Trade Talks with Japan
This note is supplementary to the one which was sent on to you
last night. [1] I doubt whether the submission will carry
Ministers' discussion very far. The attitudes of the various
Departments to this matter are pretty rigid and as a result the
paper has been prepared by this Department and is pretty
colourless in order to avoid active opposition by one or another.

Commerce are anxious to have some Agreement or other with Japan
because they think it will help our exports. Customs want to have
as little to do with Japan as possible because their past
experience tells them that dealings with Japan are invariably
headaches for them. Treasury is anxious that nothing should be
done until we have a reasonably clear idea of how it is going to
work out. Our own view is very similar to Treasury's but we do
feel under some obligation to get something to Cabinet.

At the outset, I think we should ask, 'Why do we want an
Agreement?' The answer is, I think, because we want to be able to
exclude Japan from full participation in GATT. By this I mean that
we want a reason for refusing Japan m.f.n. treatment in Australia.

If this view is correct then it excludes what I might call the
External Affairs view, that is, that it is time that we welcomed
Japan into the Western group of powers and a Trade Agreement is
one way in which the welcoming hand can be extended. This view, so
far as Australia is concerned seems to me to be purely theoretical
at the present time. Any Trade Agreement which would arouse
feelings of gratitude in Japanese breasts must give them something
and this is precisely what we are not prepared to do. For the same
reason I think the Commerce view is unrealistic. We need not
expect the Japanese to give us benefits of any consequence in
Japan unless we are prepared to give them some. Moreover the
conditions of trade seem to be weighted very much in our favour.

On last year's figures, out of something like 70m. worth of
exports from Australia to Japan 61m. was wool. There is no tariff
on wool and it is difficult to believe that Japan would readily
place duty on a raw material like wool just to annoy us when Japan
has no local industry to protect.

Theoretically there are perhaps four positions that can be
identified, each becoming less preferable from the Australian
point of view.

1. Japan having no m.f.n. treatment in Australia under GATT and no
agreement outside GATT (present position);

2. An agreement incorporating a quota system;

3. An agreement incorporating the Canadian duty method;

4. No agreement and Japan receiving m.f.n. treatment in Australia
under GATT.

Apparently we start with the assumption that 1 and 4 are out. The
real issue then seems to be, 'What are the respective merits of 2
and 3?'This seems to me to involve a close examination of (a)
vulnerable industries, and (b) important industries. The
submission is woefully deficient in this respect. Either Customs
do not know the answers or they will not tell. Textiles and toys
are traditionally the things most affected by Japanese competition
and a precise examination of these at least should be made. It may
be possible to get a clearer view by inviting a senior Customs
officer along to the Committee Meeting on Tuesday. If so, some
mention of it should be made today because not only is Meere away
in Europe but the top bracket of Customs people is likely to be in
Sydney next week unless Short is warned that his presence will be
needed by Cabinet. [2]