1950/51 Sterling Area Trade Arrangement with Occupied Japan

Negotiations which have been in progress for some time in Tokyo
with the Supreme Commander for the Allied Powers for a Sterling
Area Trade Arrangement with Occupied Japan for 1950/51 recently
came to an end and the Arrangement was signed by the participating
parties, including Australia, on 29th November.

Trade Arrangements for 1950/51
2. The 1950/51 Trade Arrangement differs very little from the
earlier Arrangements which have covered trade between Japan and
the main sterling area countries since 1948/49. The chief object
of these Trade Arrangements is to facilitate a high level of trade
between the sterling area and Japan without incurring the risk of
a loss of dollars.

3. This danger of dollar loss arises from the payments
arrangements which govern trade between the sterling area and
Japan. In brief these arrangements provide that trade shall be
conducted in sterling and that SCAP may periodically convert into
dollars any sterling that he accumulates in excess of his working
balances.

4. The Trade Arrangements minimise this danger by preventing trade
between the sterling area and Japan from getting too far out of
balance. Estimates are made of the value of commodities Japan is
likely to buy from the sterling area participants during the year
and this value, adjusted for other sterling payments Japan is
likely to make such as for 'invisible' services, is divided up
amongst the sterling area participants to cover their purchases
from Japan. These estimates are incorporated in the Trade
Arrangements as Trade Plans. They are reviewed during the year and
adjustments are made if trade seems to be getting out of balance.

5. The Trade Plan estimates are not binding commitments on
Australia and the other participants that trade shall in fact be
the same in composition and amount as the estimates. They are
merely estimates made in the light of best available information
and the parties to the Arrangement agree to facilitate trade and
to issue the necessary import licences.

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Australia's Share of the Trade
8. Japan is important to Australia both as a source of essential
supplies which might otherwise have to be paid for in dollars and
as an expanding market for Australia's exports. Under the Trade
Arrangements the total value of trade both ways between Japan and
Australia has increased from A4m. in 1948 to about A30m. in
1949/50 and the Trade Plan for 1950/51 provides for a further
increase to A46m.

9. Australia's sales to Japan in 1950/51 are estimated in the
Trade Plan at A24.35m. made up of wool A16.6m., wheat A6.3m.,
other grains A1.2m. and miscellaneous A0.25m. These estimates
were put forward by Australia early in the trade negotiations at
Tokyo and later reports of Japanese requirements indicate that
they will be very considerably exceeded by actual sales.

10. Australia's allocation of purchasing power under the Trade
Plan amounts to A22m. as compared with last year's initial
allocation of A6.2m. The main commodities which Australia expects
to import from Japan in 1950/51 and for which licences have been
issued are steel (mainly galvanised iron), copper, textiles
including raw silk, plywood, tinplate and chemicals.

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