CANBERRA

As you are aware, tariff negotiations are at present being
conducted in Geneva between Japan and certain of the contracting
parties to G.A.T.T. with a view to Japan's accession to the
General Agreement. It will therefore be necessary for the
Government to decide, in the near future, whether the G.A.T.T.

shall apply between Australia and Japan or whether we should
invoke Article XXXV of the G.A.T.T. as against Japan.

If the G.A.T.T. were applied between Australia and Japan the
principal effect, as far as Australian import trade is concerned,
would be that we would be under an obligation to extend
unqualified most-favoured-nation tariff treatment to Japanese
imports and to restrict Japanese imports only to the extent
necessary to safeguard our external financial position and balance
of payments.

Australian industries have from time to time expressed grave fears
of the effect of Japanese competition, even with the protection
afforded by the application of the General Tariff rate to Japanese
imports and we have been under constant pressure not to disturb
the incidental protection afforded by import licensing control on
Japanese goods. It is clear that certain important Australian
industries would suffer hardship if unconditional most-favoured-
nation treatment were afforded by Australia to the whole range of
Japanese goods and I consider that we should not agree to the
application of the G.A.T.T. between Australia and Japan, at least
until a clearer picture emerges of the strength of Japanese
competition.

The course open to the Government in these circumstances is to
invoke the provisions of Article XXXV as against Japan. Article
XXXV is in the nature of a 'safety clause' which provides, in this
context, that if Australia does not participate in tariff
negotiations with Japan and does not sign the Decision on Japan's
accession [1], Australia is released from the otherwise automatic
obligation to apply the provisions of G.A.T.T. to Japan.

We have been advised that the United Kingdom Government has
notified Japan of its intention to invoke Article XXXV as against
Japan and that an announcement to this effect will be made some
time after Easter, although a firm date for the announcement has
not yet been decided. The action of the United Kingdom means that
there will be strong pressure from Australian industries for
Australia to do likewise and it would be extremely difficult for
us to justify failure to act in a similar manner.

Irrespective of the pressure that could arise as a result of the
action of the United Kingdom Government however, I consider that
it would be in Australia's best interests to invoke Article XXXV
as against Japan, at least until Japan's trading position is
clearer.

I therefore propose that, after the announcement has been made by
the United Kingdom, I should make an announcement in terms of the
attached draft press statement. [2] It would, however, be a matter
of courtesy to advise Japan of our intentions before the
announcement is made and I consider that, before release of the
press statement, Japan should be informed confidentially of our
intention (say a day or so before) so that no publicity would be
given to the matter in Japan before publication in Australia.

Unless you so desire, it is not my intention to bring this matter
before Cabinet by way of a formal submission.