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Historical documents

51 Minute From Shaw To Casey

10th February, 1954


Trade with Japan
The following developments have taken place regarding trade with
Japan since the preparation of our submission dated 27th January,
1954. [1]

In reply to Senator McLeay's suggestion in his letter of 26th
January that informal trade talks be arranged with the Japanese
Embassy as a matter of urgency, the Prime Minister expressed the
view that this matter should be discussed by Cabinet. A draft
submission was prepared by the Department of Commerce and
Agriculture for consideration by Cabinet but the Prime Minister
has now decided that the matter should not go to Cabinet. [2]

We understand through Departmental channels the Prime Minister
feels that, in view of recent publicity [3], Cabinet might be
unduly cautious in considering questions relating to Japan before
the elections and is anxious for the present to avoid raising
issues which might possibly be contentious.

In the light of the Prime Minister's views, the interdepartmental
Committee preparing a report on Japan's trading position (the
Committee comprises representatives of the Departments of Commerce
and Agriculture, Trade and Customs, Treasury and National
Development) agreed at a meeting on 9th February that completion
of the report should not now be regarded as a matter of urgency.

Moreover Treasury suggested that Japan's sterling position was not
yet critical since United States aid was continuing and Japan
could swap dollars for sterling. It was decided to amend the draft
conclusions of the report and take account of the Treasury view.

It was thought that the report might be ready for consideration by
Cabinet in two weeks to a months time. We understand that one of
the conclusions of the report is that Japan might well be placed
in the same import licensing basis as other non-dollar countries.

The interdepartmental Committee apparently does not, however, see
any prospect of this being done before 1st July, 1954.

We understand that the Department of Trade and Customs propose to
recommend a further general relaxation of import licensing
restrictions to take effect from 1st April and at the same time to
recommend further relaxations on imports from Japan.

The consideration of matters affecting trade with Japan is now
being treated as highly confidential.

As regards a reply to the outstanding Japanese notes, the
Department of Trade and Customs are preparing as a matter of
urgency a redraft for circulation to Departments concerned. There
appears to be agreement among the Departments that this reply
should be as helpful as possible, within the limits of existing
Government decisions, and that details should be given on the
extent of previous relaxations and on current administrative
policy. As regards informal talks, the view is strongly held by
Trade and Customs, Treasury and National Development that nothing
can be done to meet the Japanese request at this stage. It is, of
course, understood that Mr Nishi might be asked to receive our
reply to his aide memoire of 14th January, 1954, and that some
remarks would necessarily be made at the time by the Secretary or
Assistant Secretary of this Department. (A reply should also be
made to our Embassy in Tokyo in response to the note of 5th
November, 1953, from the Japanese Ministry of Foreign Affairs).

You will be aware that, following the conclusion of the sterling
payments agreement between the United Kingdom and Japan on 29th
January, 1954 [4],(see attached copy of Commonwealth Relations
telegram No. 4 of 29th January) the New Zealand Government has
announced its willingness to enter into bilateral trade talks with
Japan. In this regard, Mr Nishi informed the Secretary in the
course of a courtesy call on 5th February that Japan now proposed
to work out detailed trade arrangements with sterling area
countries to fit into the general framework of the overall
sterling area payments arrangement.

Under the circumstances it is doubtful whether action at present
proposed will go far to meet the wishes of the Japanese

1 A long submission signed by Shaw and Upton noting that a report
on Japan's trading position being prepared for Cabinet by an
interdepartmental committee would not be ready for some time, and
that a draft reply to Documents 46 and 48 by Trade & Customs was
being amended after discussions with the departments concerned.

There was little hope of early agreement to trade talks, although
the negative tone of the draft reply had prompted the Department
of Commerce & Agriculture to recommend that McLeay urge immediate
agreement. His proposal was likely to be favoured by the
departments of National Development and Prime Minister, but
opposed by Trade & Customs and not favoured by Treasury until the
wider issues of Japanese trade had been considered. The submission
recommended that DEA support early dispatch of the redrafted
response, and seek membership of the interdepartmental committee,
in view of the overriding importance of removing an irritant in
relations with a powerful neighbour, of keeping Japan in the
Western trade orbit and preventing her adopting prewar 'bad
practices' such as dumping and subsidies.

2 See Document 50 and note 5 thereto.

3 A US proposal to use Japanese technicians for a survey, under
the ANZUS Pact, of waters around New Guinea and New Britain had
drawn widespread hostility in Australia late in January.

4 The agreement was extended for a further year until 31 December
1954. Japan had ended 1953 with a substantial sterling deficit on
current account; the United Kingdom undertook to help Japan earn
sterling by measures including partial relaxation of United
Kingdom import restrictions.

[AA : A1838/278, 3103/10/2, iii]
Last Updated: 11 September 2013
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