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Historical documents

174 Minute From Robertson To Phillips

27th November, 1956

CANBERRA

Trade Arrangement with Japan-Escape Clause Providing for the
Imposition of Special Duties in an Emergency
In the event of any trade arrangement providing for the accord of
most-favoured-nation tariff and non-discriminatory import
licensing treatment to Japanese goods, it will be necessary to
reserve the right to take special action against imports from
Japan in emergency circumstances.

2. The recent amendment to the Customs Tariff (Industries
Preservation) Act [1] authorizing the Minister for Customs and
Excise to impose special duties, in certain circumstances, has
provided us with an appropriate power, under our domestic
legislation, to take emergency action against imports from Japan.

3. The powers conferred by the Customs Tariff (Industries
Preservation) Act are wide and provide, in the circumstances
described, for the imposition of special duties on imports of
particular goods from one or more countries provided that the
action taken is not inconsistent with our international
obligations.

4. The Japanese will, no doubt, insist that our right to take
emergency action against imports from Japan be defined in any
trade arrangement (or ancillary document) which we may enter into
with Japan. Any emergency action inconsistent with the defined
power would then be contrary to the trade arrangement with Japan
and, for that reason, to our domestic legislation as well.

5. It is unlikely that the Japanese would agree to our exercise of
an emergency power as wide as that provided by the Customs Tariff
(Industries Preservation) Act. The type of power to which they are
most likely to agree is one which conforms as far as practicable
with Article XIX of the General Agreement on Tariffs and Trade.

6. It is considered that the Japanese would prefer any 'emergency
powers' regarding the imposition of special duties to be provided
for in an exchange of notes rather than in any trade arrangement
itself. (This is the case as regards their agreement with Canada.)

7. After considering the terms of the Exchange of Notes annexed to
the Canada-Japan Agreement and the terms of Article XIX of
G.A.T.T. in the light of what would appear to be our requirements,
I have drafted a note covering the imposition of special duties
which could form a basis for further discussion on this question.

8. Several points in regard to the note call for comment. These
are:

(a) The imposition of special discriminatory duties on Japanese
goods:

Our domestic legislation permits the imposition of special duties
which may be discriminatory or non-discriminatory as between
countries. It clearly gives the power to impose special duties on
Japanese goods only.

Article XIX does not permit discriminatory action against the
products of any one Contracting Party.

The exchange of Notes between Canada and Japan which reserve to
Canada the right to establish values for ordinary and special duty
purposes do not permit discrimination against Japanese goods. Any
action taken must apply equally to the products of other m.f.n.

countries and, in that sense, the power is consistent with Article
XIX of G.A.T.T.

I think we are agreed that it will be necessary for us to reserve
the right to take discriminatory action against Japanese goods in
an emergency and that the right must be clearly recognized by the
Japanese. How can this understanding be established?
I would prefer it to be written into the Exchange of Notes
(although this may not be acceptable to the Japanese) and there
would appear to be three ways in which this could be done-
(i) By including the words 'Australia reserves the right to impose
special duties on goods produced or manufactured in Japan' in the
opening passage of the Exchange of Notes, or
(ii) By including the words 'produced or manufactured in Japan' at
appropriate places in both paragraphs 1 and 2 of the Exchange of
Notes. (This would present drafting difficulties as far as
paragraph 2 is concerned); or
(iii) By omitting any reference to Japanese goods in the Exchange
of Notes, it being understood that the power to impose special
duties relates back to the Australian legislation which permits
discriminatory duties.

From the presentational aspect (iii) might be the most acceptable
form of words to the Japanese. For clarity of meaning and ease of
construction, however, I would prefer (i) and have adopted that
line in the draft, the relevant words being shown in square
brackets.

(b) Conformity in other respects with provisions of Article XIX:

On the assumption that the Japanese will require the emergency
power to conform as far as practicable to the terms of Article
XIX, 1 have included certain passages (which are shown in square
brackets) in paragraphs 1 and 2 of the draft Note. Although the
passages shown in square brackets would curtail our power to
impose special duties, I can see no reasonable objection to their
inclusion. In fact, the Japanese could reasonably insist on their
inclusion.

(c) Assessment of the special duty:

No provision has been made in the draft regarding the assessment
of the special duty (on the understanding that it will be assessed
in the manner prescribed in the Customs Tariff (Industries
Preservation) Act). The latter Act, unlike the Canadian
legislation, does not fix a ceiling for the ad valorem incidence
of the special duty. Under our legislation the special duty could,
for example, be 100% or 200%. The Japanese have already expressed
some misgivings on this point and may raise difficulties if, and
when, negotiations reach the drafting stage.

(d) Interests of preferential countries, eg. the U.K.

It is possible that we may receive pressure from the U.K. to
impose special duties on certain Japanese goods in cases where the
request is unreasonable and/or we do not desire to take action. It
might be contended, therefore that the inclusion of some such
words as 'in the national interest' in the Exchange of Notes
relating to the imposition of special duties would provide us with
a ready answer to the U.K.'s requests. (The U.K. has included
those words in her own draft legislation relating to subsidized
imports).

I feel it would be absurd to include any such words in the
Exchange of Notes if only because we could scarcely be expected to
take permissive action unless it were in our national interest to
do so. Any unreasonable request from the U.K. could be rejected on
the grounds that the inflow of imports from Japan was not
unforeseen or that it would not be in our national interest to
take action as requested (at the same time pointing to the U.K.'s
attitude) or that the Minister's power under the Act was
permissive and not mandatory, implying that he would only take
action if in our national interest to do so.

(e) Acknowledgment of the conformity of the 'emergency power' with
the provisions of GATT
The Japanese Ambassador to Canada in a note to the Canadian
Minister of External Affairs on 31.3.54 said, inter alia, that
'the Government of Japan recognizes that in the application of the
Agreement on Commerce signed this day, the Government of Canada
has the right to establish values for ordinary and special duty
purposes in accordance with terms set forth in your Excellency's
Note referred to above. The Government of Japan concurs in the
view that the provisions set forth in your Excellency's Note are
consistent with the General Agreement on Tariffs and Trade. The
Governments of Japan will also regard these provisions as
continuing to be applicable in the event that the General
Agreement on Tariffs and Trade is applied between Japan and
Canada.'
No provision similar to this has been included in the attached
draft. The Japanese could hardly make such a statement if the
words referred to under (a)(i) or (a)(ii) above were included in
the Exchange of Notes. But they might be prepared to make such an
admission if course (a)(iii) were adopted. This, however, raises
another question-are we prepared to include a statement in an
exchange of notes which implies that we contemplate the
application of the G.A.T.T. as between Japan and Australia at some
future stage? In determining our attitude in this regard we must
take into account the fact that our bargaining strength with the
Japanese is greater now than it is likely to be after the
signature of any initial arrangement. In other words, if we do not
secure a concession now we may not be able to secure it later on
and an undertaking by the Japanese that they would regard a right
on our part to impose (discriminatory) special duties as
continuing to apply in the event of the application of the
G.A.T.T. could be valuable to us at some later stage.

It appears, however, that our attitude in this matter can only be
determined after further discussion among ourselves and in the
light of the trend in negotiations with the Japanese.

Attachment

EXCHANGE OF NOTES REGARDING AUSTRALIA'S RIGHT TO IMPOSE SPECIAL
DUTIES ON JAPANESE GOODS IN AN EMERGENCY
'On the occasion of signing the Agreed Minute of discussions on
commercial relations between representatives of the Government of
the Commonwealth of Australia and the Government of Japan, I have
the honour to inform (i) [2] that the Government of the
Commonwealth of Australia reserves the right to impose special
duties (on goods produced or manufactured in Japan] in the
following terms:

1. If, [as a result of unforeseen developments and of the effect
of the obligations incurred by Australia under the aforesaid
Agreed Minute] any goods are being imported into its territory [in
such increased quantities and] under such conditions as to cause
or threaten serious injury to the domestic producers in its
territory of like or directly competitive goods, Australia will be
free, in respect of such goods, to impose special duties [to the
extent and for such time as may be necessary] to prevent or remedy
such injury.

2. If any goods, which are the subject of a concession with
respect to a preference, are being imported into its territory in
the circumstances set forth in paragraph 1, so as to cause or
threaten serious injury to domestic producers in a third country
which receives or received such preference, Australia will be free
[if the third country so requests] to impose special duties on
such goods [to the extent and for such time as may be necessary]
to prevent or remedy such injury.

3. In determining whether special duties should be imposed in
respect of any goods pursuant to paragraphs 1 and/or 2 and in
determining the level of such special duties. Australia will take
into account the prices of like or directly competitive goods, if
any, being imported at that time from other countries.

4. Before Australia takes action pursuant to paragraphs 1 and/or
2, it will give notice in writing to Japan as far in advance as
may be practicable and will afford the latter an opportunity to
consult with it in respect of the proposed action. In critical
circumstances, where delay would cause damage which it would be
difficult to repair, action under paragraphs 1 and/or 2 may be
taken provisionally without prior consultation, on the condition
that consultation shall take place immediately after taking such
action.'

1 See Document 153.

2 A handwritten note reads: 'Here insert title of addressee, e.g.

Your Excellency'.


[AA : A1310/1, 810/1/39]
Last Updated: 11 September 2013
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