216 Mr Torao Wakamatsu, Japanese Consul-General in Sydney, to Mr J. A. Lyons, Prime Minister

Letter SYDNEY, 14 June 1938

With reference to your letter of June 1st [1], replying to my representations of May 24th [2], and in which you informed me that the Commonwealth Government could see no justifiable reason for altering its decision to prohibit the export of iron ore from Australia, I have the honour to state, under instructions from the Imperial Government, to whom I conveyed the details of your letter, that the principle, as set forth in your letter, of the conservation by a State of its natural resources does not necessarily directly justify such a drastic measure as will lead to the compulsory forfeiture of the vested interests of foreign nationals, and that it is the right of any Government, should the legitimate interests of its subjects become jeopardised by any unreasonable cause, to do its utmost to safeguard such interests.

I am also instructed to present to you the further views of my Government on this question of the embargo on iron ore exports, as follows:-There is no room for doubt that, as you stated in the House of Representatives on May 19th [3], and as Dr Woolnough also implied in his Report [4], a practical, critical, and complete survey of Australia's iron ore resources has yet to be made, to clarify and stabilize the whole question. In the absence of such a survey as that mentioned above, such a drastic and far-reaching measure against foreign interests as is now contemplated by the Commonwealth Government cannot be justified.

Secondly, no fresh evidence as to the extent of Australia's iron ore resources has appeared, to justify the sharp change of policy on the part of the Commonwealth since August last year, when your Government reiterated its affirmation of the adequacy of Australia's iron ore deposits, and its assurances that it had no intention of interfering with the developmental work at Yampi Sound. Therefore, it is evident that no emergency has arisen necessitating such a drastic measure.

Thirdly, in view of the fact that the Commonwealth Government is taking into consideration only the quantities of iron ore which can be developed economically, and also that no embargo on the exportation of pig iron or steel is contemplated, it is evident that nothing vital in this connection has occurred to disturb the basic conditions of the national life of Australia. It can reasonably be inferred that the only result of the contemplated measure will be the accumulation of monopolistic profits by iron and steel industries in Australia. Such a measure as will encourage the augmentation of particular industrial profits at the vital sacrifice of legitimately vested foreign interests, can in no wise be justified.

Fourthly, the iron ore deposits which are capable of economic development, are not absolutely limited, as their capability in that respect will increase according to both the improvement of productive technique and the growing demand. The development of the Yampi Sound deposits, which Dr Woolnough reported to your Government to be one of the two main economical sources of iron ore in Australia, had been entirely neglected as an uneconomical enterprise, until the Japanese industrialists invested their capital in the work.

In view of the above-mentioned facts, the Imperial Japanese Government can see neither any justifiable reason why the exportation of such a reasonable amount of iron ore, out of the enormous total deposits, as is necessary to enable the enterprise at Yampi Sound to carry on economically, will have a vital effect upon the national requirements of Australia, nor any absolute and urgent necessity for depriving the Japanese investors of the fruits of their strenuous preparatory work, the completion of which is now in sight.

Furthermore, I have the honour to state that, besides the security of the development work at Yampi Sound, the question about which the Japanese Government is no less seriously concerned, is the undesirable disturbance which it is not improbable the contemplated embargo may cause to the traditional amicable relations between Australia and Japan, for the promotion of which the Japanese Government has often expressed its sincere desire, the Commonwealth Government reciprocating this sentiment; for, the measure cannot but be judged, from its practical results, to be particularly disturbing to Japan, despite your abstract assurance to the contrary. It is a matter of great regret to the Imperial Government that, without any well-established evidence of absolute and urgent national necessity, the Commonwealth Government is about to take such an inequitable measure, which is obviously contrary to the general current of world opinion, which, in view of the immeasurable harmfulness of economic nationalism, is urging the remedying of the mal-distribution of natural resources among nations by such peaceful means as freer access to raw materials and freer markets for exports.

I have the honour to state, therefore, that the Japanese Government cannot but most earnestly request the Commonwealth Government to abandon the contemplated absolute and far-reaching embargo on iron ore, the imposition of which, judging from what has appeared in the press, does not seem to meet with the approval of persons of impartial views.

TORAO WAKAMATSU

1 Document 213. It was in fact sent on 2 June.

2 Document 208.

3 See Document 202.

4 Attachment to Document 203.

[AA : A981, AUSTRALIA 90]