CANBERRA

Australia's Trade Relations with Japan
The question of Australia's future trading relations with Japan
has arisen in two ways, viz:-

(i) through representations made by the Japanese for trade
discussions, either formal or informal; and for relaxations in
Australian licensing treatment of Japanese goods.

The Japanese presented notes on 5th November, 1953, and 14 January
1954 [2] which have not been answered, although information
concerning the relaxations made and the present level of licensing
was given verbally and confidentially to Mr Kakitsubo on 5th
April. [3]

On the matter of trade discussions you will recall that on 12th
March you confirmed to the Japanese Ambassador advice previously
given him by the Minister that that time was inappropriate to open
discussions on contentious issues. [4]

(ii) through Japanese attempts to initiate tariff negotiations
under the GATT with a view to accession to that Agreement.

2. This was overcome for the time being at the last session of the
contracting parties in October, 1953, by adoption of a procedure
under which contracting parties, who wished to do so, could sign a
Declaration agreeing to apply the GATT between themselves and
Japan. Australia abstained on the vote along with the UK, New
Zealand, South Africa, the Federation of Southern Rhodesia and
Nyasaland, and Czechoslovakia. These six countries, and France,
Indonesia, Cuba and Peru, have not signed the Declaration-24
countries have signed.

3. Japan with the support of the USA has again asked I.C.I.T.0.

[5] to arrange tariff negotiations, with a view to accession to
the GATT. The US has offered to consider requests for tariff
concessions from countries which agree to negotiate with Japan.

4. An expert committee, composed of the Departments of Commerce
and Agriculture, Trade and Customs, Treasury and National
Development, set up under the direction of Cabinet, has produced a
report on Australia's trading relations with Japan (see attached
submission of 29th June). [6] The only recommendations in the
report are 'short-term' measures in relation to import licensing
controls (para. 62). It considers that the present is not the time
for long-term decisions on our trade relations with Japan; nor,
the report says, is it appropriate to decide immediately such
questions as:

(i) the application of the GATT to Japan;

(ii) the grant of m.f.n. tariff treatment to all, or some, imports
from Japan;

and
(iii) the Australian attitude to Japan's request for trade
discussions.

5. This report is in the hands of the Minister for Trade and
Customs, who will presumably submit it to Cabinet. We have not
been able to ascertain when this will be done.

6. The Interdepartmental Committee on the GATT has discussed in a
preliminary way Japan's renewed request for tariff negotiations
under the GATT but, since the question of scheduling the
negotiations can only be decided by the contracting parties at
their session in October, it is unlikely that concrete
recommendations on the matter will be put to Cabinet for some
time.

7. The Minister for Commerce and Agriculture has suggested to the
Prime Minister that informal discussions be held soon between
Ministers on a number of matters, including the revision of the
GATT, trade with Japan and the provisions of the Ottawa Agreement.

As we understand it, Commerce officers feel that by this means
Departments will be able to clarify lines of policy they can work
to with the objective of putting concrete recommendations to
Ministers later.

8. It is possible that such discussions will be held in the newly
created Prime Minister's Committee on 21-23 July.

9. The interests of the Department of External Affairs and
Commerce and Agriculture run together on the general question of
trade with Japan. It would be well to concert a common line of
action on procedures and policy if this is possible. Our
objectives to some extent conflict with the concern of Trade and
Customs to protect Australian industry through the import
licensing controls and through retention, at least, of the present
tariff treatment accorded to Japan (General Tariff-the highest
level). Treasury appears to be in rather a dilemma at the moment,
since admittedly there is no ground for discrimination against
Japan, in exchange control policy, on balance of payments grounds.

(See attached cable 685 from the Australian alternate
representative on the Executive Board of the I.M.F.) [7]. National
Development's interest presumably runs parallel to Trade and
Customs.

10. It would seem that in whatever form the question comes before
Ministers it will be desirable to brief our respective Ministers
with a view to securing some broader concession than that
recommended in the Export Report referred to above. External
Affairs would cover the international political issues and
Commerce the commercial export considerations.

11. The principal problem lies in the measures which could be
advocated:

Association with Japan under the GATT is a remote possibility,
unless adequately safeguarded (but see Canadian example mentioned
below).

Extension of m.f.n. tariff treatment to all imports from Japan
likewise appears to be impractical, because of Australian
manufacturing interest, and Ministers' previously expressed
concern over the protection of the U.K. market in Australia.

M.f.n. tariff treatment on a limited range of goods (which it is
understood New Zealand has agreed to) would appear a possibility,
but it is not possible for us to make a selection of goods without
the cooperation of Trade and Customs. Moreover, it is understood
that Commerce and Agriculture have examined this and do not
consider it presents any solution.

On the import licensing aspect, the interdepartmental Expert
Report recommends removal of discriminatory licensing in respect
of those Japanese goods which offer no detriment to Australian
industries; this process to be spread over several licensing
periods. It may be possible to broaden this. Although the
Government has not committed itself specifically in relation to
Japanese goods, it has reiterated many times that import
restrictions generally are not intended for protection purposes.

The non-protection principle is the best answer to opponents of
the admission of Japanese goods, together with the ancillary
argument that they should look to the Tariff Board for protection.

The Japanese have expressed dissatisfaction with the system of
'administrative' licensing control applicable to all Japanese
goods. It would appear that no change could be made within the
recommendations of the Expert Report.

Approval to conduct trade discussions with Japan on a bilateral
basis would be helpful, but presumably we should need to know the
limits within which Ministers consider we could negotiate.

12. The Department of Commerce and Agriculture feel that the
agreement concluded by Canada with Japan provides the key to a
possible resolution of Australian difficulties. (A note prepared
on this by Commerce and Agriculture is attached.) [8] Under the
Agreement, Canada extended liberal treatment to Japanese goods, in
return for similar treatment by Japan to Canadian goods, but has
protected herself against conditions likely to cause injury to
domestic producers, by reserving the right to establish values for
ordinary or special duty on imports from Japan. Whilst agreeing to
apply the GATT to Japan, Canada has made this subject to the
provisions of her bilateral agreement [with] Japan.

13. If agreed by Mr Crawford, it is considered, we should
endeavour to secure the agreement of Ministers to the opening of
trade discussions with Japan, within the overall limits of
achieving agreement along the lines of the Canadian-Japanese
Agreement.