CANBERRA

Informal Trade Talks with Japan
Attached please find a paper which indicates in general terms the
objectives which we would seek in the talks with Japan, both in
regard to principles which would apply in respect of our export
trade and to specific questions on individual commodities which we
would seek to obtain from the Japanese.

Following our talks the other day [1] I see our approach to the
Japanese as being along the following lines:

(1) We, on our part, to outline to the Japanese the kind of
problems we see facing our exports to Japan in respect of both
general principles and also in respect of particular treatment of
specific commodities. We would speak in as general terms as
possible and seek, in the first stage especially, to direct a
series of questions at the Japanese in the course of the talks
rather than clearly commit ourselves to any requests. For
instance, in the case of wheat, there are a great many aspects of
the actual operation of the Japanese Government Import Agency
which cut across normal tariff or licensing arrangements and in
themselves are probably much more important than such issues. For
instance, what decides whether the Japanese require one type of
wheat or another type of wheat, what dictates the timing of
purchases, and whether the Japanese customer has any election in
country of origin of wheat imports and whether normal commercial
considerations apply.

We think we know the answer to most of these questions but we
would want to get Japanese reaction to them.

In harmony with the above general and informational type of
approach to the Japanese, we would expect to canvass through a
whole range of our commodity interests and in support of this we
have virtually completed our statistical and other preparatory
work.

(2) We would understand-although this is entirely a matter of your
concern-that the Japanese would approach us in very much the same
way as we have indicated above we have planned to approach them.

In other words, we would rather dissuade the Japanese from putting
to us any log of requests, but would steer them into expanding
their difficulties as they see them in our market and being given
an understanding of the kind of factors which present themselves
as difficulties in our trade policy relating to imports from
Japan.

If my understanding of the above is correct, then for our part we
are ready for the Japanese to be notified that we are prepared to
commence informal talks with them. I think that in order to
preserve the informality of the talks, it might be as well for
your officers to be present when the export aspects of the talks
are going forward. I suggest this part of the talks be held in
this Department.

Similarly, I think that our officers could come across to your
Department and be present when import aspects are being discussed.

This procedure would avoid the formality of in any way regarding
the Australian officials as a delegation or of having papers and
minutes, etc. used as they would need to be in the case of more
formal talks.

If the above is satisfactory to you, I would suggest that while,
from our point of view it might be desirable to have the Japanese
talk first about our import policy, it is probably unavoidable
that we, as initiating the talks, would have to lead off with the
export side of the talks.

If you could confirm with me then I would suggest that you and I
jointly suggest that the Japanese Ambassador see us and at that
time we could then explain the location and method which we
envisage above and get the talks going.

I believe that there is some importance in our being amongst the
first to initiate talks with the Japanese and also being able to
say at G.A.T.T. that we are, in fact, both willing and currently
undertaking talks with the Japanese, and I wonder if you could
give me a call when you have a chance to look at this.

Attachment

13 October 1955

TRADE WITH JAPAN

OBJECTIVES

(a) In terms of general principles
We would need to be assured of some fair and reasonable
opportunity of entry into the Japanese market. This would involve
our receiving most-favoured-nation treatment on the tariff and
non-discriminatory treatment in relation to import licensing.

However, if our objection either in relation to the tariff or
import licensing treatment cannot be parallelled by what we could
offer the Japanese we should have to limit our request in the same
way as our offer is limited, that is, if we can give Japan most-
favoured-nation treatment on the tariff only in respect of 90% of
her trade to Australia, we will need to sort out the items on
which we seek most-favoured-nation treatment and limit them to
something the same proportion of our exports to Japan.

From the point of view of the requests, we have to make on Japan,
it would be preferable for most-favoured-nation treatment on the
tariff to be limited rather than non-discriminatory treatment on
import licensing.

On import licensing we would need either-
(a) to make our requests on Japan subject to her having adequate
sterling resources or
(b) limit the terms of any agreement or understanding to a short
period in which each country might feel able to give a guarantee
of unconditional nondiscriminatory treatment.

(b) Specific objectives within the above principles

While we should be satisfied from our point of view to receive
non-discriminatory treatment in import licensing, in view of the
degree to which Japan's trading position vis-a-vis other countries
and also other factors influence the direction of her trade we
should need to seek specific commitments in relation to particular
products.

(1) WHEAT, BARLEY AND DRIED MILK The Canadians in their agreement
with Japan obtained a guarantee of unconditional non-
discriminatory treatment except where otherwise agreed upon
between the two Governments in relation to three products which
are also of interest to Australia-wheat, barley and dried milk.

However, we understand that in order to protect the Canadian
position on the market against American disposals of surpluses,
the Canadians have a secret understanding with the Japanese that
they will enjoy annual quotas of 550,000 tons of wheat and 300,000
tons of barley. If the Japanese have given some quota commitment
to the Canadians on wheat, there are obviously some qualifications
to nondiscriminatory treatment for Australia. Under these
circumstances we should need to have some assurance of exactly
what non-discriminatory treatment in this respect means and from
our point of view the only way in which we can get a precise
interpretation would be to receive a quota. The same
considerations would apply in our seeking a quota on barley and
possibly on milk powder.

(2) WOOL The Japanese, we understand, are now under some pressure
to increase purchases of wool from Argentina which again means
that we need to explore rather thoroughly with the Japanese
exactly what treatment we will receive on wool if we get non-
discriminatory treatment. It may be that we will finally be
prepared to accept an assurance of non-discriminatory treatment
but at least in the initial stages we would need to see what
offers the Japanese would be prepared to make on maintaining our
present share of the trade.

(3) SUGAR Mr Wolfensberger [2] advises that CSR [3] are interested
in securing a market in Japan for sugar and that they will give us
advice on what quota they would like to sell to Japan. They have
been advised that we are looking at the question in terms of a
quota in order to give some precision to our request but that we
cannot hold out any hope that we will secure a quota.

(4) MISCELLANEOUS COMMODITIES Other items in which we would be
interested in exploring what non-discriminatory treatment would
mean in Japan are cattle and horse hides, meat, oats, butter and
cheese and other foreign foodstuffs, horns and hoofs, casein,
tallow, welding rods, asbestos. In the case of some of these items
which were under the automatic approval system, some
discrimination has applied against Australia and other sterling
area countries in that the Japanese importer has had to make a
deposit with his licence application, part of which is forfeited
if he does not go through with the transaction. In the case of the
sterling area, the deposit was 25% and as low as 3% on other
countries. We are informed today that the Japanese Press has
announced that in the half-yearly budget for October/March 1956,
the deposit required of 25% had been reduced to 3% which would
remove some of the discrimination against the sterling area.