TOKYO

Trade Talks with Japan
[matter omitted]

2. Today I had lunch with Mr Udo, who is acting Chief of the First

Overseas Market (i.e. Sterling Area) Section of the International
Trade Bureau of MITI. The normal Chief, Mr Shima, is at present in
London with the delegation to the U.K. talks. Mr Udo has recently
returned from Canada where he spent about three years.

3. Mr Udo had spent the morning at an inter-departmental
conference dealing with the forthcoming talks with Australia. He
told me that one of the points which worried Japan was what he
described as 'the Australian request for safeguards'. On my asking
exactly what he meant by this, he said that it was our request for
the right to take unilateral action to protect Australian industry
from being damaged by excessive Japanese imports. (Although I am
well aware of our feelings along these lines and of our interest
in what has been called 'the Canadian approach', I have since
lunch been unable to locate any reference to safeguards in a quick
examination of the papers exchanged on 29th August. [1] Perhaps
the matter arose at an earlier stage.)

4. Mr Udo said that there were a number of interests who objected
to our request for safeguards and that the most vociferous of
these was the Textile Bureau of MITI, i.e. the group concerned
with the promotion of Japan's textile exports. He further went on
to say that he could not understand Australia making such a
request because we already had a very tight import licensing
system and this should provide completely for the protection of
Australian industry.

5. Emphasising that I was expressing my own personal opinion only
and that I could not in any way commit the Government, I said that
Japan should appreciate that the Government did not regard import
licensing as a permanent feature of the Australian economy. It
disliked the system and wished to abolish it as soon as the
balance of payments situation made that practicable. Against this
background, therefore, the Australian Government contemplated that
points of principle which might be agreed in the present trade
talks should be such as were capable of being carried forward and
working effectively in a situation where Australia had abolished
import licensing. I agreed that the question of safeguards to
Australia's domestic industry might be of little practical
significance at the moment but that we regarded it as a matter of
great potential importance in the future.

6. I further expressed by own personal opinion that even against
an import licensing background Australia might consider it
necessary and desirable to wish to retain some safeguards against
Japan capturing (e.g. in the case of textiles) the whole of the
import market to the serious detriment of other suppliers who were
good customers for Australian exports.

7. In relation to these two points Mr Udo said that he fully
understood the first, that the fact that it was the Government's
aim to abolish import licensing clarified a number of points which
had hitherto seemed to them to be obscure and that Japan had no
desire to attain a situation which would result in damage to a
significant Australian domestic industry. On the other hand,
however, he emphasised that Japan had no such feelings in relation
to other countries supplying the Australian import market. Japan
believed in free international competition and felt that it should
not be hampered by quantitative restrictions on its competition
with other countries for the Australian market.

8. He went on to emphasise that Japan could not regard the talks
as being satisfactory if we insisted upon limiting Japan's share
of the imported textiles. As against this, however, he realises
that we cannot, for instance, make concessions on the import of
rayon yam which would affect Courtaulds [2] and he fully
understands and appreciates the reason for this.

9. Four Japanese delegates are leaving here tomorrow week(26th
October) by Qantas for the talks. They are Mr Ushiba and Mr
Takashima, whose names I have already reported to you, together
with Mr Kawanami of the Foreign Office. The fourth man has not yet
been selected but he will be a Customs man from the Ministry of
Finance. Mr Udo told me that they did not expect the talks to last
very long and that the finance approved covers a stay of one month
only.

10. In my memorandum of 9th October, I mentioned that I was having
lunch with Mr Ushiba the following day. This, however, did not
eventuate because he was 'tied up'. However, I am endeavouring to
arrange a luncheon with the delegation early next week.