MELBOURNE

On 14th December 1956, the Rayon and Cotton Weavers' Association
submitted a detailed statement regarding their attitude towards
trading relationships between Australia and Japan. The statement
was principally concerned with the dangers with which, in the
opinion of the Association, the Australian textile and clothing
industry would be faced if most-favoured-nation tariff and non-
discriminatory import licensing treatment were accorded to imports
from Japan.

In the statement, the Association requested that the importation
from Japan of all textiles and clothing (which are made or are
capable of being made in Australia) be restricted to the level of
imports of those goods from Japan during the year 1955/56.

The Association also requested an interview with the Minister to
discuss the points raised in its statement. This interview took
place at the offices of the Department of Trade, Queen's Gate, St
Kilda on 5th March, 1957. The following were present at the
discussion:

Mr J. McEwen Minister for Trade
Dr W. Westerman Deputy Secretary Department of Trade
Mr R. Robertson Department of Trade
Mr A.M. Flanders (of Bruck Mills), President of the Rayon and
Cotton Weavers' Association
Mr Vine, President of A.C.M.A.

Mr T.A.W. Furphey (of Davies, Coop), representing Australian
cotton textile manufacturers
Mr R.W.C. Anderson Assistant Director, A.C.M.A.

Mr A.J. Burgess Executive Director, R.C.W.A.

MR ANDERSON opened the discussion by asking the Minister if he
would give some outline of the discussions which had taken place
with the Japanese and the attitude of the Government in the
matter.

MR McEWEN said he wished to make it clear at the outset that the
Japanese had not asked for any special privileges for their trade.

All they want is the same tariff and import licensing treatment
for their goods as other countries. At no time had the Japanese
suggested that any duties in our Tariff be reduced. The issue, as
far as they are concerned, is simply the accord of most-favoured-
nation tariff and nondiscriminatory import licensing treatment.

If the Japanese request were granted, we would remain completely
free to take emergency action against their exports to prevent any
serious damage to our industries. The right to resort to emergency
action would be part and parcel of any trade deal which we might
make with Japan. Any agreement with Japan must clearly reserve to
us the right to use this emergency power with which we have
already equipped ourselves by inserting an appropriate provision
in the Customs Tariff (Industries Preservation) Act. [1] It was
essential, therefore, when thinking of m.f.n. for Japanese goods
to think, at the same time, of the existence of the reserve power.

The first was qualified by the second.

[matter omitted]

MR McEWEN said that our export interests in the Japanese market
were so important that it was essential that our trading
relationships with Japan should be placed on a more permanent and
satisfactory basis than at present. Vital export interests were at
stake and although we were not unmindful of the important
diplomatic issues concerning our relations with Japan, the line
which we had followed in the trade discussions had been determined
primarily by trade considerations. The following points must be
emphasized:

(a) Japan is now our second largest market and it is a growing
market for our goods.

(b) The very imbalance in trade would be sufficient grounds for
irritation on the part of the Japanese. This year Japan will buy
something over 100 million worth of our goods and we will buy
something under 15 million from Japan. This large balance is due
in some part to special discriminatory restrictions against
imports from our second best customer.

(c) Japan is our second largest market for wool and wheat, our
largest market for barley and our fourth market for sugar. It is
in the power of the Japanese Government to do us grave damage in
these sectors of our export trade. If the Japanese were to reduce
the exchange allocation for Australian wool by some 20 m.-we would
no doubt sell the wool elsewhere-but the absence of Japanese
bidding in that portion of the market could bring down quite
severely the value of our entire clip. By withholding or
curtailing exchange allocations they could do great damage to our
wheat, barley and sugar exports. We are in a very vulnerable
position and we cannot expect the Japanese to put up much longer
with the way we are treating their interests. We must put
ourselves in a position where the Japanese cannot suddenly resort
to retaliatory action and do us great damage. To reach this
position we must remove most of Japan's legitimate grievances.

(d) Although we have no obligations to Japan under the G.A.T.T. we
are open to attack in the G.A.T.T. forum every year. If Japan took
retaliatory action against our exports she would not have much
difficulty in convincing G.A.T.T. countries that her action was
justified. No other country treats imports from her second best
export market as we treat imports from Japan.

Mr McEwen said that, despite all of these considerations,
Australia had the obligation to protect her industries from
damaging competition from Japan and other low-cost suppliers. He
believed, however, that we could do this as well as protect our
export interests. We had passed the necessary legislation, we had
made it abundantly clear to the Japanese that we would use this
legislation if necessary and it was up to the Japanese, in their
own interests, to see that a situation did not arise which would
necessitate our using the emergency power.

MR VINE said that he appreciated the magnitude of the issues
involved in the negotiations but his concern was the great damage
which could be done to the Australian textile industry by imports
from Japan. That country was now making the finest quality
textiles in the world and her prices were ruinously low. It was
only necessary to look at what had happened in Canada to realise
what could happen here. Canada had a trade agreement with Japan
but that did not prevent the Canadian market being flooded with
Japanese shirts and other clothing. The same thing had happened in
the U.S.A. The U.S.A. had corrected the position by putting a
quantitative limitation on imports from Japan. We must do the same
or our industries would be ruined.

MR McEWEN said that, late last year, he had discussed the Canadian
position in Ottawa with Mr D.D. Howe (Minister for Commerce and
Industry). He had gone to special pains to get a full appreciation
of the situation. Mr Howe had assured him that nothing serious had
happened in Canada.

DR WESTERMAN said that the same opinion had been expressed by
Canadian officials. In only one case had Japanese imports
threatened to reach dangerous proportions and when the facts had
been brought to the attention of the Japanese, prompt and
effective remedial action had been taken in Japan.

MR VINE disputed these views. He said the whole Canadian textile
industry was in the doldrums and the garment industry had been
torn to shreds. The U.S. market was being swamped with low priced
Japanese goods of excellent quality.

MR McEWEN said that there was no basis for an agreement with Japan
which excluded garments and some other goods from m.f.n. The
Japanese just would not accept such a proposition. If garments
were to present a particular problem they could be dealt with
through the Tariff as could any other item.

MR VINE, in disagreeing, said that the Tariff was not an effective
protective instrument in such cases. The Canadians had not been
able to handle the matter through their Tariff.

DR WESTERMAN said that a single tariff duty was not the only way
these matters could be handled through the Tariff. The Americans
have the tariff quota principle as their disposal. The South
Africans have special tariff provisions.

MR VINE said that the Americans had not dealt with the Japanese
textile and garment problem that way. Imports from Japan had been
quantitatively controlled.

DR WESTERMAN said that while it was quite true that the U.S. had
not curtailed imports from Japan by special tariff measures that
did not dispose of the fact that there were special appropriate
and effective tariff measures (such as sliding scale duties, etc.)
which could be adopted. He was well aware that the Japanese had
voluntarily imposed a restriction on their exports.

MR ANDERSON said that he felt it was extremely relevant to point
out that the U.S.A. had realized it could not deal with the
problem of imports from Japan through tariffs and had considered
that the only effective way was to persuade the Japanese to
restrict their exports.

[matter omitted]

MR McEWEN said he could see no reason why the garment trade could
not be protected by tariffs.

MR FLANDERS replied that tariffs were no effective protection.

MR ANDERSON sought to illustrate the point by reference to
ribbons. The Tariff Board, he said, would have been obliged to
recommend a duty of some 300% to protect our ribbon industry
against Japan, so great was the disparity between wage levels in
the two countries. The Board had taken the line that import
licensing was protecting the industry and had left it at that.

Nothing would stand between the ribbon industry and annihilation
if quantitative restrictions were removed.

MR FLANDERS said that Japan was now permitted to supply a fairly
substantial part of our imports. If that were increased still
further or if Japan were put on the same footing as other
countries we would be thrown back on the emergency power, i.e., on
the dumping legislation and we could never prove dumping.

DR WESTERMAN explained that the emergency power had nothing to do
with dumping. The only affinity it had with dumping was that it
was included in an Act whose other provisions related to dumping.

MR VINE said that the textile industry was reconciled to the fact
that the global import restrictions were not permanent. He asked
if quantitative restrictions could not be applied to Japanese
textiles on a permanent basis-did the industry have to wait until
the dangerous import run was underway before any action could be
taken. If so, disaster was inevitable.

MR McEWEN said he wished to repeat that there was no room in any
treaty with Japan for quantitative restrictions. Perhaps he had
not elaborated this matter sufficiently. It came down to this-to
write quantitative restrictions on Japanese exports into any
treaty would be to invite quantitative restrictions on wool at the
Japanese end. There is no answer to this logic. [2]

[matter omitted]