Australia's Commercial Relations with Japan

1. The purpose of this submission is to recommend that informal
trade talks be held with the Japanese Embassy as a matter of
urgency.

2. On 27th January, 1954, I conveyed this proposal in letters
which I addressed to the Prime Minister, the Treasurer, and the
Ministers for External Affairs, Trade and Customs and National
Development. The Prime Minister felt that this matter could
appropriately be considered by Cabinet.

3. On four occasions in the last ten months, the Japanese
Government has drawn attention to the need for securing relaxation
of the Australian import restrictions on Japanese goods. [1] It
has been pointed out to us that a sharp decline has taken place in
Japan's sterling reserves, that our relaxations of last July
affecting Japanese goods have had little positive result, and that
further relaxations should be effected as soon as possible so as
to enable Japan to continue to be a good customer for Australian
products.

4. In May, 1953, the Japanese Government proposed that an informal
talk take place as soon as possible with a view to improving trade
relations between the two countries. In our reply to this
invitation, it was indicated that the proposed discussions were
not considered necessary. [2] The suggestion for informal talks
was renewed in November last, but the Japanese Note Verbale
containing this proposal has not yet been answered.

5. The Japanese Ambassador's Aide Memoire of 14th January, 1954
[3], copy of which is attached, contains a number of points which
cannot be lightly dismissed. A market in Japan for a substantial
quantity of wheat would be most useful at this juncture. With a
record exportable surplus of barley available from the recent
harvest, it would be unfortunate if Japan-our principal customer
for barley at present-were to reduce her purchases.

6. Already Japan is taking substantially less Australian wool this
season.0ur greasy wool exports to that market during the five
months ended 30th November, 1953 were 38% by value lower than in
the corresponding period in 1952. The Australian Embassy, Tokyo,
states that the decline in Japan's purchases of our wool is due to
her sterling difficulties and not to a diminution of demand.

Japan's total wool imports have in fact increased, Argentine and
Brazil featuring prominently in the trade.

7. Australia, Canada and New Zealand were among the limited number
of GATT Contracting Parties which abstained from signing the
Declaration regulating the commercial relations of the signatories
and Japan. [4] The Canadian Government has, however, been
conducting bilateral discussions with Japan since June, 1952, and
New Zealand has informed Japan that she is prepared to do so.

Australia, on the one hand, has rejected Japan's multilateral
approach through GATT for closer commercial relations and, on the
other hand, has also refused to enter into bilateral discussions.

It is relevant to mention here that proposals have been made in
Japan for the imposition of higher duties on imports from
countries (such as Australia) which do not extend most-favoured-
nation tariff treatment to Japanese goods.

8. Ministers will be aware that a full investigation of
Australia's trading position vis-a-vis Japan is being made by a
number of Departments concerned and I expect that the report will
shortly be available for Cabinet. Whilst policy decisions on our
commercial relations with Japan should no doubt await Cabinet's
consideration of this review, I feel we should inform the Japanese
Government without further delay that we are prepared to arrange
informal talks as soon as possible between a small group of senior
officials and the Japanese Embassy in Canberra. The senior
officials might be drawn from the Departments of External Affairs,
Treasury, Trade and Customs, National Development and Commerce and
Agriculture.

9. Such informal discussions could embrace such matters as a full
explanation of our present import licensing policy, the extent of
relaxations in licensing restrictions on Japanese goods, the
current trade position of the two countries, the decline in recent
months in the Sterling Area's trade with Japan, Japan's sterling
and dollar reserves position and the present trade policy of the
Japanese Government.

10. These informal talks would bring to light any
misunderstandings at present affecting our commercial relations
and would pave the way for full-scale bilateral trade talks if
these were later found to be desirable. I think such informal
talks, clearly stated as aiming only at the exchange of
information, could be entered into without commitment on future
action by Australia, and would serve the useful purpose of
demonstrating that it is not our intention indefinitely to hold
Japan at arm's length in trade matters.

11. I recommend that the proposal contained in paragraph 8 above
be approved. [5]