TOKYO

Trade Talks
As I mentioned in my memorandum of 29th January, Mr Yoshino had
asked for a discussion with me. This took place this afternoon. It
extended over a couple of hours and the points which he made may
be summarised as follows-

(1) The policy decision made by the Government in respect of U.S.

surplus commodities and the Australian talks was confined to a
decision not to enter into a third agreement (in respect of the
period up to June, 1958) on wheat or any other commodities.

Despite the views of many Ministries it was not a decision not to
enter into any future deals with the U.S. except in the case of
some financial or agricultural crises. This arose from the
attitude of the Ministry of Agriculture & Forestry which has 'kept
the door open' for future years.

(2) Despite the departure of Mr Kono, there are still elements
within the Ministry of Agriculture (notably Mr Watanabe, the Chief
of the Economic Bureau-competent, influential and a 'Kono' man)
which wish to resume surplus deals at a later date. In addition,
the Ministry and the Food Agency are under fairly strong pressure
from the U.S. Embassy to keep the door open. In particular, there
is very strong pressure to avoid giving Australia any kind of
quality [1] for wheat. The Foreign Office does not believe that
this pressure strictly represents the views of the U.S. Government
but that it arises primarily from the enthusiasm of the local
representatives. The Foreign Office has put this view strongly to
the Ministry and has pointed out that it is responsible for
interpreting U.S. policy and maintaining good relations with the
U.S. The Ministry officials remain unconvinced.

(3) There was a meeting yesterday of senior representatives of the
Foreign Office, Economic Planning Board, MITI, the Ministry of
Finance and the Ministry of Agriculture & Forestry to discuss the
resumption of the Australian talks. The conclusions reached at
this meeting represent 'some progress' but were not completely
satisfactory because the Ministry of Agriculture maintains its
stand that there should be no attempt to seek a variation of the
Government's formal decision that the surplus deals should be
suspended for one year only. Some points arising out of this
meeting are-
(a) Mr Ushiba was temporarily out of Tokyo and was therefore not
present.

(b) It was agreed that two, and possibly three, representatives of
the Food Agency should return to Australia with Ambassador Suzuki
next week in order to have detailed discussions with the Wheat
Board and satisfy themselves about 'a number of technicalities'.

(c) Wheat remains the only problem. It was confirmed that
Australia's other requests could be granted.

(d) The meeting agreed that whilst the surplus deals were
suspended, Japan would purchase Australian f.a.q. on a 'global
non-discriminatory competitive basis' and that if the surplus
deals were ever resumed, Japan would undertake to ensure that
Australia retained its 'fair share' of the market. For this
purpose, the fair share would be assessed in the terms of past
performance during the period when surplus deals were suspended.

This undertaking would be committed to writing, would form part of
the agreement with Australia, and would be ratified by the Diet.

(4) Yoshino is uncertain whether the undertaking referred to in
(3)(d) above would be satisfactory to Australia because Australia
might feel that she was making permanent concessions in return for
temporary advantages. Ushiba shares his fears but at the moment
that is the best which they can persuade the various Japanese
interests to accept.

(5) Ushiba is reluctant to return to Australia because he does not
want to take the risk of being associated with negotiations which
fail. His position in the Foreign Office is such that no-one is
prepared to instruct him to go to Australia if he doesn't want to.

For this reason, Yoshino would prefer that the Japanese Embassy in
Canberra should complete the negotiations. However, Ambassador
Suzuki has not got the necessary economic and commercial
background and is 'too nice' to be a good negotiator ... they do
not feel inclined to trust the negotiations to [Uyama]. For these
reasons Yoshino would prefer the negotiations to be resumed in
Tokyo. This would enable Ushiba to take part without accepting the
full responsibility for a failure if that should occur. In
addition, Ushiba's talents and persuasive personality would be
useful in influencing other Ministries. However, Yoshino, thinks
that it is probably impossible for Australia to agree to resume in
Tokyo.

(6) Yoshino hopes that Ushiba can be persuaded to go to Australia
and he would be glad of a lead from Australia as to whether the
Japanese undertaking referred to above would be satisfactory to
us. (I said that I did not think that it was reasonable to expect
this and that I would not ask for it).

(7) He concluded by saying that the main purpose of the discussion
was to let Australia know in an unofficial and informal way the
reasons for Japan's delay in resuming the negotiations. [2]