CANBERRA

Wheat
MR. UYAMA asked for confirmation on the details of Australia's
request on wheat viz. opportunity to compete for at least eight
million bushels per annum of higher protein wheat and opportunity
to supply fifteen million bushels or one-sixth of Japan's total
imports of F.A.Q. wheat.

He said that his understanding was that the request did not commit
Japan to buy but to give Australia the opportunity to supply.

MR. PHILLIPS confirmed the details of the request. He explained
that this meant opportunity to supply on semi-hard wheat but no
commitment to supply. On F.A.Q. wheat it meant opportunity to
supply, but no commitment to supply.

In the light of our understanding of Japan's method of purchase,
opportunity to supply a reasonable share on a commercial basis
could only have real meaning if there was a commitment to purchase
providing supplies were available.

MR. UYAMA pointed out that the Japanese made it a rule not to
commit themselves to purchase but may commit themselves to make
foreign exchange available. A few ad hoc commitments had been
entered into but not many.

MR. PHILLIPS pointed out that Australia's problem was to translate
'opportunity to compete' in terms of Japan's purchasing framework.

MR. UYAMA said that a reply to their urgent cable on Food Agency
wheat specifications was expected in a few days. If the Wheat
Board could adjust specifications then Australia will be in a
position to compete freely in the market. It would be possible to
give a commitment to allow Australia to compete in Japanese
tenders but difficult to give a commitment to purchase.

Japan had given Canada an assurance that wheat will be purchased
on a global basis and in the light of this Japan could not give
any country an undertaking to purchase wheat. Japan was trying to
reduce the irregularities in its purchasing.

MR. PHILLIPS pointed out that the delegation could only see non-
discrimination in wheat as a commitment to purchase, in view of
Japan's state trading. Wheat was of political and economic
importance to Australia. He felt that the question of assurances
could be left to plenary.

Wool
MR. PHILLIPS asked for details of wool allocation for the current
year.

MR. UYAMA advised that allocation was 350,000 bales for October
1956-March 1957 period on global basis-20-25,000 to Argentine. The
allocation was, of course, a monetary allocation. In the case of
wool, the current sterling holdings were a very important factor
in determining the quota.

In reply to a question from Mr. Phillips, Mr. Uyama said that
F.E.F.A. funds for wool were handled by direct allocations to
consumers who make arrangement to import either direct on their
own behalf or through an importer. This was done to avoid
speculation. Cotton was handled similarly and for all other goods
the funds were made available to importers. (But see sugar.)

Sugar
MR. PHILLIPS outlined the case for sugar along the lines of Dr.

Westerman's statement in plenary. [2] He detailed our request as
being for amendment of Japanese tariff to allow sugar of below 99
polarisation to qualify for the lower tariff and for an import
quota of up to 100,000 tons for Australian sugar.

MR. UYAMA said that the instance of dollar sugar being purchased
for sterling referred to the time when Japan's sterling holdings
had been high. To save dollars Japan had called tenders on a
global basis, payable in sterling. Cuba had been the successful
tender. It had not been the intention to purchase dollar sugar for
sterling.

There was a problem in altering the tariff as requested. After the
war Japan encouraged her refining industry and it would be
politically difficult to remove protection at this stage.

MR. CAMPBELL explained that we understood that the selection of
98 polarisation as the point of operation of the Japanese
differential tariff was essentially for protection of Japanese
refining industry. Other countries had the same problem. U.K. and
Canada and probably others managed with 99 as the standard for
protective duty and these were important markets for our sugar
which at 98.5 polarisation was still a true raw sugar.

MR. PHILLIPS pointed out that while we could produce lower pol.

sugar and had in fact run off a batch recently especially for the
Japanese market, the higher cost involved was in fact tantamount
to paying a higher duty.

MR. UYAMA asked whether, if Japan continued the duty as at
present, Australian mills could change their standard to below 98
pol.

MR. PHILLIPS said that they may be able to but in terms of return
it may not be worth it. He asked to what extent the suggested
change would affect Japanese industry.

MR. UYAMA explained that in Japan lower grades of sugar were
preferred in some cases for cooking and confectionery and among
the country people. He would refer Mr. Phillips' enquiry to Tokyo
as a normal routine enquiry rather than in connection with the
negotiation. The Minister for Agriculture is particularly powerful
and where a question of this nature is put in connection with the
negotiations an unfavourable reply would certainly be given.

In response to a further question by Mr. Phillips Mr. Uyama said
that sugar allocation was divided 80% to refineries, 20%
importers. The allocation to importers was sold to refineries in
accordance with normal buying.

Refineries also import their 80% through importers.

MR. PHILLIPS suggested that if all sugar goes to refineries
Australian sugar could not go direct to consumers and hence
protection to refineries would be maintained.

MR. UYAMA said that 98.5 pol. sugar or even lower grades could be
used for cooking etc. and were not always treated as raw.

Hence they could compete with refined sugar from refineries by
going straight to the consumer.

MR. UYAMA did not think this diversion could be prevented. He
asked for a figure of Australian availability.

MR. CAMPBELL explained our position under the International Sugar
Agreement and pointed out that sales within our export quota
depended on price and relative value of the market to the
Australian Sugar Board. There was obviously room for selling to
Japan in view of the recent sales of 110,000 tons.

MR. UYAMA asked for this to be broken down into grades and for the
cost of the low grade sugar sent to Japan.

MR. CAMPBELL advised that all the exports recorded were 98.5
polarisation. To get into the Japanese market, the Australian
industry had run off a special run but the cost of doing this
seemed to limit the annual availability to some 50,000 tons and
even so it was doubtful whether it would be considered worthwhile.

The cost could not of course be passed on to the Japanese buyer as
the market was competitive. It was agreed to obtain the cost of
the low pol. sugar sold to Japan if possible.

Beef Tallow and Cattle Hides
MR. PHILLIPS explained the Australian position as outlined by Dr.

Westerman in plenary. [3]

MR. UYAMA explained that the presence of U.K. and colonies under
A.A. was a result of concessions exchanged in the U.K.-Japan Trade
Agreement.

Japan was concerned at the prospects of over-supply of tallow and
the tendency was to cut down if possible.

MR. PHILLIPS pointed out that Thailand, a bigger supplier than
Australia in 1954 and 1955, was on A.A. for cattle hides.

MR. UYAMA explained that this was because of trade agreement
obligations.

MR. PHILLIPS pointed out that as regards tallow the dollar area
appeared to have the greatest share of quotas although we
understood our prices were comparable.

MR. UYAMA explained that since October, 1956, allocations for both
cattle hides and beef tallow have been on a global basis.

Commitments on bides will be abolished soon and no commitments now
exist with Brazil and Indonesia.

It was agreed that cattle hides and beef tallow could be referred
to plenary.