CANBERRA

1061. Your 1316. Japan.

1. Thanks your message.

2. However, our advice from three reputable independent sources
suggests that negotiations with Japan far further advanced than
State Department indicate.

3. Outcome of United States disposal negotiation with Japan has
direct bearing on current Australian-Japanese trade talks. Now
apparent that under last P.L.480 deal Japan was obliged to take
from United States 750,000 tons of its commercial purchases, in
addition to 450,000 tons under Title 1. This meant all Japan's
soft wheat requirements were 'tied' to United States and other
soft wheat exporters excluded. Our information is that in
negotiations for new deal, Title 1 figure is again 450,000 tons.

Critical issue is volume of commercial purchases which Japan will
be obliged to purchase from United States. Reports suggest United
States urging 750,000 tons, which would again exclude Australian
soft wheat from Japanese market and make impossible conclusion of
Australian-Japanese Trade Agreement.

4. Crawford on Friday had full discussion on possible new United
States deal with Howard Jones [1], who undertook to inform Walter
Robertson [2] and to take up with State Department. In conveying
to Jones our serious concern with implications of potential new
deal, Crawford stressed following:-

(a) Principle of tying-up commercial purchases as condition of
surplus transaction, particularly when such arrangement excluded
all hope of entry to market.

(b) New transaction on lines which we understand are being
proposed by United States would wreck chances of establishing
liberalised Australian-Japanese trade relations. This would be in
conflict with policy of United States which has pressed us to
provide improved trading opportunities for Japan.

5. We do not wish further approach to State Department until Jones
has had opportunity to report his talk with Crawford. Above points
for your information in case State Department should raise with
you. Would appreciate prompt advice any reports relating to
possible transaction with Japan.

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