In my letter of 4th April [2], forwarding some papers on Japan, I
touched on certain major developments in Japan and how they appear
to us in Canberra. It has occurred to me that a few notes on the
attitudes in Australia to certain current issues in our relations
with Japan may provide a useful supplement to this earlier letter.

Public opinion here on Japan generally is less vocal and excitable
now than it was two years ago. The more sensational of the local
newspapers have adopted a more moderate line in their handling of
news items concerning Japan. The following extract of a recent
leading article which appeared in the Sunday Telegraph provides a
fair sample of recent Australian editorial opinion:

'In the last ten years there have been encouraging reports of a
Japanese change of heart and general outlook. Australians who took
part in the last war will try to sink their scepticism, and hope
that the new relationship with Japan can be founded on a realistic
decency and not on an assumption that might is right.

Today's realities of global co-existence make it inevitable that
former enemies make their peace. We are at peace with Japan-let's
hope we can become friends.'
Various visits of Japanese to Australia over the past twelve
months-e.g. of the Japanese training ship Taisei Maru, and of the
two Cabinet Ministers, Kawasaki and Miki-evoked little comment in
the press and passed off completely without incident.

It would be going too far to say that anti-Japanese feeling in
Australia has evaporated. We must see that we do not get too far
ahead of public opinion in our official dealings with Japan.

The RSL is, naturally enough, a factor to be reckoned with in our
efforts to promote closer relations with Japan. In August 1955,
the NSW State Congress of the RSL passed a resolution expressing
'the strongest possible opposition' to a 'soft' policy towards
Japan. However, the Federal President, Sir George Holland,
personally takes a more moderate attitude.

The major current issue in our relations with Japan is the pearl
fisheries dispute. There are, as you know, two distinct problems
to this issue-the Special Agreement for referring the dispute to
the International Court, and the Provisional Regime Agreement
which governs Japanese pearling operations pending a decision by
the Court.

We have not got very far on the first of these problems-the
Special Agreement. The Japanese produced their first draft in
February 1954, we replied with our own draft in February 1955, the
Japanese came back with a revised draft in August 1955, and Bailey
[3] is still preparing his reply to this last Japanese draft.

Bailey has moved very slowly indeed on this matter and we have had
no success in our efforts to hasten him along. I suspect that he
is following a deliberate policy of delay on this matter. He can
claim however that he has been kept busy with other matters, and
that a good part of the delay has arisen in London with various
international law experts whose views he feels he should have.

Recently Bailey has been considering whether it might perhaps be
advisable, given the difficulty at reaching agreement with the
Japanese on the terms of reference to the International Court, to
let the Japanese take us to Court without a Special Agreement. He
feels that if the Court's decision should go against us there
would be less local criticism of the Government if it had been
brought before the Court by the Japanese acting unilaterally, than
if it had entered into an agreement with Japan for submission of
the case to the Court. There may be something to this view but I
am inclined to doubt whether public opinion will attach very much
importance to the method of procedure by which the case is
submitted to the Court. If Australia loses the case, the
Government will be subjected to criticism, come what may.

Whilst the Special Agreement is exclusively in the hands of the
Solicitor-General, the Provisional Regime is handled by five
Departments. In addition to ourselves, there are the Departments
of Primary Industry (which now administers the Pearl Fisheries
Act), Trade (which contains the officers formerly of Commerce and
Agriculture who have handled pearl fisheries questions since the
beginning-Dr Westerman and Warwick-Smith), Territories, and the
Attorney-General's Department. This multiplicity of interested
Departments tends to bog down questions arising under the
Provisional Regime Agreement and makes it difficult to give the
Japanese a quick answer to their various requests. Attorney-
General's and ourselves take the identical view that arrangements
for the Japanese must be reasonable and based only on genuine
conservation requirements. Attorney-General's view stems mainly
from the desire to do nothing under the Provisional Regime which
may prejudice our case when the fisheries dispute comes before the
Court. We base our own view on general policy towards Japan and
the possible effect on future negotiations with Japan, as well as
the pending Court case. Trade and Primary Industry generally
support our views on this question.

The Minister for Primary Industry, Mr McMahon, has shown himself
more than ready to hear the External Affairs point of view, and I
have had a couple of long conferences with him in which I
(together with Bailey) warned him that decisions which enable the
Japanese to show that we have been unreasonable and denied them
access to pearl shell over and above the true requirements of
conservation will work against us when the question eventually
goes to the Court. Bailey warned him that, if the Court ruled
against Australia, it may well quote in extenso the Australian
Government's decisions which caused the Court to rule against
Australia; and that this is a prospect of domestic political
significance of no less long-term moment to the Government than
some of its immediate worries about letting the Japanese into
Western Australian and Queensland waters on the eve of elections
in those States.

Please keep strictly to yourself this reference to the local
political situation. I think Suzuki has deduced from remarks made
by McMahon that pending State elections are causing difficulties
for the Commonwealth in providing certain fishing areas. But we
have never told them formally and I do not think that the
Government would want any such attitude to appear on record, even
if they thought that frankness with the Japanese would convince
the Japanese that they ought to be patient and not press for
something which would be politically embarrassing. As to this last
point, I have been offering the opinion that the Japanese would be
unlikely to be tolerant of domestic political difficulties if we
did lean on that argument. I see no reason why the Japanese should
not take a hard line in the belief that, if Australia gave them
what they wanted, they would be so much better off and, if
Australia refused to give them reasonable access, their long-term
case before the Court would be so much strengthened.

Territories Department has consistently adhered to an unreasonably
narrow attitude on the Provisional Regime, dictated it would seem
solely by their desire to keep to a minimum the Japanese pearl
shell catch from Northern Territory waters. They remain completely
unmoved by the argument that unreasonableness at this stage may
mean in the long run, through loss by Australia of the Court case,
that Australia will have no future control over Japanese pearling
activities. For example, this year Territories at the outset of
discussions said that the total permissible catch for the Japanese
in the Northern Territory Division would be 250 tons. The
Commonwealth Fisheries Division figure for the Northern Territory
was 850 tons. After considerable discussion this figure was
reduced to some 700 tons in an effort to meet Territories' views.

Territories however are sticking to their original figure of 250
tons, without giving any convincing reasons in support of this
figure, which we all know to be quite arbitrary.

I see little hope of bringing Territories around to our point of
view on this matter. They will continue to exercise a delaying
effect on all decisions and the most we can hope is that with the
support of Primary Industry, Trade and Attorney-General's, we
shall be able to surmount Territories' objections and give the
Japanese something approaching a fair deal.

Another issue of some significance in our relations with Japan is
the war criminal question. Whilst France, the Philippines, and
Nationalist China have released all Japanese minor war criminals
sentenced by their Courts, we still hold 120, the United States
130, the Netherlands 88 and the United Kingdom 15 in Sugamo
Prison. The United Kingdom and Netherlands will probably release
all their prisoners by the end of this year and it seems likely
that the United States will also this year rid itself of the bulk
of its prisoners. We have moved very carefully on the war criminal
question. As you can appreciate it is a potentially explosive
question in Australia. We commenced releasing minor criminals on
parole last September, and so far have released over 30. The press
has taken little or no notice of their release and we feel that
the rate of release should be accelerated. However, it seems
certain that short of granting amnesty, which I think would be
quite unacceptable to public opinion here, we shall shortly be
forced into the position of being the only former Allied Power
still holding Japanese war criminals in Japan. This is unfortunate
but will have to be faced. The difficulty is that Australia was
sentencing Japanese war criminals as late as 1951. Some life
prisoners therefore have only served five years of their sentence
and will not be eligible for release, even under the present
generous provisions, until 1961.

These war criminals are held under the War Crimes Act which is
administered by the Department of Army. Army has not proved too
difficult on this question, but generally favours a more cautious
approach than ourselves. We have had to prod them along a little
on occasions but have in the long run received their agreement to
whatever we have sought. At the moment we are clearing with Army a
submission to Cabinet recommending a speed up in the rate of
release of these war criminals and the release on parole and
repatriation of some 42 Korean and Formosan War criminals held in
Sugamo. If the submission is approved we should be able to reduce
the number of prisoners held by Australia to 20 or 30 by the end
of this year. This should go a long way towards meeting Japanese
demands that something be done on this matter, although this
question will still remain an irritant in our relations.

The remaining question of importance which I would like to mention
is that of trade with Japan. There have been informal trade talks
with Japan as a preliminary to more formal discussions and the
records of these informal talks are in the Embassy. Although the
results of the informal talks have not yet been considered by
Ministers, the Department of Trade believes that there exists a
basis for a useful arrangement with Japan under which we might
relax our import licensing restrictions on a number of Japanese
goods and our customs duties on a number of items in return for
some commitments by the Japanese on grain and wool of the kind
they have given to Canada.

In two respects we exercise discrimination in our trade relations
with Japan. These are firstly our tariff treatment of Japan (i.e.

duties imposed on imports) and secondly our import licensing
treatment.

Australia has what is called a three column tariff in ascending
order of magnitude. The first column gives the British
preferential tariff rate. The second column gives the 'most-
favoured-nation' (m.f.n.) rate, and the third column, which
applies to Japan, gives the 'general tariff rate'. There are very
few countries trading with Australia which do not have the benefit
either of the British preferential or the most-favoured-nation
rates. Japan is certainly the only major trading country to which
the general tariff rate applies.

A few months ago, Cabinet considered the possibility of extending
m.f.n. tariff treatment to Japan when the question of Japanese
accession to the General Agreement on Tariffs and Trade (G.A.T.T.)
was under consideration. It was decided that because of the
uncertainties regarding the strength of Japanese trading
competition and the possible effects of such competition on
Australian industry and employment, Australia could not at this
stage agree to give Japan m.f.n. tariff treatment. A secondary,
but in the domestic political scene quite important, consideration
was the possible effect on British markets in Australia of
sharpened Japanese competition in such commodities as cotton
textiles.

The volume of our imports is controlled by our import licensing
system. We have separate quotas for dollar and non-dollar imports.

However, the treatment accorded Japan is less advantageous than
that accorded to other non-dollar countries. Generally speaking,
an import licence does not specify the country from which the
goods must be imported, beyond distinguishing between dollar and
non-dollar sources. That means that the holder of an import
licence may select his own source of supply. However, freedom to
import from Japan is limited. A list of 36 items has been compiled
(comprising Japan's major items of export to Australia) and an
importer cannot import from Japan more of any commodity on that
list than 16 and two-thirds per cent of the amount (by value) ...

imported from all non-dollar countries during the year ended 30th
June, 1954. The restriction on import licences from Japan was
fixed by the government partly to test the strength of Japanese
trading competition, and partly to protect British (not
Australian) industries from competition.

It is one of the requirements of the General Agreement on Tariffs
and Trade that Contracting Parties must accord each other most-
favoured-nation tariff treatment. (Imperial preferences are
specifically protected). But one article in the Agreement (Article
XXXV) provides that the Agreement shall not apply as between one
contracting party and another if 'either of the contracting
parties, at the time either becomes a contracting party' does not
consent to such application. When Japan's accession to the
G.A.T.T. was under consideration we decided not to vote against
Japan's admission so as to avoid putting obstacles in the way of
countries which wanted to regulate their trade with Japan under
the G.A.T.T., but decided to invoke Article XXXV because we would
not otherwise have been able to maintain the existing level of
tariff protection against imports from Japan except by raising the
m.f.n. tariff rate. Japan's admission to the G.A.T.T. was
unanimous, but fourteen countries, including Australia, New
Zealand, United Kingdom, France, India and South Africa invoked
Article XXXV. Although the United Kingdom invoked Article XXXV,
she does give Japan m.f.n. tariff treatment. The U.S.A. and Canada
did not invoke Article XXXV.

The question of the conditions under which Japanese businessmen
can enter and stay in Australia was covered in a note attached to
my letter of 4th April. The point which gives me some concern is
whether the Japanese will be content to be told that they have
conditions no more onerous than those apply to other Asians. It
seems to be the aim of the Department of Immigration to equate the
treatment given to Japanese with that given to other Asians,
particularly Chinese. This is commendable in itself but it is not
quite the entire point. The Japanese may well ask to be treated no
less favourably than any other alien, for example French or
American. On this we have not been able to clarify the thinking of
the Department or Minister of Immigration.

I hope that these general remarks will be of some help to you in
interpreting the Australian attitude on the current issues now
confronting Australia and Japan.

[Handwritten]

Needless to say, they are personal and for your guidance: and not
for formal quotation back.