TRADE WITH JAPAN

Renewal of trade arrangement with Japan for the year 1949/50

Negotiations at Tokyo between the representatives of the Supreme
Commander for the Allied Powers on behalf of occupied Japan and of
the Sterling Area participants which have been proceeding since
August, have led to agreement upon a renewal for 1949/50 of the
trade arrangement with Japan on lines similar to the earlier plan.

[2] It covers both private and Government trade.

The Sterling Area participants comprise the United Kingdom and
Colonies (excluding Hong Kong), Australia, India, South Africa,
New Zealand and Ceylon. There are also several bilateral
agreements between S.C.A.P. and other countries in the Sterling
group. These are known as non-participants.

The arrangement aims at trade between Japan and the Sterling Area
participants being balanced between sales and purchases at the
highest practicable level.

At 30th June 1949, however, there was a balance of trade in favour
of occupied Japan to the extent of about A 12.5 million. This
caused an imbalance which, under the Overall Payments Agreement,
could be converted into dollars to the detriment of the Sterling
Area. However, this difficulty has been overcome by such amount
being used by S.C.A.P. as a working capital fund.

The new arrangement has been strengthened with a view to
preventing future imbalances and so avoiding the possibility of
loss of dollars.

Trade during the past year 1948/49, so far as Australia is
concerned, showed a sterling credit of A4.6 minion, thus
assisting in reducing the imbalance. Our sales to Japan amounted
to A6.2 million as against purchases therefrom of A1.5 minion.

The main items of our sales consisted of wool A4.5 million;

cereals 1.4 million; dried milk A133,000; hides and skins
A132,000; trochus and pearl shell A37,900; lanolin A3,750;

horns and hooves A1,250.

Under the new trade plan for 1949/50 it is estimated that Japan
win purchase goods to the value of A68.75 million from the
Sterling Area participants. For 1948/49 trade had been estimated
at A35 minion each way.

On the basis of last year's trade, we have estimated Australian
sales to Japan this year at about A7.5 million, consisting mostly
of wool A6.5 million; with cereals A500,000; dried milk
A200,000; hides and skins A200,000; other A100,000.

Australia's requirements from Japan were estimated at a similar
amount in two categories-'essentials' and 'desirables'. Owing to
the necessity of the overall balancing of sales and purchases and
the demand for many of Japan's products, particularly cotton
textiles, Sterling Area requirements have had to be confined to
'essentials', which leaves Australia's share as A6.2 million
comprising mostly metals and metal products, the other items being
rayon, timber, silk, machinery, insulators, etc. However, in
addition, there will be a considerable number of contracts which
were not fulfilled by the end of the last yearly period to be
carried over into this year.

The estimated purchases by the other participants are United
Kingdom and Colonies A39.45 million; India A6.8 million; Ceylon
A1.56 million; New Zealand 1.04 million; South Africa A341,250.

Total new purchases from Japan by the Sterling Area participants
during 1949/50 are estimated at 56.9 million.

Submitted for approval.