from all
countries other than those with specifically 'hard' currencies and
that in relation even to these consideration be given to
relaxation of restrictions on commodities of major importance to
small economies where the value of imports likely to be involved
is not so great as to have any material significance in our
balance of payments.

Particular case of this is involved in your Schedule 11 Cuban
requests item 24 cigars which states that the matter of
prohibition is to remain one of administration by Trade and
Customs.

The leader of the Cuban delegation has presented a letter stating-
(A) Cigars are one of Cuba's most important export products.

(B) Prohibition is a serious obstacle to success in getting
reciprocal and mutually advantageous agreement.

(C) Removal of prohibition is desired.

Australian responses to Cuban requests are necessarily limited.

Cuban responses are regarded by Commerce as reasonable and further
modifications in our favour under consideration. To some extent
the position of Cuba in relation to cigars is analogous to our own
with wool. Apart from the general issue dealt with above we feel
it would be helpful if prohibition on cigars could be removed or
modified. Early advice would be appreciated.