Ministerial Dispatch 6/1947 TOKYO, 12 December 1947

Australian Wool Exports to Japan

1. I have the honour to report that there have recently been made
to me by both GHQ, SCAP officials and Japanese Government
officials, adverse comments over Australia's alleged unwillingness
to facilitate exports of wool to Japan. As you are aware, one of
the main present concerns of General MacArthur is the
rehabilitation of Japanese industry with a view to restoring some
export trade which would lighten the burden of the Occupation
costs on the United States Treasury. In SCAP's industrial
programme wool imports to Japan are important and the Japanese
industrialists and SCAP economic experts concerned have drawn up
detailed lists of the types of wool required for a partial re-
establishment of the woollen textile industry. So far, however,
only 7,000 bales of Australian wool have been imported into Japan
since the end of the war. As I understand it, the difficulty is
primarily, if not solely, one of finance in that Australian wool
brokers are able to dispose of their stocks readily and for cash
on a good market. SCAP has no cash available for financing wool
imports and neither Australian wool brokers nor the Commonwealth
Government has been interested in considering a credit
arrangement.

2. At the moment therefore there is a stalemate which, as I see
it, can be broken only by one of two methods. Firstly, SCAP might
succeed in establishing a revolving export-import fund based on
the Japanese 'gold pot' and apply from this some twenty or thirty
million U.S. dollars for the purchase of wool from Australia. The
Far Eastern Commission are, however, still considering technical
aspects regarding the use of the 'gold pot' as collateral for
credit in the way suggested. The other method might be for the
Commonwealth Government, through perhaps the Commonwealth Bank, to
arrange informal credits to an 'open account' with SCAP which
would be used to finance certain wool firms and enable some start
at least to be made in the sale of wool exports to Japan. Details
would, of course, have to be worked out between the Department of
Commerce and the Commonwealth Bank, and the background has been
reported fully by the Commercial Counsellor to this Mission, Mr.

H. Wrigley, and the Commonwealth Bank's recent representative in
Tokyo, Mr. McWatters.

3. From a short term point of view, it is important that the
stalemate be broken so as to overcome what is really an important
criticism of Australia in GHQ, SCAP on the score of lack of co-
operation in helping their industrial rehabilitation programme.

There is also an erroneous belief that the Australian Government,
perhaps at the instance of the United Kingdom Government, is
disinterested in seeing the Japanese woollen textile industry
restored. From a long term point of view, I would assume that
Australia's main interest lies in restoring her former important
market for raw wool in Japan. In this connection I would report
the plans which are being made by GHQ, SCAP for the importation of
as much wool as possible from the Argentine and South Africa and
also their encouragement of the local production of alternative
fibres, such as ramie. I am aware that the present world demand
for Australian wool is at a high peak, but it may still be wise to
take some steps to encourage the maintenance of the former
important market in Japan. I would suggest, therefore, that
consideration be given to the arrangement which I have put forward
above, namely the making of some informal credit arrangements
between the Commonwealth Bank and some wool export firms. Full
details of SCAP's immediate wool requirements are already in the
hands of the Department of Commerce and of the Wool Realisation
Commission.

PATRICK SHAW
Head of the Australian Mission in Japan