Import Licensing of Japanese Goods and the Proposed Trade and
Tariff Talks with Japan

In connection with Cabinet submissions Nos. 135 and 142 [1], the
Department of Trade and Customs submits for consideration the
following line of approach in the matter of.

(a) The assimilation (partial) of Japan into the import licensing
system applicable to non-dollar countries.

(b) The proposal for Trade and Tariff talks with Japan with a view
to placing the trade and tariff relations of the two countries on
a more satisfactory basis but also taking GATT factors into
consideration.

First Step
A decision should be taken by the Government on the Department's
specific proposals relating to the partial assimilation of Japan
into the licensing arrangements applying to imports from non-
dollar countries. These proposals are explained in Annex A. [2]

Following a survey directed towards listing all goods which are
regarded as likely imports from Japan two tabulations are
attached, viz:-

Annex B: listing the principal goods proposed for assimilation
into the non-dollar licensing system.

Annex C: listing goods which the Department proposes should be
excepted from complete assimilation.

Second Step
If the Government approves the Department's import licensing
assimilation proposals, the Ministers abroad to be informed of the
specific proposals and consulted before the assimilation plans are
put into effect. If Ministers abroad concur, the proposals can be
put into effect independently of developments in the 'Trade and
Tariff Talks' field.

Third Step
A decision should be taken by the Government on the Department's
submission (Annex D) bearing on 'Trade and Tariff Talks' aspects
of the matter including the aspects having relationship to
G.A.T.T. questions.

Fourth Step
The decision of the Government on 'Trade and Tariff Talks' aspects
to be conveyed to Ministers abroad to obtain their reactions and
to avoid them embarrassment in their dealings either with
Commonwealth countries or with G.A.T.T. matters.

Fifth Step
When the proposals for the assimilation (partial) of Japan into
the non-dollar licensing system are finally approved by the
Government and by the Ministers abroad, they could be put into
effect promptly thereafter, if that course is desired. It is
assumed that the Government does not propose to negotiate with
Japan on licensing assimilation issues but act voluntarily.

Sixth Step
When the reactions of Ministers abroad bearing on 'Trade and
Tariff Talks' aspects have been received, a final decision as to
how those aspects are to be dealt with vis-avis the Japanese
Government would be taken.

Annex C

COMMODITIES RECOMMENDED FOR LIMITED ASSIMILATION WITH OTHER NON-
DOLLAR IMPORTS

COMMODITIES TARIFF ITEMS
Cotton piece goods, 105(A)(1)(a), (b), (c) and (d)
Furnishing and upholstery fabrics 105(A)(3)
Cotton flannelettes 105(C)
Artificial silk piece goods 105(0)(1)
Velvets, velveteens and plushes 105(E)(1)
Waterproofed piece goods 105(H)(1)
Trimmings and ornaments for attire 106(B)
Buttons 106(F)(3), (4) and (5)
Ribbons 107(A)
Artificial flowers and fruits 109
Dress gloves 113(B)
Handkerchiefs 120(B)(1)
Towels and towelling 120(C)(1)(b)
Flat bed knitting machines 168(A)(3)
Domestic sewing machine heads 168(B)(2)
Filament lamps (except motor vehicle types) 180(0)(2)
Cutlery 197(B)(2)
Aluminiumware 204(B)(1)
Tools of trade 219
Portland cement and clinker 234(A) and (D)
Porcelaineware for electrical purposes 237
Flooring and wall tiles 240(A)
Crockery and other chinaware and porcelaine 241 (B)
ware
Glassware 250(C)(2) and (F)
Sulphur 275(A)(1)
Plywood 291(M)
Articles for games (including sporting gear)310(A)(2)
Toys 310(B)
Artificial jewellery 314
Cinematographs 320(A) and (B)
Spectacles and sunglasses 321(A)(2) and (3)
Elastic (up to 6 inches in width or diameter)331 (B)(2)(b)(1) and
(2)
Pencils, pencil cases, fountain pens 346(A)(1), (C), (D), (E)
and (F)
Bags, baskets, cases, purses etc. 376(A), (B) and (C)
Cotton yarn 392(A)(1) and (5)
Artificial silk yarn 392(G)

Annex D

TRADE AND TARIFF TALKS ASPECT
The form of any tariff agreement depends essentially on two
factors:-

(a) the structure of the Customs Tariff of the country whose
Tariff must be amended to put the agreement into effect;

(b) the nature of the Tariff concessions granted and the tariff
and other obligations assumed in the Agreement.

The Department has therefore anticipated the concessions and
commitments which Japan can be expected to seek if negotiations
for a Trade and Tariff Agreement are opened, and presents for
consideration its detailed recommendations as to the tariff
concessions which appear to be both possible and impossible.

(These recommendations are limited mainly to those items on which
the duties applicable to Japan would be lower if Australia
accepted an obligation to accord m.f.n. treatment to Japan.)
The Department has taken that action because it is very evident
that it is the only way of illustrating the nature and dimensions
of the very difficult issues which need to be decided before
serious negotiations with Japan could be contemplated.

The exercise and the detailed studies which it has involved lead
the Department to the following views:-

(a) The present Tariff as it applies to Japan is out of date. This
applies particularly to the pre-war specific rates which were used
extensively as protection against low value Japanese imports.

Post-war, the Tariff Board when recommending m.f.n. rates on a
number of items stated that reference back to the Board may be
necessary if Japan is granted the m.f.n. tariff.

(b) The import licensing restrictions maintained against Japan
since 1941 have been applied so selectively that no one is in a
position to assess the possible intensity of Japanese competition
in particular products under a more liberal import regime.

Experience over the last year since the facilities for the
importation of Japanese goods have been extended to a wider range
of goods suggests that many surprises may be expected.

(c) It appears unlikely that the Government will find it possible
to concede Japan the m.f.n. tariff rates on all items unless that
concession is associated with some quantitative limit having
discriminatory application to Japan.

(d) The Canadian Agreement with Japan provides no answer to
Australian problems. The Canadian approach may be suitable where
an embarrassing increase in imports is expected only as an
exceptional event in the future. It is unsuitable where an
embarrassing increase is already foreseeable.

(e) If the Government, after considering the departmental
recommendations on individual items, accepts that the accord of
m.f.n. rates must be associated with quantitative restrictions,
the UK proposal in the G.A.T.T. context for rules to permit
agreements providing for discriminatory quotas or duties to
protect domestic industry or the export interests of other
countries against 'disruptive or manifestly unfair competition'
from Japan would go part of the way to meet the Australian
position if the proposal is accepted by the Contracting Parties.

Acceptance appears doubtful.

(f) It appears very unlikely that the frame work of the G.A.T.T.

provisions could be used as the basis for a satisfactory Agreement
between Australia and Japan. In that case it would be necessary to
avoid negotiations with Japan in the G.A.T.T. context, and to
refrain from signing the Protocol of Japan's accession when the
time comes to make decisions on those matters. (Probably in
November and June respectively).

(g) As the G.A.T.T. is to undergo review and it cannot be foreseen
what new rights and obligations it may include, it does not
provide a satisfactory framework for dealing now with the special
problems associated with Japan.

(h) At present, the Department cannot see a basis for assuming
that it would be possible to negotiate with Japan a formal
agreement of the kind which the Japanese Government could be
expected to accept, for the reason that, as the Department sees
the difficulties, it would involve Japan's formal acquiescence in
the application of discriminatory treatment to her major exports.

This view is of course dependent on the decisions yet to be taken
by the Government as to the concessions possible on the individual
Tariff items.

(i) The most practical course appears to be one of informing Japan
that the Government proposes to examine, with goodwill, ways and
means of affording Japan greater opportunities to expand her
export trade to Australia, and to follow a policy of progressively
easing import restrictions on Japanese goods (especially
discriminatory import restrictions) whenever developments under
the proposed more liberal licensing arrangements reveal that
special protection against Japan is unnecessary on particular
products. In addition Japan could be accorded, on a non-
contractual basis, m.f.n. tariff rates on as wide a range of goods
as protective considerations (and possibly preference
considerations) permit. After Australia has had actual experience
in trading under the more liberal conditions, experience may show
that a basis exists for a formal Tariff Agreement with Japan.