CANBERRA

Trade Negotiations with Japan

Summary
This submission suggests that Australia enter into negotiations
with Japan with a view to concluding a trade agreement covering
most-favoured-nation tariff and import licensing treatment. We
feel that Ministers should be certain they realise the
implications of the proposals in relation to our trade with the
United Kingdom and our domestic industries but nevertheless we
recommend support of the proposals. We make the suggestion that
negotiations should be placed in the hands of Trade, but subject
to the oversight of all of the Departments concerned.

Content of the submission
The submission points out that Japan is an important and expanding
market for Australian goods mainly wool, wheat, barley and
possibly sugar. At the moment these goods enjoy fairly equitable
treatment in the Japanese market although there is room for
improvement in the treatment of grains especially in relation to
the receipts of surplus disposals from the U.S.A. On the other
hand, we discriminate very severely against Japan with respect to
both the tariff and also import licensing. If our treatment of
imports from Japan does not improve there is a very real danger
that they will discriminate against our exports to them-not just
in retaliation but more likely in order to economise in their
spending of sterling.

The Minister suggests that in the negotiations we seek from Japan
commitments to safeguard our export interests in her market e.g.

in tariff treatment, import licensing treatment, her internal
economic policies on major Australian commodities (wool, wheat and
barley), and opportunity of prior consultation in respect of
proposed receivals of aid for surplus primary commodities from
U.S.A. which might prejudice Australian trade interests.

In return in order for the trade agreement to mean anything for
Japan we would have to offer commitments to extend most-favoured-
nation tariff treatment to Japan and, subject to currency
considerations, the same import licensing treatment as is extended
to non-dollar countries generally.

The Minister points out that these concessions are likely to raise
problems for the protection of Australian industries and also for
export industries in the U.K. and other major supplying countries.

Textiles would be the main item involved and so would other
consumer goods such as crockery and toys. It is suggested
therefore that we negotiate an 'escape clause' to allow us to
impose special duties or quotas to prevent serious damage to
Australian industries or to the trade of established suppliers to
the Australian market like the U.K. This would require special
legislation.

The Minister points out that the fact of our negotiations with
Japan and especially proposals for an escape clause will be very
useful in our dealings with the U.K.

The proposed negotiations with Japan have no immediate connection
from Australia's point of view with the question of the
application of the G.A.T.T. to trade relations between Japan and
Australia.

Comment
We feel that we must underline the fact that for a trade agreement
to mean anything to Japan it must provide an opportunity for her
to increase her exports to us. For the moment this will operate
within the overall framework of our import licensing and will not
therefore mean any increase in total imports-it will mean a shift
in their source mainly at the expense of the U.K. The submission
is proposing an escape clause to prevent serious damage. This
escape clause will be the crux of the whole negotiations and we
have no guarantee that Japan will accept one that will allow us to
protect third countries. However we do not know what is possible
until we start negotiations. When import licensing is relaxed, our
own industries might well feel the pinch but the process will be
gradual and no sudden shifts are likely. The proposed escape
clause should provide sufficient safeguard in this event although
there is always the chance of some damage occurring before it can
be brought into operation. The difficult task with the escape
clause will be to persuade the Japanese to extend it to cover the
interests of third parties.

We feel that these risks must be faced if we are ever going to do
anything to correct the present unsatisfactory situation of our
trade relations with Japan. A more satisfactory basis is overdue,
and it is a wonder that there has not been any retaliation so far.

The proposed negotiations should enable us to safeguard the
present position of our exports to Japan and give us an
opportunity to expand them. With careful negotiations and with the
right sort of attitude from the Japanese there is a good chance
that the difficulties will be overcome.

Recommendation
The recommendations of the submission are supported. However,
these negotiations go beyond the purely trade sphere, and because
of the interest of other Ministers, we suggest that while the
actual negotiations should be handled by the Minister for Trade
and his officers, they should be subject to the oversight of a
group of Ministers-the Prime Minister, Treasurer, Ministers for
Trade and External Affairs. These departments should also be
consulted.

Common courtesy as well as its tactical benefit in the forthcoming
trade discussions with the United Kingdom, warrant advice to the
United Kingdom of our intention to negotiate in advance of any
public announcement.