TOKYO

Trade Talks
Today Mr Williams and I gave a luncheon in a private room at the
American Club for the members of the Talks delegation, who are
leaving on Friday, and one or two others.

2. Three of the members of the delegation areas I have reported
before. [1] The fourth man (a Customs expert from the Ministry of
Finance) has not yet been nominated-apparently because MITI and
the Foreign Office do not believe that such a member is necessary.

It is therefore still unclear whether there will in fact be a
fourth member. In addition to the three members of the delegation,
the others who attended were Mr Udo (concerning whom I wrote to
you on 18th October), Mr Kosugi of the Foreign Office, who has
recently returned from a term in Canberra, and Mr Yoshino, who is
Chief of the Sterling Area Section of the Economic Bureau of the
Foreign Office and who will largely be concerned with instructing
the delegation.

3. Mr Ushiba (the leader of the delegation),whom I met today for
the first time, is an extremely charming, personable, confident
and intelligent man. His English is excellent. He well and
favourably remembers Mr H.C. Menzies when he occupied this post
and is anxious to see him again in Canberra. He is a keen golfer
and is taking his golf shoes but not his clubs. I suggest that it
would be very good tactics to see that he gets some golf in
Canberra.

4. In discussing matters with Mr Ushiba I made a number of points
which, I emphasised, represented my own personal point of view and
which (even although they may be incorrect) I think I should
report to you. These are given just as they occur to me and not
necessarily in the order of their importance or in the order in
which they were discussed.

(a) Speaking quite frankly I pointed out that the great majority
of the Australian population had not forgotten the war and
although it might not be apparent on the surface there was a deep
distrust and dislike of Japan in Australia. There were, of course,
many groups who believed that it was better to let bygones be
bygones but nevertheless the feelings which had their origin in
the war were important political factors of which any and every
Australian Government would have to take account.

(b) There were two broad groups opposing increased Japanese
imports-
(i) Australian manufacturers; and
(ii) Australian exporters to markets (such as India and the United
Kingdom) which could be damaged if those countries were forced out
of the Australian market by Japanese competition.

(c) Because of both (a) and (b), the Australian Government could
not (whatever its assessment of the merits of the case might be)
proceed quickly in its liberalisation of trade with Japan.

(d) For these reasons I personally felt that-
(i) Japan should be satisfied with a 'first step' which could be
allowed to run for a year and which could enable the Australian
public to become used to increased Japanese imports. They would
then probably find that the consequences were not so serious as
they had earlier feared and the stage would then be set for what
might be called 'second step' negotiations when Australia might be
able to make some further concessions.

(ii) It would be wise for Japan to concentrate upon those
commodities in respect of which it might be relatively easy for
Australia to make concessions. By way of example, I suggested (and
again I emphasised I was expressing my personal view and had not
examined the matter in detail) that it might be fairly easy for
Australia to grant concessions on canned fish because the
Australian fresh fishing industry was unlikely to suffer to any
extent and that perhaps the only consequences would be to push
South Australian dried fish out of the market. On the other hand,
and by way of giving an example at the other extreme, I said that
I thought it would be impossible for Australia to give any
concessions on rayon yarn-if only because of the special position
of Courtaulds.

(e) Our balance of payments problem was extremely difficult and
was likely to remain so for some time. For this reason it would
not be possible to grant any concessions which increased the total
of Australian imports. It would only be possible for us to reduce
the present discriminations against Japan (and I frankly admitted
that Japan was the only country against which we did discriminate
at present) in order to enable Japan to gain a greater share of
the Australian import market at the expense of other countries.

(f) Despite these difficulties from the Australian side, we
nevertheless recognise that Japan is our second biggest export
market-that it is growing and that it has further potential. For
these reasons it is in our narrow interest to eliminate the
present discriminations against Japan.

5. I realise that making statements of this kind may be considered
as 'sticking my neck out' and perhaps as improper. However, I
believe that in all the circumstances they are wise-if only for
the reason that they tend to establish a favourable and realistic
attitude of mind within the Japanese delegation. It was surprising
and refreshing (and this applies to similar conversations which I
have had in recent months) to find how much Japanese officials
realistically appreciate the problems of the Australian side. I do
not think that they will push things too hard in these current
talks but they will hope for (and they will probably demand with
the threat of the wool allocations) some significant concessions.

In my opinion, they are prepared to accept and to regard as a
victory something very much less than that for which they are
formally asking-but they will only adopt this attitude if they are
convinced, firstly, that Australia is genuinely friendly and,
secondly, that the present negotiations will be followed at an
interval of about 12 months by another set of negotiations at
which they will make further advances. [2]

[matter omitted]