Japan's Accession to GATT

Japan as a country receiving m.f.n. as a right under GATT would
present difficulties in relation to protection of Australian
industry and UK export interests in this country.

Japan now is and was for some years before the trade dispute
Australia's second most important market, mainly for wool. The UK
is our most important market for wool and a wide range of
commodities.

The difficulties in relation to Australian industry would arise
where a commitment had been taken to any country under GATT not to
increase the duty. Release from the commitments would involve
counter-concessions to the other countries concerned, and to Japan
where she established her 'substantial interest'.

When the duty was increased on any commodity, difficulties in
relation to the UK would arise, because of the general commitment
under GATT to freeze preferential margins. The Department of Trade
and Customs would assume that with margins (particularly those on
textiles) frozen, duties at the level sufficient to protect
Australian industry against Japan would entirely kill UK trade.

There would therefore be considerable opposition to lowering
duties against Japan to the m.f.n. level and giving Japan the
benefits of Australian concessions and obligations under GATT.

Discussions in GATT so far have been along the lines of the
application of measures not otherwise permitted under GATT when
imports from any country threatened disruption of a significant
sector of industry.

The Department of Trade and Customs feels some hesitance about the
result of these discussions because the measures taken will
require approval from the Contracting Parties, with a possible
maximum delay of 30 days in obtaining approval. They would, in any
event, not feel satisfied that the proposals gave assurance of
adequate protection to Australian and UK interests.

It seems likely, however, that most countries will vote in favour
of Japan's accession to GATT on these terms. The UK may seek to
amend the proposal to allow prior action and post-approval by the
Contracting Parties.

From the point of view of this Departments approval, prior or
post, by the Contracting Parties is a desirable condition of any
release from obligations under the agreement. If countries are to
obtain releases, the releases should be controlled. Otherwise
benefits obtained for export industry would be insecure.

Japan has no concessions to offer Australian trade seeing that
most Australian exports enter Japan duty free. (However, she is
talking of introducing a two-column tariff).

Wool is, of course, by far the most important item and Japan might
take action against wool if we continue discrimination against her
trade.

The facts that would tend to make Japan consider action against
Australian wool are the heavy adverse balance in trade with
Australia and the large outgoings for wool which brings in no
export earnings but is required mainly for local consumption.

Any Japanese action that involved switching purchases away from
Australia to other sources of supply would prove difficult for
Japan as she would find it difficult to obtain elsewhere the large
quantity of the types of wool she requires. She has stocks that
would help her over a period of six months on a one shift basis.

Additionally it is considered that a reduction of purchases by
Japan would not necessarily involve an undue reduction in
Australian prices during the coming year. Demand for wool at
present seems strong in relation to supplies.

Japanese support for the auctions has, however, been important in
the post-war period, the more particularly as she competes with
Bradford for the 'bread and butter' lines of the Australian clip.

In the long run, however, we should be concerned at any action
that might strengthen the case for increased production of
synthetics. There are no technical difficulties in switching wool
processing machinery to synthetics and there seems to be
considerable scope for Japanese industry to lower wool content to
the level prevailing in the early post-war period. The important
point in relation to increased use of synthetics is that Japan
would be unlikely and probably unable to retrace any steps taken
in that direction. To that extent negotiations after the event
would face an impossible task.

It is true, of course, that action approved by the Contracting
Parties might involve discrimination against Japan. But if this
were approved by the Contracting Parties, Japan would not be
legally entitled to discriminate in return. She could, of course,
withdraw from the GATT, but in doing so she would lose the value
of the GATT concessions and would know that the majority of
countries that had voted against her in GATT would hold something
the same views outside GATT.

The Associated Chambers of Manufactures has vociferously opposed
Australian participation in GATT. They have the same attitude to
Japan's accession to GATT. Few voices have been raised in support
of GATT, nor has any organisation spoken in support of Japan's
accession to it. Woolgrowers and some members of Chambers of
Commerce could reasonably be expected to support these proposals.

This Department's view is that exclusion of Japan from GATT
settles no problems, but the application of GATT as between
Australia and Japan may offer possibilities of controlling to some
extent Japan's general export and import policies. Any retaliatory
measures by Japan against any move by Australia to restrict
Japan's exports to Australia, provided these are based on
reasonable grounds, should also be subject to more control than if
GATT did not so apply.