CANBERRA

PRESENT:

For Japan For Australia
Mr Nobuhiko Ushiba (Leader) Dr W.A. Westerman (Leader)
Mr Atshushi Uyama (Alternate) Mr G.P. Phillips (Alternate)
Mr Toshimichi Kajiki Mr A.J. Campbell
Mr Kanji Hibino Mr M.T. Farrell
Mr Tohru Udo Mr K. Jones
Mr Teruo Kosugi Mr B. Meere
Mr Hajime Nishimiya Mr D.J. Munro
Mr A.L. Senger
Mr M.W. Oakley
Mr N.R. Lind

MR WESTERMAN: Welcomed Mr Ushiba and the Japanese delegation. [1]
He said that the Australian delegation had not felt in a position
to seek further instructions from their Government until the
Japanese response to Australia's initial requests had been
received. However on receipt of the Japanese reactions to the
Australian requests a report would be made to Ministers as soon as
possible to determine the basis for further negotiation.

MR USHIBA: Explained that to speed the negotiations the Japanese
response had been prepared in the form of a draft agreement and
appropriate notes and agreed minutes.

[matter omitted)

MR USHIBA then presented copies of the Japanese paper to Dr
Westerman and outlined the contents.

The paper consisted of-
1. 'Agreement on Commerce Between Japan and the Commonwealth of
Australia'
2. 'Exchange of Notes Regarding Australia's Right to Impose
Special Duties on Japanese Goods in an Emergency'
3. 'Exchange of Notes' setting out the understanding on the action
to be taken in Japan to prevent damage to Australia's national
interest
4. 'Agreed Minute' on treatment to be accorded individual
Australian commodities
5. 'Exchange of Notes' reserving Japan's position on the areas set
out in Article 3 of the Peace Treaty. [2]

In relation to the draft note on the imposition of special duties,

MR USHIBA pointed out that the Japanese Government would wish to
reserve the same right as was reserved by the Australian
Government. At the moment Japan had no legislation to enable such
special duties to be applied but it was desirable to make the
right to impose such duties reciprocal within the agreement.

He also explained that where the Japanese Government reserved the
right to take substantially equivalent action should the
Australian Government impose special duties, it was intended that
such action should be within the limits of G.A.T.T. and that the
operation of the reservation would be a matter for consultation
between the two Governments.

MR USHIBA said that the draft on the measures to be taken by Japan
to prevent damage to Australian industries or sudden disruption of
Australia's trade pattern, attempted to set out in a concise form
the views of both Governments which had been made clear in the
course of negotiations last year.

In relation to the Australian requests on the individual
commodities [3], MR USHIBA said that it had been thought desirable
to include the final understanding in an Agreed Minute. The
Japanese position on each commodity was as follows:-

Wool: Automatic Approval for wool was not possible because of the
effect that this would have internally and it was intended to
continue the allocation of exchange for wool imports. However,
Australia would be given the opportunity to compete for the 90% of
this allocation which would be on a global basis. It was intended
to import between 1.2 million and 1.3 million bales in the coming
fiscal year.

Higher Protein Wheat and Barley: Tenders would be called on a
global basis. It was expected that total purchases of semi-hard
wheat would be not more than 200,000 tons for fiscal year 1957/58
and hence Australia's expectation of selling some 220,000 tons to
Japan would be too high. However tenders would be non-
discriminatory. Total purchases of barley were planned at about
900,000 tons in 1957/58 and Australia's share was expected to be
something less than one-third of this. Although this would be
below the Australian expectation of 35% of total imports, the
difference would not be great.

Sugar 60% of Japan's sugar imports would be reserved for Indonesia
and Formosa under the Open Account Agreements. At present the
remaining 40% was allocated on a dollar and sterling common quota
basis but it might be decided to eliminate sugar purchases for
dollars altogether. However, a certain amount of dollar sugar was
imported through the U.K. and this could continue even if
allocation were restricted to sterling. It was intended to import
about 1.2 million tons of sugar from all sources in the coming
fiscal year.

Beef Tallow and Cattle Hides: Beef tallow and cattle hides would
be placed on the Automatic Approval list as requested by the
Australian delegation. It was estimated that total imports of beef
tallow would be 120,000 tons to 130,000 tons in the fiscal year
1957/58. Also it was estimated that total imports of cattle hides
would be 68,000 tons in the fiscal year 1957/58. This should give
Australia ample opportunity to compete.

Dried Skim Milk: The two points to be considered here were:

(i) Japan's commitment to Canada, and
(ii) The demand for dried skim milk in Japan was limited to the
School Lunch Programme, and feed purposes. Tenders were called
separately for each. The C.C.C. had offered milk at very low
prices for the School Lunch Programme but the purchases for use as
feed were fully competitive. Imports of some 4,000 tons to 5,000
tons were planned for feed purposes in the fiscal year 1957/58 and
25,000 tons for the School Lunch Programme.

Dried Grapes: The import quota for dried grapes at present
afforded U.K. and colonies was negotiated in exchange for
concessions granted to Japan and hence it would not be possible to
include Australia in that quota. However, in view of the
Australian request it was intended to make a new quota for
Australia. Although the figure of 100,000 was mentioned the value
would be reviewed each year.

MR USHIBA then commented on those requests which had not been
covered in the Japanese draft.

Confectionery and Chewing Gum: The quota given U.K. for
confectionery was in exchange for quotas for Japanese goods in the
U.K. and no imports of confectionery were made from other sources.

Chewing gum was not even imported from the U.K.

Films: Australian films were eligible to share in non-dollar and
global quotas allocated to films. There was no special treatment
given to any country.

Wool Duty: A binding of duty-free entry was beyond the scope of
these talks but MR USHIBA personally thought that Japan would be
happy to enter into tariff negotiations with Australia at any time
after the Agreement had been concluded.

Sugar Tariff: Economically and politically it was impossible at
this time to meet Australia's request. Although special measures
had been suggested by the Australian delegation to facilitate the
implementation of this request, the Japanese import procedure and
tariff system was not geared to handle the type of operation
involved. It might be possible at a later time to discuss this
matter again should the Australian Government wish to raise it but
within the framework of these negotiations it was not possible to
meet this request.

MR USHIBA then went on to explain briefly the Japanese draft on
soft wheat. He pointed out that the Japanese paper was based on a
similar principle to the compromise suggested in the Australian
note of 15th February, 1957. [4] The Japanese view was that before
action could be taken to enable Australia to make up sales of
wheat to Japan to the agreed level under the circumstances
envisaged in the agreement it would be necessary to agree on the
existence of such circumstances. For this reason the Japanese
suggestion was for consultation to be followed by such action as
was agreed to be warranted.

MR USHIBA pointed out that if the trade practice which was the
subject of consultation occurred near the end of the year, it
might be difficult for the Japanese Government to meet its
obligation under the Agreement before the year ended. Hence the
Japanese draft envisaged the compensatory action as being
undertaken in the subsequent 12 months. The quantity of wheat to
be specified in the agreement as a basis for any compensatory
action in the first year of the agreement was still to be
determined by negotiation.

In relation to any possible future surplus deals with the U.S.A.,
Japan would be ready to assure the import of Australian wheat up
to the quantity actually imported in the previous year. However,
if such a deal with the U.S.A. should be considered in the next
U.S. fiscal year, it might prejudice the conclusion of the deal if
the Japanese were to tell the U.S. Government of any prior
commitment to purchase particular quantities of wheat from
Australia not based on any actual past record of import. Hence the
Japanese draft did not specify any quantity in respect of
Australian wheat to be imported in the event of an agreement with
U.S.A. on surpluses in the first year of the currency of this
Agreement. Although at the moment no such deal with the U.S.A. was
contemplated it was necessary for Japan to keep the door open.

Referring to the reference to eventual application of G.A.T.T.

between the two countries MR USHIBA said that while the Japanese
delegation understood the Australian position on this it was hoped
that there would be no objection to the inclusion of the
reference.

DR WESTERMAN thanked MR USHIBA for his statement. He suggested
that after the Australian delegation had examined the Japanese
draft, it might be desirable to have further discussion between
the delegations before submitting the Japanese response to
Ministers. There were certain points which might require
clarification. For example, the Japanese draft on soft wheat
suggested on first glance that the quantity imported from
Australia in the first year could become the maximum amount for
imports from Australia in subsequent years. (MR USHIBA intervened
to say that this was not the intention of the Japanese
Government.) This would obviously be an undesirable position from
Australia's point of view. For instance, should Australian wheat
be in short supply in any year due to an adverse season or other
factors, this could restrict our opportunities for next years
sales.

DR WESTERMAN hoped that it would be possible to discuss further
the Australian requests which Japan had not met in their draft.

The request on the sugar tariff was one example and the request
for binding of duty free entry on wool was another. In relation to
the latter Dr Westerman pointed out that the granting of m.f.n. to
Japan would not only involve substantial lowering of duties but
would give in effect, indirect bindings to Japan. Hence the
Australian view was that the negotiations were of some importance
to Japan in relation to tariffs.

MR USHIBA mentioned that it might be some time before the Japanese
Food Agency could be ready to begin the actual purchase of f.a.q.

wheat from Australia. Hence although the agreement might operate
from say April or May, the wheat purchases may not commence until
perhaps July. Therefore the agreement as regards wheat would run
from July to June the following year. This arrangement would also
be beneficial to Australia since the quantity of wheat to be
imported into Japan in the first year would be important to
Australia.

MR USHIBA pointed out that in relation to Dr Westerman's statement
on the effect of granting Japan m.f.n., Japan had also bound
tariff items under G.A.T.T. and Australia would obtain the benefit
of this. Further, Japan's tariff rates were very low and Australia
had been receiving de facto m.f.n. treatment. The Japanese view
was that the granting of m.f.n. by Australia to Japan was merely
balancing the treatment which Australia already received from

Japan.

DR WESTERMAN replied that there was an important difference in the
relative benefit obtained by the two countries. Whereas the rates
which Australia had bound affected a fairly high proportion of
Japan's exports to Australia, the rates bound by Japan were of
minor interest to Australia since items such as wool and wheat
were not included.

It was agreed that a further meeting would be held as soon as the
Australian delegation had examined the Japanese draft.