Trade Negotiations with Japan Permission is being sought to commence formal trade negotiations with Japan on the basis set out under the heading, 'Recommendation', on pages 11 and 12. 
2. Trade consulted us departmentally last week: we were pleasantly surprised with the liberal terms proposed for discussion. These provide for on our side, elimination of discrimination applying solely to Japan on import licensing procedures and tariffs. Japan is the only major trading country which does not enjoy most- favoured-non-tariff treatment. Special discriminatory import licensing procedures have existed against Japan.
3. Foreign Policy Consideration a. Japan must have reasonable trading opportunities with the non- Communist world.
b. Australia should develop trading interests in Asia and the Far East.
c. Australia should not discriminate against low cost, low-wage commercial producers. All Asian countries hope some time to become such. The West will have to compete; but safeguards are necessary to prevent violent disruption of normal trading patterns.
4. Likely effects of extending m.f.n. tariff to Japan a. Most Japanese imports are 'B category' for import licensing purposes (i.e. they are not essential). Imports of 'B category' goods are fixed at 30% of imports for the year. Consequently, a flood of Japanese goods is not likely.
b. Japan is not always the lowest cost supplier of major Japanese exports.
c. Japan recognises the danger of flooding other markets and has introduced export controls on some goods.
d. Australian industries can be protected by Tariff Board procedures.
5. Protection for regular suppliers, eg. U.K a. The Minister for Trade proposes an amendment to the Industries Preservation Act which could enable the introduction of emergency duties if Japanese goods were to threaten unduly the interests of regular suppliers, such as the U.K. See Recommendation (a)(iii) on page 12, and note Recommendation (a)(ii) is subject to Recommendation (a)(iii).
b. Proposal is similar to that which Canada operates vis-a-vis Japan except that the protection against excessive Japanese competition in Canada's case is brought about by special arrangements for determining value for duty instead of the introduction of an emergency duty.
c. There is reason to believe that the Japanese Government will regulate exports to prevent retaliatory action.
6 General economic considerations a. We are discriminating against one of our major export markets (see paragraph 30).
b. We might lose this market. Import restrictions would then be accentuated, which would make further inroads into imports from countries like the U.K.
7. There is considerable unemployment in Japan. Relaxation of trade discrimination would help.