CANBERRA

Japanese Trade Negotiations
On Wednesday afternoon I attended a short meeting at Trade chaired
by Phillips to put interested Departments in touch with the
proposed line for the trade negotiations with Japan which
commenced the following morning. Trade, Primary Industry,
Treasury, External Affairs and ourselves were represented.

Reference was made to the terms of the Cabinet submission [1] and
to the introduction into Parliament of an amendment to the Customs
Tariff (Industries Preservation) Act [2] to enable emergency
action to be taken in the event of imports causing a threat to
Australian industry or to established suppliers overseas.

Trade have prepared a list of sensitive items [3] all of which
appear in the present restricted list of goods from Japan but the
list is much shorter than the existing list. The principal items
are sheeting, canvas and duck, china and glassware, toys and
fountain pens.

Because of the State trading activities in Japan and their
reception of U.S. surplus commodities it was not considered that
m.f.n. tariff and licensing treatment would be sufficient and that
Australia should seek specific commitments on individual
commodities.

Briefly, the targets would be-
WHEAT 8m. bushels of hard wheat. 15m. bushels f.a.q. wheat-or
1/6th of total. i.e. 23m. bushels compared with sales last year of
11.4m. hard.

BARLEY 35% of imports, about 350,000 tons which is in line with
our present trade. This has increased greatly in the last year or
so.

WOOL 900,000 bales or 90% of total purchases and perhaps with a
binding of free entry. (This is hardly necessary and would not
want to be treated as a substantial concession demanding
compensation elsewhere.)
SUGAR An amendment to the tariff classification so that Australian
sugar which has slightly higher polarization value than others can
qualify for the lower rate of duty. A quota of 100,000 tons.

The present thinking is that these quotas would need to be for a
period of five years but would be subject to the marketing
arrangements in Japan and should be considered as a guaranteed
minimum opportunity for Australia without us being obliged in a
period of shortage to meet these targets.

The Japanese have allowed themselves about one month in Australia
but want an opportunity to attend the Olympic Games so it was
expected that at the most the negotiations would extend over three
weeks with possibly a short resumption after the Games break.

Trade were hoping to go to the Ministerial Committee as soon as
the negotiating lines of both parties became reasonably clear.

Negotiations with Japanese Delegation
The first formal meeting with the Japanese delegation took place
at 10.30 a.m. on Thursday, 1st November. A list of the members of
both delegations is attached. Mr. Kurahachi, Consul-General in
Sydney, was not present and will be called upon only when
required.

It was agreed that meetings in plenary session would be from 10am.

to 12 noon each day and meetings in committee which would be
purely fact-finding between 3-3.30pm. and 5.30pm. each day. There
would be no verbatim minutes of the meetings but a summary record
would be made available by the Australian secretariat as soon as
possible. There would be no press announcements during the
progress of the negotiations unless these became absolutely
necessary and in any case there would be agreement about what was
to be said.

Dr. Westerman outlined Australia's attitude towards the
negotiations. The Japanese were in fact asking us for m.f.n.

tariff and licensing treatment and we were doing the same but
because of the particular nature of Japanese import controls and
certain State trading arrangements we would want our m.f.n.

treatment from them to be directly related to the practical
situation.

He listed the following points:-

88% of Japanese imports now qualify at higher rates of duty than
m.f.n.

The m.f.n. we would give is already bound largely to other
countries. We might find it necessary to increase bound duties and
would then need to pay the price elsewhere. Australia has
contractual preferences which under the G.A.T.T. arrangement would
need to be raised also if m.f.n. were raised. We have a rather
long drawn out procedure for tariff enquiries.

A bill for an Act to be allowed emergency action in the terms of
Article XIX of G.A.T.T. has been introduced to Parliament.

The Government's general attitude towards the negotiations must be
conditioned by public opinion and there would need to be off-
setting benefits for the granting of m.f.n. to Japan.

Dr. Westerman emphasised that Australia approached the
negotiations with the desire to give m.f.n. to Japan, pointed out
that we are now talking with the U.K. about reducing preferences
and this would enable us to increase benefits to m.f.n. countries
but we must have m.f.n. in the real sense. He added that our
import licensing system was plainly discriminatory against Japan
because of the fear that tariff protection would be inadequate. It
was necessary therefore to have some reserve power which it was
hoped would not need to be used. In fact we would look for co-
operation from the Japanese possibly along the lines of the
Canadian experience.

Dr. Westerman outlined briefly his understanding of the workings
of the Japanese tariff and licensing system and referred to the
different treatment of goods, on automatic approval, State trading
and allocations which discriminated by countries. He then referred
generally to what we would require of the particular commodities
(this followed the line discussed at the meeting the day before
though without going into detailed figures although some were
mentioned). Minor items were beef tallow cattle and cattle hides
(Australia would seek automatic approval now given to some
sterling area countries) dried skim milk (we are not completely
sure of the position-understand the bulk is purchased from C.C.C.

surpluses at a price we could meet); dried fruits was also
mentioned but not very enthusiastically.

Mr. Ushiba read from a prepared statement the Japanese general
position in these negotiations. They were seeking general non-
discriminatory treatment under G.A.T.T.; were disappointed at our
invocation of Article XXXV and would like G.A.T.T. relationship
with us. If this were not possible they would like to see what
could be done to remove the disabilities to it. They sought the
removal of licensing discrimination and the granting of m.f.n.

tariff. He referred to the figures of overall trade between our
countries over the past four years and emphasised the growing
imbalance in our favour. He mentioned the general non-
discrimination in licensing we had accorded since 1954 against
which had to be off-set the intensifications in 1955. If no
solution to the problem could be found Japan would have to
consider reducing imports from Australia which was the main source
of the deterioration in their sterling area position. In fact in
their talks about a trade and payments arrangement with the United
Kingdom they are now seeking greater export opportunities in the
sterling area.

As to the fear of flooding Australian markets by Japan the
Japanese felt that the present system of import quotas would be
sufficient safeguard and in effect they asked 'give us a chance to
prove that your fears are groundless?'. In this regard they were
concerned to know what interpretation and modus operandi would be
applied to the newly introduced emergency legislation. In spite of
the imbalance of trade Japan had not discriminated against
Australian imports and in fact had treated us not at all badly.

Some of our requests appeared to go beyond m.f.n. and the Japanese
would be prepared to look at those closely after m.f.n. had been
given.

Mr. Ushiba's statement was to be made available to the Australian
delegation.

Dr. Westerman then suggested that working committees should be set
up to establish the factual position; for instance, on our
emergency legislation and on commodities. The Japanese appeared
anxious to get our commodity demands promptly (this is probably
because they have not a State trading man with them and would need
to refer them to Japan for comment). It was agreed that a
committee should meet that afternoon consisting of Phillips,
McPherson and Campbell on our side and Takashima, Kawanami and
Ushiba. There would be a later meeting about the emergency
legislation which at the Australian end would be handled by
Robertson and Farrell.

[The Committees would all report back to the plenary session] [4]

Mr. Ushiba pointed out that our present reserve list of imports
would be important to the Japanese and they were anxious for us to
tell them our fears on particular commodities. Dr. Westerman
replied that it was our intention to abandon this reserve list
though we would still have a shorter list of sensitive items about
which we would talk to them later.

After the meeting Dr. Westerman mentioned to me that he was hoping
to arrange a meeting of the Ministers Committee perhaps some time
next week at a stage when there would be something definite to
report. He appreciated that with Mr. Casey away [5] there would
only be Sir Arthur Fadden and Sir Philip McBride in addition to
Mr. McMahon. I did not mention it to him but I wondered whether
the Prime Minister might care to nominate somebody else during Mr.

Casey's absence. Perhaps this could be Senator Spooner or Mr.

Townley if it is appropriate in view of his new position. [6]