MR WARWICK SMITH [1] suggested that the meeting should examine the
position reached in the negotiations and consider what
arrangements might be made to facilitate the progress of the
discussions.

MR USHIBA agreed with this suggestion. Referring to the latest
Japanese drafts which had been distributed, he made the following
comments.

1. Agreement on Commerce. Document A.

[matter omitted] [2]

g) Article V.-Emergency Action-The Japanese point of view was:-

(1) To some extent Japan could understand the Australian view that
unless Australia had some safeguard in the form of emergency
measures against a sudden and large influx of Japanese goods the
Australian Government could not give Japan m.f.n.

(2) If GATT applied, such safeguard would be used without
discrimination, in accordance with the principle of GATT. However,
so long as Australia invoked Article XXXV, it would be inevitable
that safeguards would be applied in some cases against Japan only.

This was felt rather strongly in Tokyo, but nevertheless it was
felt that Japan would have to acquiesce, albeit reluctantly. The
Japanese Government expected that in the light of the operation of
this Agreement Australia would soon think fit to enter into GATT
relation with Japan.

(3) The Japanese Government was concerned with the problem of how
far and under what circumstances Australia intended to invoke the
emergency measures. If GATT applied reference would be made to the
Contracting Parties as umpire but in the absence of such an
umpire, there would always be a possibility of abuse, in spite of
the best intention of the parties concerned.

The Australian delegation had repeatedly stated that they regarded
this safeguard as a last resort and it was not their intention to
invoke it frivolously. In fact, a separate document had been
suggested to record the understanding that Japan and Australia
would co-operate to the best of their ability (although there was
a legal and administrative limit to what the Japanese Government
could do in inducing exporters to exercise restraint) to forestall
a situation that might result in damage to certain Australian
industries.

(4) However, the Japanese Government still felt great anxiety as
to the circumstances under which such emergency measures could be
invoked and the extent to which they might go, since it would be
almost impossible to determine beforehand these points exactly. If
the safeguards were frivolously invoked it might seriously impair
or even nullify the benefits Japan expected from this Agreement.

And if the Australian Government took emergency measures exceeding
the degree necessary for the protection of Australian industry,
inflicting damage on the Japanese exporting industry, it was very
difficult to see why Japan should not have the right to take some
defensive measures to retrieve such damage.

(5) It was for these reasons that the Japanese delegation proposed
para 3 of their draft, providing for certain countermeasures which
might be taken in case consultation should fail or in emergency
cases. This was a measure which was authorised under Article XIX
of GATT, but the main purpose in proposing this paragraph was
rather to use it as a powerful and effective disincentive. The
Australian delegation had stated that they regarded para 3 of
their draft as a powerful disincentive, and there was no reason
for the Japanese delegation to disagree with the Australian view.

However, the termination of the Agreement was a serious matter and
the Japanese idea was to set up a disincentive which would not
lead to such a grave consequence but which might prove to be as
powerful a disincentive.

MR USHIBA thought personally that the Japanese Government would
have no objection to the inclusion in Article V of para 3 of the
Japanese draft as well as para 3 of the Australian draft.

(6) The Japanese Government had no intention of resorting to
retaliatory action whenever the Australian Government invoked
emergency measures under this Article. Its purpose was primarily
to provide a powerful disincentive, and counter measures would be
taken only where inevitable and to the extent necessary to
counterbalance the damage done to Japanese export industry.

[matter omitted]

2. Agreed Minutes
The form of the Agreed Minutes, i.e. whether it would be one
document or would consist of several separate documents, had not
been decided and reserving this point, the Japanese view on
matters of substance was as follows:

A) WOOL DUTY. The Japanese delegation had made it clear on
numerous occasions that the Japanese Government considered the
request for a binding of duty free entry for wool as being beyond
the scope of the present negotiations.

However, since the Australian delegation had indicated that they
regard this question as a prerequisite of the Agreement, the
Japanese Government had, after adjusting widely different views of
the various Government agencies concerned, drafted a compromise
formula which tried as fairly as possible to incorporate the views
and ideas expressed by the two delegations. This meant a very
great sacrifice and concession on the part of the Japanese
Government, paid for the sake of a mutually satisfactory
Agreement.

The draft attempted to link the Japanese commitment to retain the
present level of wool duty for three years with the expression of
Australia's intention to endeavour to withdraw the invocation of
Article XXXV within the same period of time. Although the basic
idea had been cleared, the text had not yet been approved by Tokyo
and herefore, should not be regarded as the final wording.

B) WHEAT. The Japanese Draft Agreed Minutes replace para 4 of the
Agreed Minutes This draft was based on the idea agreed upon by the
two delegations that under fair and non-discriminatory basis.

Where unfair trade practices were adopted by one of the main wheat
exporters, or in the case where Japan entered into non-commercial
agreement with a third country, Japan would be ready to secure for
Australian wheat an equitable share in the Japanese market.

Whether an unfair trade practice existed or not would be
determined by consultation of the two Governments, and such
practice would be deemed to exist when a third country offered
wheat to Japan at lower prices than those offered to other foreign
markets. Such other foreign markets would be major wheat importing
countries such as Great Britain, which was importing wheat from
various sources on a competitive basis. Should this criterion
appear unsatisfactory it might be possible for Japan to agree to a
similar formula to that in the United Kingdom - Australia Trade
Agreement.

c) BARLEY. The Japanese draft was intended as a substitute to para
3 of the Australian Agreed Minutes. Japan had been importing about
30% of her total barley requirements from Australia and the
Australian Government had expressed its satisfaction with the
Japanese barley importing policy. In view of this and the fact
that Japan had no intention of changing her policy, the assurance
of consultation embodied in the Japanese draft should be
satisfactory to the Australian Government. The Japanese Government
could go no further, considering Japan's relations with other
barley exporting countries (U.S.A., Canada).

D) SUGAR. It was at present beyond the power of the Japanese
Government to do anything about the sugar duty, and it would be
helpful if Australia dropped this matter from this Agreement.

Japan agreed on the principle that Australian sugar would be given
the opportunity to compete freely for not less than 40% of total
Japanese sugar imports. The Japanese Government was quite
confident that the 40% quota of free competition would be
maintained and at present there was a possibility that this quota
would be expanded rather than reduced. If, however, such
opportunity was impeded, the Japanese Government would be ready to
consult with the Australian Government. The Japanese Government
was reluctant to go beyond this, as they considered the
possibility of the opportunity to compete for 40% being impeded
too remote to be realistic.

E) DRIED VINE FRUITS. Since Japan envisaged the term of the
Agreement to be three years, with the possibility of extension, it
was ready to give Australian vine fruits a yearly quota of
100,000 for three years. This kind of quota was provided usually
only on a year to year basis in Japanese trade agreements with
other countries, but in view of the Australian request, Japan was
ready to undertake a commitment for three years. If the Agreement
was extended, this matter would be the object of consultation
between the two Governments considering whether Japan would
continue to give quotas for dried vine fruits to other sterling
area countries.

3. Exchange of Notes on Surplus Disposals (Document E)
Tokyo did not like this idea of a commitment to consult on surplus
receivals. There were already many clauses in the Agreement
providing for consultation. The Japanese drafts on wheat and
barley were framed with Australia's requirements in this respect
in mind and obviously if Japan wished to enter a Surplus Disposal
Agreement, she would be ready to consult with Australia with a
view to securing an equitable share for Australian wheat or barley
in the Japanese market. In addition to these, Articles II and VII
of the Agreement provided opportunities for consultation.

Even without these provisions, the Japanese Government could not
possibly reject a de facto consultation with the Australian
Government if the question of Surplus Disposal Agreement was
raised by the latter.

The Japanese Government had not given any similar commitment to
any other country, including Canada, and it was not wished to make
the matter too conspicuous. It was suggested that the matter
should not be given the form of an official letter but it could be
put on the official record of the meeting as shown in the Japanese
draft.

4. Exchange of Notes on Safeguards
The Japanese delegation would be suggesting some changes in the
wording of the Australian draft but not in the sense. From Japan's
point of view it would be preferable to have the matters raised in
the Australian draft included in the record of the meeting rather
than as a separate note.

MR WARWICK SMITH pointed out that the Australian papers handed to
the Japanese delegation on the 4th April, had been delegation
papers and had not been cleared with the Government. It was hoped
to obtain further guidance from the Government in the next week.

In addition, the drafts submitted were still subject to review
from a legal and technical point of view and even where agreement
was reached the legal drafting could take some time.

[matter omitted]

ARTICLE V: The Australian delegation considered that Article V was
more likely to lead to a satisfactory situation if the Australian
approach was followed, and there was no provision for
countermeasures. The point of too ready application of Article V
was recognised and the Australian delegation was prepared to look
for further assurances to increase the Japanese Government's
confidence that emergency action under Article V would be
restricted in range and frequency of application. It might be that
an assurance of prior consultation in all cases could be given. It
would of course be understood that while such an assurance would
be given in all good faith there may be occasions when it would
only be possible to give very short notice.

The Australian Government would be better able to strengthen its
assurances to the Japanese Government if the Australian Government
had greater confidence that the assurance on the part of Japan
would narrow the possibility of Australia's needing to resort to
emergency action under Article V.

However, it was not intended to give the impression that Article V
must be entirely inoperative. The Australian delegation could not
allow the position to arise where if Australia did impose
emergency measures under Article V, the Japanese Government would
consider it a breach of faith.

[matter omitted]

MR WARWICK SMITH then turned to the commodity aspects of the
Agreement. He pointed out that in the original requests, Australia
had sought an assurance that Japanese import licensing treatment
of Australian goods would continue to be at least as favourable as
at present. This request was to some extent covered by the
drafting of the commitments on the various commodities but
Australia would wish to make some general reference in an
introductory paragraph to the agreed minutes on commodities, which
minutes would preferably cover all the commodities in a single
document. The introductory paragraph would include the following
points:-

(i) the treatment to be accorded to particular commodities was
within the general undertaking of most-favoured-nation and non-
discriminatory treatment for Australian goods and represented
minimum treatment.

(ii) that Japanese import licensing treatment of Australian goods
would continue to be at least as favourable as at present. This
would of course, be subject to the balance of payments criteria.

At the time when the original request list was presented it was
thought that it might be necessary to seek particular provisions
to ensure that trade and economic policies of the Japanese
Government would not be aimed at reducing the import of
commodities of export interest to Australia. However, it was now
thought that the point would be covered by the commitment on wool
and wheat and the general undertakings.

In relation to the particular commodities, Mr Warwick Smith made
the following comments:-

In some products, such as confectionery and chewing gum, which had
been mentioned to the Japanese, and others such as fountain pens
and processed cheese, it appeared that no licences at all were
available. These products had all been the subject of
representation by Australian exporters in connection with these
negotiations. Australia followed the principle of allowing minimum
commercial imports of all commodities and it was suggested that
the Japanese may be able to give some assurance that licences
would be made available for minimum commercial imports of goods in
this category.

WHEAT: The two sides appeared to be sufficiently close to enable
an agreement to be reached. It was assumed that the general
commitment that wheat and barley would be purchased on a
competitive basis would apply to higher protein wheats.

BARLEY: The Japanese proposal appeared to be one which might prove
acceptable in substance.

WOOL: The Australian draft on wool had provided that Japanese
import restrictions on wool would only be maintained for balance
of payments reasons. It was not clear whether this was acceptable
to Japan.

MR USHIBA said that the point raised in connection with wool,
above, appeared to be covered already in the draft Article II of
the Agreement. He would check with Tokyo but he did not think that
there was any objection to including some such wording as
suggested in paragraph I of Article II of the Australian draft.

MR WARWICK SMITH continued with comments on commodities:-

SUGAR: Subject to consultation with the sugar industry, the
Australian delegation was prepared to recommend to the Government
that the tariff question be dropped.

WOOL DUTY: The Australian delegation was prepared to put the
Japanese proposal concerning the wool duty and G.A.T.T. to the
Government.

AGRICULTURAL SURPLUSES: The Australian Government would not be
particularly worried as to the form of the undertaking but would
like it clearly indicated that the assurance was for prior
consultation. This was not clear from the Japanese draft.

Australia had similar undertakings from U.K. and the Federation of
Rhodesia & Nyasaland and would seek similar undertakings where
appropriate in all future agreements with other countries.

MR USHIBA explained that the matter of minimum commercial imports
of confectionary, chewing gum etc. was one which had been argued
strongly by the U.S.A. on many occasions but Japan had not given
any such commitment to the U.S.A. nor could Japan undertake such a
commitment to Australia.

On F.A.Q. wheat the question of a guaranteed standard might be
raised again by the Food Agency.

Mr Senger said that the Wheat Board had provided comments on this
matter and he felt that further discussion among the experts would
solve any difficulties in this regard.

It was agreed to set up a drafting group consisting of Mr.

Corkery, Mr. Uyama, Mr. Kosugi and Mr. Nishimiya to compile a
composite draft setting out the position reached to date but
without any commitment on either side.