Trade Negotiations with Japan

Trade produced a Submission on the Japanese Trade negotiations [1]
in the hope that, at the Prime Minister's briefing meeting this
afternoon, there will be an opportunity for consideration of some
of the critical issues which are emerging.

It would be useful to get some lead from Ministers at this stage
since the negotiations have reached a point where some finer
determination of negotiating limits is needed.

The Submission is, I think, too long and takes in too much to
expect full consideration of all the points raised at this
afternoon's meeting, if the meeting is to be of the kind which was
envisaged.

Following your discussions yesterday, you will have some ideas
yourself about what is needed at the moment, but I would guess
that the negotiating processes would be assisted if Ministers this
afternoon could give particular thought to two only of the
critical issues listed in the final page of the Submission. These
are the wool, or more widely, the tariff negotiating issue and the
provision for emergency action.

Wool
Wool is now regarded by both Trade and Primary Industry as the
major commodity issue, and wheat has receded somewhat into the
background. What is sought is an obligation from Japan to bind the
existing duty-free entry of wool.

This concession is considered important not in our immediate trade
context, but as a possible protection in the event of some
considerable change in Japan's textile consumption habits if the
use of synthetics becomes more widespread. It is also considered
important that, since wool is our major commodity, any trade
arrangements should recognise that point.

The immediate issue is not whether or not a wool duty is to be
bound, but whether these negotiations are to go into the tariff
duty field. The Japanese say this should not be the case, and any
question of duty negotiations is a matter for a subsequent
arrangement. They give the same answer to our request for a
revision of the sugar duty.

There is some logic in this attitude of the Japanese. Their
position is that, almost alone of nations with which we trade,
they are excluded from m.f.n. treatment in both duties and import
licensing, and the purpose of the current negotiations is to
remove the special disabilities and put them on a par with other
trading countries. If the positions were reversed I think I would
be arguing very strongly on the same lines as the Japanese.

Although there are special historical and emotional reasons for
treating Japanese trade as being in a special category our normal
practice is to apply m.f.n. treatment to all and sundry. (I am
excluding the dollar issue on import licensing.)

Therefore, whilst it would be good if the Japanese were prepared
to make these special duty concessions, I am disposed to suggest
that, if they are adamant in their attitude, we should set our
requests aside. I would not greatly object to a declaration by
Australia as suggested in paragraph 14(i).

On the other hand the Japanese may attach so much importance to
achieving general m.f.n. treatment that they will be prepared to
make this special exception. We should continue our efforts for
the moment but I would recommend that this particular request need
not be regarded as an essential feature for the new agreement.

Provision for Emergency Action
When Cabinet authorised negotiations, it required that any
agreement should enable us to take special action to protect our
own industries or the interests of other trading partners. The
draft article on this section, which has I believe now gone to the
Japanese, says that Australia or Japan 'may take measures' to
prevent or correct such a situation. This, of course, confers
unlimited powers, but specifically it is envisaged that such
measures would be either special duties or quantitative import
restrictions.

In their earlier discussions the Japanese indicated that they
would not find any difficulty with a special duties provision
modelled on the Canadian Agreement. This enables the Canadians to
impose at their own discretion special duties to bring Japanese
prices up to a fair price.

I would expect that the Japanese would react quite firmly to the
unlimited provision which we have suggested, and we might find
this point a stumbling block. My recollection is that it was
accepted in the Canadian/Japanese negotiations that this special
provision was there for presentational purposes and if the
agreement was to remain in existence, there was an obligation on
both parties to see that this particular provision did not have to
be used. This attitude is also accepted by the Australian
negotiating team. If a situation arose in which emergency action
had to be taken, it would mean virtually that an agreement was not
practicable. If this is a reasonable understanding then it may
well be unnecessary to ask for such an unlimited power. It would
need to be understood by the Japanese that they have to take steps
to see that their merchants do not do anything which would make
emergency action necessary.

I am, therefore, disposed to recommend in this particular case
that we do not regard an unlimited provision for emergency action
as necessary. We certainly wait for the Japanese reaction and
gauge the intensity of it if they do reject our suggestion.

I recognise that this is largely a question of political
presentation and Ministers alone can decide whether such a course
is acceptable.