CANBERRA

Agreement on Commerce Between the Commonwealth of Australia and
Japan

Widespread apprehension exists throughout our Australian
membership of the far reaching implications that are inherent in
the terms of the provisional Trade Agreement with Japan recently
signed in Tokyo.

In view of such concern, I would respectfully request that you, as
Prime Minister of Australia, afford myself, as President of the
Associated Chambers of Manufactures of Australia, accompanied by
State Chamber Presidents an early interview to discuss certain
Provisions of the Agreement.

In the meantime, I set out hereunder for your consideration our
observations on the specific sections covered by the text of the
Agreement which in our considered opinion threaten the integrity
and existence of Australian Industries and their capacity for
employment. Also our comments on the assurances by the Minister
for Trade of the strength of the Australian Tariff as an important
safeguard.

We strongly contest that there exist adequate safeguards to
protect Australian manufacturers from the consequences of the Pact
for these basic reasons.

1. The present tariff making machinery is not capable of speedily
regulating any volume of goods that causes or threatens to cause
damage to Industry.

2. Australia's trade obligations under the GATT such as the
binding against increase of tariffs and frozen maximum preference
margins have weakened our tariff system and it can no longer be
relied on as a protective measure capable of being used without
long delays and interminable negotiations.

3. The special Emergency duty clauses under the Customs Tariff
(Industries Preservation) Act will not stop goods being imported
at prices and in quantities that must endanger the welfare of
local industries.

4. The Japanese Government's promise of exercising a measure of
restraint will prove incapable of controlling either the volume or
price of Japanese exports to Australia.

Australian manufacturers have repeatedly emphasised the great
danger to which industries are subjected in the absence of an
effective, speedy and positive protective policy.

It is only necessary to quote two industries as an example. The
Woollen and Worsted Industry and the vitally important Chlorine
Chemical Industry.

The first waited nearly three years and the second almost four
years for the Tariff Board, the Department, and Cabinet, to
consider their request for safeguards against external
competition, only to be informed that the Tariff Board's
recommendations for an increase in Tariffs on imported Woollens
and Chemicals had been rejected. Many other instances could be
quoted regarding delays and non-acceptance of Tariff Board
recommendations.

Mr McEwen's recent acknowledgment of this danger and final
admission-'An early overhaul of Tariff Board machinery is needed'-
has proved that we have emphasised it sufficiently well.

Regarding our second reason for concern-whilst not advised of the
underlying reasons for the rejections by Cabinet of the increasing
number of Tariff Board Reports, it is known that our international
obligations and entanglements as a Contracting Party to the
General Agreement on Tariffs and Trade are partly, if not wholly,
responsible.

Our Tariff obligations and dangerous entanglements have been
increased as a result of the Japanese Commerce Agreement. Every
item in the Australian Customs Tariff, at present bound against
tariff increase or affected by GATT has been given as a concession
to Japan. In other words the Government's inability in the past to
obtain freedom from GATT entanglements is prima facie evidence
that it will not be able to free itself or raise the tariff on
items bound against increase or increase preferential margins when
danger threatens, as it will from the activities of Japanese
exporters.

The Trade Agreement establishes this point-it reads as follows:

'The Australian delegation pointed out that Australia had already
bound against increase the rates of duty on a relatively large
number of items to other countries which were of export interest
to Japan and consequently by extending most-favoured-nation
treatment to Japanese goods in the Australian tariff, Australia
did in fact assure a stability of tariff treatment of Japanese
goods that was of considerable importance.'

It has been stated that the Government can free itself from the
obligations of tariff items that are bound against increase and
whilst we acknowledge that there has been some easement of the
obligations of the GATT, we claim that it is still necessary for
adequate compensatory concessions to be offered if bindings are
withdrawn and the bound tariff cannot be raised if the Contracting
Parties determine that the country wishing to raise the tariff,
notwithstanding that it follows a Tariff Board recommendation, has
unreasonably failed to offer adequate compensation.

You will no doubt recognise, therefore, that the decision is still
in the hands of the Contracting Parties and not in the hands of
your Government.

It will be seen that the consequences arising from Japan obtaining
the concessions of GATT can have extremely serious consequences
and emphasises our lack of confidence in the Tariffs being a
positive safeguard against increased Japanese goods which will
result from the Pact.

Our comments on the assurance by the Minister that we are
safeguarded by the Provision of the Customs Tariff (Industries
Preservation) Act, are as follows:-

Section 4 of the Sub Section 11(a) reads-
'The amount of the emergency duty in each case shall be a sum
equal to the amount, if any, by which the landed duty-paid cost of
the goods is less than a reasonably competitive landed duty-paid
cost ascertained as determined by the Minister.'

According to understanding, this particular legislation does not
empower the Minister to impose an emergency duty which would stop
goods from entering this country in competition with Australian
made goods. Powers under the Emergency Duty Provisions of the Act
restrict the Minister to imposing an Emergency Duty of a sum equal
to the amount by which the cost of the imported goods is less than
a reasonably competitive landed duty cost after which the goods in
question can then enter Australia. Once the goods were imported
they would be sold even if it meant their being sold at a
discount.

In addition, however, no emergency action can be taken by the
Government until Japan has had the opportunity of proposing an
alternative course of action. This course is, indeed, laid down
clearly in the express wording of the Agreement under Point C
Article 5, which reads:

(i) Such action would not be taken except after consultation. In
every case, consultation would be as far in advance as
practicable.

(ii) Such action would not be taken lightly; and would be taken
only where the consultation process failed to provide a mutually
acceptable alternative solution to the problem. In cases where
urgency might require action to be taken before the consultation
process was completed, consultation would be continued in an
endeavour to find a mutually acceptable solution.

(iii) So far as administratively practicable such action would apply only to those
specific goods in respect of which the action was necessary to
correct the particular situation.

(iv) Such action would apply only for such time as was necessary
to correct the particular situation and would be discontinued
immediately this was achieved.

(v) Such action would be limited to cases where serious damage was
caused or threatened.

It was quite improbable that speedy corrective or preventive
measures could be taken under this doubtful 'safeguard' and in any
case the emergency can only be taken on a most temporary basis and
it could well be that separate action will have to be taken in
respect of each shipment of goods.

Lastly, there is a very definite absence of assurances that there
will be no vital differences of opinion between those responsible
and those affected as to what constitutes 'serious damage' to an
Industry and an interpretation of the key word 'threatened'.

Industry would press for an amendment of this clause which would
permit immediate action to be taken by the Minister, without
consultation whenever the Minister has reason to believe that any
articles are being or are practically certain to be imported which
could be of detriment to an Australian industry. We would strongly
recommend that the Minister be empowered to impose such duties not
in excess of 50% ad valorem or impose quantitative limitations in
such cases where emergency action was needed. This is precisely
the authority vested in the President of U.S.A. under Section 22
of the Agricultural Adjustment Act of 1933.

Our final comments concern the much publicised Japanese
undertaking of I voluntary restraint'.

The acceptance by the Japanese Government of the political
importance of preventing damage to Australian industry in the
early stages of the Pact is not a 'safeguard'.

The main point for consideration is whether the Japanese
Government has the power to stop goods being exported to Australia
by merchants in quantities and at such prices that would be
damaging to Australian industries.

Part C of the Agreement reads:

'The Japanese Delegation pointed out in reply that under Japanese
legislation export was free in principle and that the Japanese
Government could take only limited measures to deal with these
problems. However, the Japanese Delegation indicated that the
Japanese Government would use its best endeavours within its
constitutional authority to see that exports from Japan to
Australia were conducted in such a way as to avoid or remedy the
damage or prospect of damage to which the Australian delegation
had referred.'

This establishes prima facie evidence why Australian Industry has
no faith in the principle of 'voluntary restraint' acting as a
safeguard.

We would conclude by stating the manufacturers do not take issue
with the Australian Government making a bilateral trade agreement
with Japan or, for that matter, any other nation.

Our non-acceptance of the new Japanese Pact is because the
agreement lacks the essential safeguards that Australian industry,
on behalf of its shareholders and employees, considers to be its
historical privilege.

In the circumstances, therefore, we repeat our request that the
opportunity be accorded my Organisation to present its views and
reasons why the provisional pact should not be ratified in its
present text.

F.S. VINE
President, ACMA

MR JOHN G. HURLEY President, Chamber of Manufactures of NSW
MR DANIEL SCOTT President, Victorian Chamber of Manufactures
MR J.R. GIBSON Acting President, Queensland Chamber of
Manufactures
MR A.M. SIMPSON President, South Australian Chamber of
Manufactures
MR C.J. CORNISH President, Western Australian Chamber of
Manufactures
MR A.E. POXON President, Tasmanian Chamber of Manufactures
MR E.W. PAULL President, Metal Trades Employers' Association