CANBERRA

Trade Talks with the Japanese
You asked for this Department's impression of Cabinet
understanding that 'the Departmental talks with the Japanese had
reflected the fact that the Japanese did not take exception to the
safeguards proposed by Australia'. [1]

2. The Japanese are not yet aware that we propose according them
most-favoured-nation tariff treatment and non-discrimination in
import licensing, nor are they aware of the safeguards that we
intend to invoke.

3. In the informal trade talks we explained the current Australian
practices and for their part the Japanese showed understanding of
our position. In the Initial Statement of 31st October 1955 [2],
the Japanese stated that they were 'not unaware of the
apprehension on the part of the Australian Government with regard
to possible undesirable effects to be inflicted on the Australian
industries in case of an abnormal influx of Japanese goods in
domestic markets'.

4. In its commercial relations with other countries, Japan has
recently shown a marked anxiety to establish herself as a
reputable trader, and steps have been taken by the Government and
trading organisations to restrict practices which could affect the
prestige which Japan is now trying to build up. On several
occasions, particularly in relation to G.A.T.T., the Japanese have
referred to the danger to Japanese trading prestige which could
arise out of flooding Western markets with cheap Japanese goods,
and this awareness will probably inhibit, to a great extent, the
tendencies of which Australia is apprehensive.

5. The position then at the moment is that the Japanese will be
pleased to receive most-favoured-nation tariff treatment and non-
discrimination in import licensing, that they understand the
reasons behind our present practices, and that within justifiable
limits they will accept the safeguards which we impose.

Nevertheless we should keep in mind that Japan will react strongly
if, (in our attempts to prevent what we estimate to be serious
damage to Australian industry, or to trade with established
suppliers such as the United Kingdom) we propose safeguards which
in their operation would cancel the benefits granted.