LONDON

Japanese problem.

The courses open to the Australian Government:

(1) Refuse any talk with Japan and apply Article XXXV when the
time comes. For reasons we will not repeat Cabinet has already
decided it must talk bilaterally with Japan.

(2) Let Japan in and apply XXXV if she offends our interests-the
American proposal. This has no merits for reasons given in
official cable. [1]

(3) Talk bilaterally with Japan outside GATT ignoring completely
the GATT position.

(4) Try to get a bilateral agreement with Japan not inconsistent
with GATT. Canadians believe they have done this but such a treaty
involves giving m.f.n. on all lines relying on arbitrary valuation
for duty purposes if trouble arises.

(5) Support British proposal amounting to admitting Japan to GATT
after concluding a bilateral agreement provided admission to GATT
does not require us to give up any discrimination embodied in
agreement. Americans will oppose this. If we are to support it we
must decide by middle or early November since an amendment to
Article XXXV is required.

2. Of these numbers (3), (4) and (5) are worth examination.

Support of course (5) does not deter a final result in terms of
(3) or (4). Even if a bilateral agreement were made with the
blessing of GATT there may develop, however, pressures in GATT
later on to weaken or terminate such an agreement and we would
need to weigh up the value of negotiating a bilateral agreement
completely outside GATT as against a bilateral agreement having
recognition by GATT and enabling us to accept Japan as a GATT
partner. Officers here and in Canberra can further examine the
British proposal to enable the Government to define its attitude
at the latest by the time the proposal is formally presented at
Geneva. The urgent matter at present is the question of opening
talks with Japan.

3. We stress very strongly the urgency of opening these talks for
the following reasons:

(a) Having taken decision to talk and having regard to the
economic and political position of our relation with Japan we
should not weaken our strength in bargaining by being the last in
the queue for talks. New Zealand and Canada have acted and United
Kingdom bound to start some communication soon.

(b) The recommendation of the Intersessional Committee that
arrangements be made for tariff negotiations between the
contracting parties and Japan commencing 1st February, 1955 with a
view to Japan's accession to GATT means in effect that a decision
in principle on Japanese accession to full membership of GATT will
be made at the ninth session commencing 28th October. It is
certain in our view that the decision will be in favour of
Japanese admission. If we wait it may appear that we are finally
agreeable to try and reach agreement with Japan on a bilateral
basis because it is obvious to us that every other country will
shortly have regulated their trade relations with Japan through
GATT or bilaterally.

(c) The fact that we have commenced negotiations with Japan would
make more urgent the United Kingdom desire to get some assurance
that a provision will be written into Japanese/Australia bilateral
agreement which will protect the interests of Lancashire
industries in the Australian market. This will give us a stronger
bargaining counter in our talks here aiming to get an
understanding with United Kingdom to protect Australian exports in
the United Kingdom markets.