Tokyo, 8 May 1952

Enclosed herewith for your information is copy of a Note Verbale
addressed from the Japanese Foreign Office (The Gaimusho) to the
Australian Embassy in connection with future commercial relations
with Japan. This Note was referred to in the Embassy's telegram
No. 384 addressed to External Affairs, and the Department of
External Affairs in reply (No. 269), instructed the Embassy in
Tokyo to make purely a formal acknowledgment.

I have from time to time in despatches referred to the certainty
of the Japanese desiring to discuss the question of trading,
maritime and other commercial relations with Japan as provided for
in the San Francisco Peace Treaty.

It is realised that the Most Favoured Nation Treatment in
Australia is a very moot point and would involve much political
dissension. However, the Japanese Government have asked for
information on this point and no doubt some reply will have to be
forwarded. Irrespective of this, there remains the question of the
conclusion of the Treaty regulating relationships between Japan
and Australia on even the most formal basis so far as commerce and
navigation are concerned. These will involve consideration by our
Department as well as the other Departments involved.

I have undertaken no investigation in regard to information which
you may require but would appreciate advice as to whether there
are particular aspects on which you would desire me to elaborate
as a prerequisite to the Commonwealth's consideration of this
rather delicate question.

Enclosure

NOTE VERBALE 21/TI
The Japanese Ministry of Foreign Affairs presents its compliments
to the Australian Mission in Japan and has the honour to invite
the latter's attention to the trading, maritime and other
commercial relations to be maintained between Japan and Australia
as from the first coming into force of the Treaty of Peace with
Japan signed at San Francisco on September 8, 1951.

With reference to the trading, maritime and other commercial
relations between Japan and the Allied Powers, Article 12 of the
Peace Treaty provides:

(a) Japan declares its readiness promptly to enter into
negotiations for the conclusion with each of the Allied powers of
treaties or agreements to place their trading, maritime and other
commercial relations on a stable and friendly basis;

(b) Pending the conclusion of the relevant treaty or agreement,
Japan will, during a period of four years from the first coming
into force of the present Treaty:

(1) accord to each of the Allied Powers, its nationals, products
and vessels;

(i) most-favoured-nation treatment with respect to customs duties,
charges, restrictions and other regulations on or in connection
with the importation and exportation of goods;

(ii) national treatment with respect to shipping, navigation and
imported goods, and with respect to natural and juridical persons
and their interests-such treatment to include all matters
pertaining to the levying and collection of taxes, access to the
courts, the making and performance of contracts, rights to
property (tangible and intangible), participation in juridical
entities constituted under Japanese law, and generally the conduct
of all kinds of business and professional activities;

(2) ensure that external purchases and sales of Japanese state
trading enterprises shall be based solely on commercial
considerations;

(c) In respect to any matter, however, Japan shall be obliged to
accord to an Allied Power national treatment, or most-favoured-
nation treatment, only to the extent that the Allied Power
concerned accords Japan national treatment or most-favoured-nation
treatment, as the case may be, in respect of the same matter. The
reciprocity envisaged in the foregoing sentence shall be
determined, in the case of products, vessels and juridical
entities of, and persons domiciled in, any non-metropolitan
territory of an Allied Power, and in the case of juridical
entities of, and persons domiciled in, any state or province of an
Allied Power having a federal government, by reference to the
treatment accorded to Japan in such territory, state or province;

(d) In the application of this Article, a discriminatory measure
shall not be considered to derogate from the grant of national or
most-favoured-nation treatment, as the case may be, if such
measure is based on an exception customarily provided for in the
commercial treaties of the party applying it, or on the need to
safeguard that party's external financial position or balance of
payments (except in respect to shipping and navigation), or on the
need to maintain its essential security interests, and provided
such measure is proportionate to the circumstances and not applied
in an arbitrary or unreasonable manner;

(e) Japan's obligations under this Article shall not be affected
by the exercise of any Allied rights under Article 14 of the
present Treaty, nor shall the provisions of this Article be
understood as limiting the undertakings assumed by Japan by virtue
of Article 15 of the Treaty. [1]

In consideration of the foregoing provisions, the Japanese
Government desires to be clarified on what basis the trading
maritime and other commercial relations between Japan and
Australia are to be placed upon the first coming into force of the
Peace Treaty to preclude any possible question which might arise
thereupon, and therefore wishes to be informed of the intention of
the Government of Australia at the earliest possible date on the
following point:

To what extent does the Government of Australia intend to accord
Japan the national or most-favoured-nation treatment provided for
in Article 12 of the Peace Treaty pending the conclusion of a new
treaty or agreement? Unequivocal information on this point appears
to be prerequisite to the fulfilment of Japan's obligations under
Article 12(c) of the Peace Treaty. The Japanese Government is
confident that the friendship and commercial relations between the
two countries can certainly be promoted if national or most-
favoured-nation treatment, on as comprehensive a scale as
possible, is accorded to each other on the matters envisaged in
Article 12(b)(1), except where a discriminatory measure is adopted
under (d) of the same Article.