CANBERRA

Australia's Economic Relations with Japan
The main features of our present economic relations with Japan
are:

A. Treaty of Friendship, Commerce and Navigation
2. At the opening session on 31st October l955 of the series of
informal trade talks between Australia and Japanese officials held
in Canberra, the Japanese asked for an indication of the
Australian Government's attitude to the conclusion of a Treaty of
Friendship, Commerce and Navigation.

3. The Minister told the Japanese Ambassador on 6th January, 1956,
that it was doubtful whether we could conclude a Treaty which
would be satisfactory. The Minister referred to our desire to

conclude such a Treaty with the United States and explained the
difficulties that had arisen due to the Australian federal system
and the diversity of State laws regulating many of the items
usually included in such treaties.

4. Further representations on this matter were made by Mr Uyama,
Counsellor of the Japanese Embassy, on 6th February, 1956. It was
made clear to Mr Uyama at this meeting that a Treaty of
Friendship, Commerce and Navigation was out of the question.

B. Present Discussions

5. On 6th February, 1956, the Japanese Embassy handed over a paper
on which was listed a number of subjects, and on which the
Japanese were anxious to conclude an understanding. The subjects
listed were:-

(a) Entry, stay, travelling and residence;

(b) Business activities;

(c) Establishment of companies, branches and other establishments
appropriate to the conduct of business;

(d) Foreign exchange control;

(e) Entry of goods;

(f) Customs tariff;

(g) Treatment of ships.

6. These subjects have been referred to interested Departments for
their views, and as yet we are not in a position to reply to the
Japanese. The following notes on some of the subjects listed will
be of interest:

(a) ENTRY OF JAPANESE BUSINESSMEN

7. The Japanese Embassy on 3rd November l955 were informed of
Immigration's decision that Japanese businessmen engaged in the
wool trade and their families would in the future be permitted
indefinite residence in Australia. All other Japanese businessmen
(e.g. those associated with the wheat and barley trade etc.) and
their families would only be permitted to stay for six months in
the first instance, with the possibility of an extension for
another six months.

8. An Immigration Department submission, which has been
pigeonholed since before the election, is now with the Secretary
of that Department. The submission proposes that Japanese
businessmen, whose business has an annual turnover of more than
10,000, be permitted residence in Australia for seven years in
the first instance. If this proposal is agreed to, Japanese
businessmen would be on a similar footing to all other Asians. The
only difference is that at present the required annual turnover of
the business in which other Asians are engaged is only 500. [2]
According to Immigration a recommendation will be made to their
Minister in the near future to increase this amount to 10,000.

(b) THE ESTABLISHMENT OF JAPANESE TRADING AND BANKING OFFICES IN
AUSTRALIA

9. The question of the establishment of Japanese business agencies
in Australia staffed by Japanese was considered by Cabinet in
August 1951 but was deferred until after the Peace Treaty came
into force. The Minister for Immigration on reconsideration,
decided against allowing the establishment of business agencies.

10. We do not favour the establishment of branches of foreign
banks, mainly because their operations involve us in a loss of
profits on foreign exchange transactions. The only foreign bank
operating in Australia is the old established Comptoir National
d'Escompte de Paris. We have refused a United States request to
allow an American bank to operate. We can therefore claim we are
not discriminating against the Japanese on this question.

(c) ABOLITION OF DISCRIMINATORY TARIFFS

11. Japanese imports are subject to the general tariff. The former
Department of Commerce and Agriculture favoured m.f.n. tariff
treatment along the lines of the agreement between Japan and
Canada. This proposal was not favourably received by the former
Department of Trade and Customs.

12. The Japanese are still pressing for m.f.n. tariff treatment.

This is our thorniest problem, and no practical solution is in
sight.

(d) ABOLITION OF IMPORT RESTRICTIONS ON IMPORTANT JAPANESE
COMMODITIES

13. It was announced in November, 1954, that the Australian
Government had decided to assimilate licensing of Japanese imports
into the system applied to the other non-dollar countries. There
are, however, exceptions to this general rule, covering a reserved
list of 36 commodities. [3] An importer is permitted to import
from Japan, goods in the reserved list to a limit of 25 per cent
of the total value of those goods which he imported into Australia
from non-dollar countries during the year ended 30th June, 1954.

(This percentage was cut to 16 2/3 per cent by the recent
restrictions.)

14. This decision has permitted a substantial increase of Japanese
imports. Imports which totalled 4.7 million in 1952/53 and 6.5
million in 1953/54 were valued at 18.4 million in 1954/55.

15. The former Department of Trade and Customs indicated a
preference for complete assimilation of Japanese imports for
licensing purposes, but the Cabinet in deciding on partial
assimilation pointed out that this would have the advantage of
testing the strength of Japanese competition.

C Lapse of Article XII of the Japanese Peace Treaty

16. Article XII of the Japanese Peace Treaty, which provides for
reciprocal most-favoured-nation treatment between Japan and the
Allied Powers on commercial matters, lapses on 28th April, 1956.

Japan was obliged to accord this treatment 'only to the extent
that the Allied Powers concerned' reciprocated. Australia has not
accorded such treatment to Japan and Japan is, therefore, not
bound to accord the treatment which we at present enjoy in Japan.

17. In response to our enquiry, the Japanese Embassy has informed
us that Australia's present position would remain unchanged after
28th April, i.e. that Japan would be willing to give us most-
favoured-nation treatment to the extent that we accord it to
Japan.

18. It will be necessary to watch Japanese policy for any
variations of its treatment of Australian nationals and commercial
matters. It is quite possible that Japan may apply reciprocity if
the present discussions on trade and immigration matters do not
lead to the results Japan anticipates.

D. Informal Trade Talks

19. The informal trade talks between members of the Japanese
Embassy and Australian officials which began on 31st October,
1955, have now concluded.

20. The talks were on an informal and purely exploratory basis. It
is generally understood that these discussions will be followed by
more formal talks at a later stage. The Australian attitude to
formal negotiations is at present being considered and the matter
is likely to come before the Ministers in the near future.

E. Australian Trade with Japan

21. Trade between Australia and Japan has increased significantly
during this financial year and Japan now ranks after the United
Kingdom as our most important export market. Japan is our best
market for wheat and barley and our third best market for wool and
sugar.

22. Australian exports to Japan in the financial year 1954-55
totalled 58.5 million whilst our imports totalled 18.4 million.

In the first four months of this financial year our exports to
Japan were worth 23 million and our imports from Japan amounted
to 9.1 million.