WOOL FOR JAPAN
For some time past the Commonwealth Government has been in negotiation with S.C.A.P., through the Australian Political Liaison Officer, Tokyo , for the supply of wool to Japan.
2. The discussions originally centred around the supply of 120,000 bales at the rate of 10,000 bales monthly, and particular types of wool were sought by the Japanese through S.C.A.P. The Commonwealth Government was not prepared to make these finer types of wool available because it was felt that they were required by the Japanese to manufacture into worsteds and other materials which would compete with similar manufactures not only from Australia but from other countries, particularly the United Kingdom.
3. On the other hand, S.C.A.P. represented very strongly to the Commonwealth Government that it was necessary to rehabilitate the woollen manufacturing industry in Japan in order to provide employment for Japanese and to provide funds with which to meet the cost of the occupation of Japan. It was pointed out that the burden of cost was falling upon the U.S.A. and that action was necessary to enable the Japanese to resume normal occupations and to help meet the expenditure incurred.
4. After an exchange of cablegrams, S.C.A.P. was informed that the Commonwealth Government was prepared to make lower grades of wool available on certain conditions. These included an agreement with S.C.A.P. himself instead of with the Japanese Government as had been suggested, and payment for the wool on shipment from Australia in American dollars in New York converted at the rate of exchange prevailing on the day shipment was made. There were other conditions which were of minor importance.
5. Arrangements were made with the Australian Wool Realization Commission for particular types of low grade wool to be included in catalogues at auctions in Sydney and Melbourne during May.
Purchases were made on behalf of S.C.A.P. and 7,481 bales of wool were shipped to Japan on the S.S. Eastern during that month. The total value of the purchase was approximately 225,000.
6. Arrangements were made for payment in dollars in New York as a set-off against the purchase price of raw silk which had been obtained in Japan by the Commonwealth Government.
7. Since then no further action has been taken to buy wool for Japan as S.C.A.P. and the Japanese Government have intimated that they are not prepared to make further purchases unless better types of wool are available to them.
8. On the 11th June, 1947, a telegram was received from the Australian Embassy, Washington, giving the text of a note received from the State Department in which the S.C.A.P. in Japan advised that he was having difficulty in arranging the procurement of wool for Japan from Australia because of certain factors including the reluctance of the Australian Government to accept the Japanese Government or any agent thereof as a principal to any trade transaction. The Supreme Commander requested that his difficulties in procuring Australian wool be brought to the attention of the Australian Government by the U.S. authorities with a view to resolving the present difficulties as speedily as possible.
9. Information is available which indicates that efforts have been made to secure wool for Japan from New Zealand but that the Government of that Dominion is anxious to sell the coarser lines but not the finer wool counts.
10. There have been further developments in connection with the resumption of general trade with Japan and arrangements are now being made by which private trade will be resumed to a limited extent as from the 15th August, 1947. Australian business interests are being invited to participate and in view of this it is felt that it is necessary to review the Government's policy in regard to sale of wool to Japan generally. This commodity for the time being will be the only export of any magnitude which it will be possible to make available to Japan from Australia.
11. I am of the opinion that the Commonwealth Government should still continue to limit the types of wool to be made available for Japan. The lower grades can be manufactured by Japanese mills into woollen goods for use by the Japanese or for export, although it is appreciated that the export markets for this particular class of woollen manufactured goods are limited. There is, however, a demand for certain types of worsteds, particularly the lighter cloths, in Eastern markets which are not being supplied from Australia for the United Kingdom. If restricted quantities of slightly better grades of wool are made available to the Japanese mills they could manufacture and export these worsteds to these particular Eastern markets.
12. In view of the changing conditions applying to Japanese trade and particularly the appeal by S.C.A.P. himself to the Australian Government for wool for Japan, it is felt that further negotiations should now be instituted with S.C.A.P. and, if necessary, with the Japanese Government, for the sale of better types of wool. It is proposed that Japan be still requested to take the bulk of her wool purchases in the coarser types and that a percentage of say 25 of her total purchases be made up of slightly better counts but not including the top grades of our wool.
13. It is recommended for approval:
(a) that the proposal outlined in the foregoing paragraph (12) be approved;
(b) that authority be given to me to take such steps as are necessary to ensure that these proposals are adhered to; and (c) that steps be taken, in conjunction with the Australian Wool Realization Commission, to arrange for the purchase and shipment of wool to Japan. 
R. T. POLLARD Minister for commerce and Agriculture