I refer to the Japanese Note Verbale of 12th May, 1953 [1],
delivered to the Australian Ambassador in Tokyo, and copy of a
translation of which has been forwarded to your Department.

You will no doubt have had brought to your attention, the action
taken by the Japanese to reduce imports on Indian coal because of
her shortages of sterling and their reported intention to switch
purchases of rubber from Malaya to Indonesia.

I am, of course, very concerned that we should not let the
position in trade relations with Japan deteriorate to such an
extent that the Japanese take action to reduce imports of
Australian Wool. It is appreciated that that action would cause
difficulties in Japan, but for that very reason, if it were
decided on by the Japanese, it could seriously affect our balance
of payments position and could do permanent damage to Australia's
trade in wool.

I note that in the sterling area review of Japanese trade, the
United Kingdom indicated that there is some latitude for an
increase in sterling area purchases above the estimated current
level, and I note also that New Zealand has announced some
relaxation on imports from Japan.

I appreciate, of course, that Australia needs to examine the
question in the light of our own special position and I do not
suggest that because any other sterling country has or has not
taken action to liberalise trade with Japan that Australia has
necessarily to follow suit with a similar measure or to a similar
extent. Australian requirements differ from the requirements of
other sterling area countries for imports in Japan, and any action
to accord better licensing treatment of Japanese goods will have
to be taken in the light of Australia's special circumstances.

The peculiar nature of our exports needs, however, to be treated
as one of the special circumstances in our trading relations with
Japan and in order to cover this aspect fully, I should be glad if
you would arrange for the question to be considered by officers of
your Department in conference with officers of my Department and
other Departments concerned and in order to arrive at an agreed
reply to the Japanese Note.

In order to assist Departmental officers in considering the
question, it may be helpful if I set down my view that a study of
Japan's import trade in wool makes me believe that Japan could
take reprisals against Australian trade. Moreover, if action is
once taken to restrict imports from Australia, I would fear that
our trade might receive some permanent injury. I therefore wish to
stress that we should examine the possibility of offering some
concessions to the Japanese with a view to forestalling any
Japanese action to reduce imports from Australia.

I incline to the view that the general payments position should
permit some relaxation, but I appreciate that you may have some
difficulties on other counts. I would therefore propose that the
matter should be brought up for Cabinet decision before the reply
is sent and, to this end, I shall arrange for copies of this
letter to be addressed to Ministers for other interested
Departments.

In the light of the findings of Departmental officers,
consideration should be given as to whether informal talks should
be held with the Japanese and, if so, where.