106 Submission 484 To Cabinet By Menzies

19th July, 1955

CANBERRA

Japan and the General Agreement on Tariffs and Trade Attached for the consideration of Ministers is a report by the Inter-departmental Committee on Japan and G.A.T.T.

Attachment

JAPAN AND G.A.T.T.

REPORT BY INTER-DEPARTMENTAL COMMITTEE

Introduction:

The process of Japan's accession to the General Agreement has spread out over a number of years. In July, 1952, Japan made a formal request to accede to the Agreement but for various reasons the Contracting Parties did not schedule tariff negotiations which is the traditional opening move for countries wishing to accede.

In October, 1953, a date had still not been set for tariff negotiations and the Contracting Parties took a Decision agreeing to the provisional participation of Japan in the work of the Contracting Parties and drew up a Declaration which would allow those countries who so wished to grant Japan G.A.T.T. treatment in their commercial dealings with Japan. Australia refrained from signing the Declaration and abstained from voting on the Decision.

2. Tariff negotiations were finally scheduled to commence early this year. The tariff negotiations have now been concluded and instruments of accession have been opened for signature.

Contracting Parties have until 11th August to indicate whether they support Japan's accession to the G.A.T.T. The relative instrument requires signature by two-thirds of the Contracting Parties. Abstention from signing is equivalent to a negative vote.

Upon Japan's accession to the Agreement, the present Contracting Parties must apply the rules of the G.A.T.T. to Japan (including the grant of M.F.N. tariff treatment) unless they invoke Article XXXV which allows a country which has not participated in tariff negotiations with a new country to withhold the application of the G.A.T.T. between itself and the new country.

The Issues for Decision:

3. There are therefore two questions for Ministers to decide- (a) whether to invoke Article XXXV;

(b) whether to support Japan's accession to the G.A.T.T.

Article XXXV:

4. There are no new circumstances relating to our trade with Japan since Ministers last looked at the question and the Interdepartmental Committee assumes therefore that it is still the Government's intention to invoke Article XXXV at the appropriate time.

A Vote in Favour of Japan's Accession:

5. This question is of lesser importance than the invocation of Article XXXV but the issues are less clear cut. It is possible for a country like Australia (i.e. a country which did not participate in the tariff negotiations) to support Japan's accession without prejudicing its rights under Article XXXV.

6. If Japan joined the G.A.T.T. we would obtain indirect benefits from the tariff concessions that other Contracting Parties have negotiated with Japan as a preliminary to her accession. These do not amount to very much as far as Australia's exports are concerned, however, and we would get them irrespective of our application of Article XXXV.

7. There is no doubt that the United States and other countries of the Western world would like to see Japan in the G.A.T.T. Japan is anxious to obtain membership in the belief that this would promote its export trade. It is in Australia's interest that Japan should have increased opportunities for trade with countries of the Western world. It would be of general advantage to have Japan accept the discipline of G.A.T.T. even if the G.A.T.T. did not apply as between Japan and particular countries. Australia's support could be taken as a gesture of goodwill towards Japan and would indicate that although Australia could not apply the provisions of G.A.T.T. to Japan we did not wish to hinder those countries who wished to do so.

8. In November last year we proposed to the Japanese that we should have bilateral trade talks. The Japanese indicated that before they could form a definite attitude to this proposal they would like to know more details as to the nature and scope that we had in mind for such talks and we then suggested informal talks between officials. It is now up to the Japanese to tell us when they are ready for the informal talks.

9. If Australia supported Japanese accession to the G.A.T.T. it is possible that Japan might claim in the bilateral talks that as we were prepared to see other countries apply the G.A.T.T. rules without qualification to them we should be prepared to do so ourselves. However we could claim that our signature indicated that we looked at the question of our relations with them in a spirit of goodwill. We were prepared to assist them in their objective of joining the G.A.T.T. but were not able to apply the G.A.T.T. to them ourselves.

10. The Inter-departmental Committee feels that insofar as international trade issues are concerned, including the general question of our relations with Japan, there would be advantages in Australia supporting Japanese membership to the G.A.T.T. by signing the decision on accession.

11. Attitude of Other Countries:-Japan's accession requires a two- thirds majority vote (this means 23 countries). If we presume that those countries which participated in the tariff negotiations plus the other countries which are already provisionally applying the G.A.T.T. to Japan will vote in favour, it seems fairly likely that Japan will get votes from 26 countries (see attached table).

However, it is not completely certain that Japan will get the necessary majority without Australia's vote. The Japanese Charge d'Affaires, Canberra, has expressed doubts whether the necessary votes will be forthcoming and has indicated that Japan would welcome Australia's support. [1]

12. We have been advised that New Zealand will invoke Article XXXV but will support Japan's accession to the G.A.T.T.

13. The United Kingdom will invoke Article XXXV but we do not know their attitude towards voting for accession. A telegram from London on this is expected in the near future.

Summary of Conclusions:

14. The Interdepartmental Committee considers that:

(a) Australia should invoke Article XXXV at the appropriate time (paragraph 4);

(b) Australia should support Japanese accession to the G.A.T.T. by signing the Decision on Accession (paragraph 10).

Addendum to Cabinet Submission Canberra, 30 July 1955 Since the above report was prepared the following additional developments have occurred in relation to Japanese accession:

(a) United Kingdom attitude: The United Kingdom have already announced publicly that they will invoke Article XXXV. They have advised us in confidence that they intend to vote in favour of Japanese accession. (Copy of letter from United Kingdom Senior Trade Commissioner is attached). [2]

(b) Publicity: We have had requests from the Japanese and also from the G.A.T.T. Secretariat to refrain from making public the position regarding our vote on the decision on accession and on Article XXXV until 10th September-this is the earliest day on which Japan can accede and is 30 days later than the day on which the Decision is to be taken (11th August).

The Interdepartmental Committee feels that as it will be public on the 11th August whether the decision was taken or not it would be difficult for the Government to refrain from making its attitude public if questioned.

It is suggested then that the Japanese and the G.A.T.T.

Secretariat should be informed that there would be serious difficulties for the Government to undertake not to make its attitude to the Decision and Article XXXV known until the 10th September. [3]

1 See Document 104.

2 Not published.

3 On 30 July Cabinet accepted recommendations(a)and (b) in paragraph l4 and added that the decisions should be announced by the Prime Minister not later than the time of signing and that shortly in advance of the announcement Casey should inform the Japanese Charge d'Affaires (Decision 558).

[AA : A462/20, 602/2, iv]