CANBERRA

Control of Imports from Japan

The 'Canadian Approach'
While our global imports are restricted, through licensing
control, to their present level it is unlikely that the accord of
m.f.n. tariff and non-discriminatory licensing treatment to
Japanese goods would create real problems over the general field
of Australian industry.

2. There are, however, 'pockets' where competition from Japan,
even within the existing global quotas, could create serious
problems. As a generalisation it may be said that these problems
would arise in the case of goods where Australian production and
the Australian market is relatively small and Japan's competitive
position especially strong. To isolate these 'danger pockets' is
the main objective of the current 'item sheet' survey of imports
from Japan in the light of price data for 1955/56. [1]

3. The other object of the survey is to isolate the items where
competition from Japan could result in severe dislocation of the
pattern of our imports (or, to put it more bluntly, could cut
deeply into the share of our imports supplied by the United
Kingdom).

4. In the event of the accord of m.f.n. tariff and non-
discriminatory licensing treatment to Japan it is assumed that it
will be necessary for some form of 'special' control to be
exercised over imports from Japan if only to deal with the
problems referred to in paragraph 2 above.

5. It has been suggested that what is colloquially referred to as
the 'Canadian line' would be an appropriate 'special' control to
meet our problem. In short, the understanding between the
Canadians and the Japanese is that the latter will control their
exports to Canada so as to avoid any serious disruption to
Canadian industries. The Canadians do not suggest a Japanese
export quota for any goods, the judgement and the responsibility
for the export level being left to the Japanese. If there is a
'dangerous inflow' of any commodity-and this has happened only
once-the Canadians ask the Japanese to take remedial action. The
Canadians are empowered, under their existing legislation, to fix
arbitrary values for duty purposes in certain circumstances. This
'reserve' power could be used to check any dangerous increase in
imports from Japan but it has not been used against Japan and it
appears that the Canadians do not think it will be necessary to
use it against Japan so long as the present understanding exists.

6. It is possible that some of our thinking about the suitability
of the 'Canadian line' as a solution to our problem vis-a-vis
Japan is based on the assumption that the position in Canada does
not differ basically from the position in Australia. There are,
however, two very important differences, viz:-

(a) For practical purposes, Canada has no import licensing
restrictions whereas we have tight imports controls which are
particularly severe in the case of goods which are Japan's
principal traditional exports.

(b) Canada does not accord any special protection to United
Kingdom exports (i.e. over and above the tariff preferences
accorded to the United Kingdom against m.f.n. countries).

7. Canada's global imports have been increasing for a number of
years with the expansion of the Canadian economy. This, together
with the absence of import restrictions, means that:-

(i) Japanese exports to Canada, both in individual lines and in
total value, can reach a fairly high (and increasing) level.

(ii) The Canadian global import level for particular commodities
being fairly well ascertainable and reasonably constant, the
Japanese can assess with reasonable accuracy the level to which
their exports can be permitted to rise without causing serious
disturbance to Canadian industries (i.e. to the only interests
which the Canadians desire to protect).

8. Let us now look at the 'Canadian line' from the point of view
of our own problem vis-a-vis Japan and on the assumption that we
wish to protect our own industries only. (For practical purposes,
under present circumstances, our interest would be confined to the
'pocket' problems referred to in paragraph 2).

9. Our permissible global import levels for goods in which the
Japanese are most interested have fluctuated considerably in
recent periods with relaxations and intensifications in import
licensing control. For that reason it would be exceedingly
difficult for the Japanese to assess the level at which they could
export particular lines to Australia without damaging Australian
industries. If Japanese export control were to be satisfactory
from our point of view I think we would have to provide them with
export control quotas for selected goods for each licensing
period.

10. I consider that the Canadian line would be acceptable to the
Japanese, even though modified to the extent of our suggesting the
export quotas for selected lines. (The list could be kept fairly
short.) It would-
(A) Remove overt discrimination against Japan (and the Japanese
are probably just as interested in the question of principle as
they are in the actual level of their exports).

(B) Permit Japanese exports to reach a reasonable total figure
(say A25m.-the severe global licensing measures against textiles
and other 'B' category goods would make it unlikely that Japanese
exports would be much in excess of this figure).

(C) Permit Japanese exports to reach a higher level tha[n] if
discriminatory controls, in some form or other, were exercised at
this end against selected Japanese goods. The Japanese could seek
out quota holders willing to use all or a great part of their
global quotas to import from Japan whereas, if at present, a
ceiling (less than their global quota) were imposed on quota
holder's imports from Japan many importers, under present
circumstances, would not use any of their quota to import from
Japan.

11. The Japanese are well aware of our problem, including its
political aspects, regarding imports from Japan. They would, I
believe, agree to control certain of their exports to a level
which we might suggest provided that they are convinced we are
safeguarding our industries only and not seeking to protect the
trade of their competitors.

12. I see no reason why we could not come to a satisfactory
arrangement with the Japanese which would, in nearly all cases,
protect our own industries. We would, of course, also need to
introduce legislation giving us emergency powers to take action:

(I) To demonstrate to our manufacturers that we had the power;

(II) To deal with emergency cases if only arising from imports
through entrepot sources, e.g. Hong Kong.

13. While our global imports of 'B' category goods are held at
their present low level, I cannot see the Japanese agreeing to
limit their exports to a level which would preserve the bulk of
our restricted market for imports for the United Kingdom. In the
first place it would be well nigh impossible for the Japanese to
assess the extent to which they could export particular lines to
Australia without causing substantial damage to the United
Kingdom's trade interests. In the second place, if they could
assess the level or if we were to suggest the level to them, it
would be obvious that their total exports could not reach a figure
which the Japanese would regard as satisfactory (see my second
minute of 24.9.56). This is merely an illustration of my view that
there can be no basis for an agreement with Japan if we are
determined to give any substantial and special protection, (other
than through the preferential tariff) to the United Kingdom's
exports to Australia.

14. While we must, no doubt, make a survey of the items among our
imports from Japan which are of special interest to the United
Kingdom, we should, I consider, concentrate on the 'pocket' items
which are dangerous to our own industries. [If] [2] there is to be
an agreement with Japan-and it is highly important that there be
an agreement-special restrictive measures will need to be confined
to relatively few items. [We] shall, however, have to determine
the degree of restriction necessary in the case of each item and
whether it is to [be on] a quantity or a value basis. But we
cannot make any progress here until the 'Item sheets' have been
completed in the light of price data for 1955/56.

15. Meanwhile, I am looking at the question of the legislation
which it will be necessary to introduce to give us emergency
powers.