G.A.T.T.-Admission of Japan
I understand that the U.K. Ministers were anxious to know your
Government's attitude on the question of the admission of Japan to
G.A.T.T. [1] Sir Frank Lee [2] told me that the U.K. Government
had now decided to apply Article 35.

You will recall that under this Article it is possible to say
about a new member of G.A.T.T. that the obligations of G.A.T.T.

will not be assumed towards that new member. Accordingly the U.K.

has decided that so far as Japanese/U.K. trade relations are
concerned these will be conducted outside G.A.T.T. Principal
importance of this decision is that the U.K. will not be obliged
to extend to Japan most favoured nation treatment throughout her
tariff.

I understand that the U.K. Ministers reached this decision after
rather prolonged debate in which the official point of view was
strongly put by the Foreign Office. Their anxiety concerning your
view was les[t] an Australian decision might be taken to admit
Japan to the obvious embarrassment of U.K. government.

I, of course, gave no indication of any decision by your Cabinet,
but did briefly review the factors in the problem before us. These
are broadly similar to those operating in the U.K. case with one
important difference.

The central problem for Australia is whether or not to grant most
favoured nation treatment. Politically and economically this would
be extremely difficult on some items of our tariff. The general
presumption amongst officials has been that we too must apply
Article 35 and conduct our trade relations outside G.A.T.T. unless
it were found that the Canadian solution were adaptable to our
purposes. Briefly the Canadian approach is to grant most favoured
nation treatment to Japan with a major proviso. Under this proviso
should Japanese imports threaten Canadian industry by low prices
then the Canadian Government is free arbitrarily to assess the
value of Japanese goods for duty purposes. The assessment would
restore the landed price to that considered not unreasonable for
competition with local industry.

We strongly doubt whether this method is in fact legal under the
G.A.T.T. rule, but the Japanese are not disposed to challenge it.

However, Customs Department have some real objections to the
course and it must be confessed that it still requires the
Government to sell the idea that manufacturers are adequately
protected by the advice [3] from unfair Japanese competition.

On the whole my expectation is that officials will advise the
Government to apply Article 35. Meanwhile no haste is being shown
by either side in the bilateral trade talks between Australia and
Japan. We are in no hurry and the Japanese are naturally stalling
in the hope that we will declare something of our attitude towards
her admission in G.A.T.T. [4]