144 Letter From Kawai [1] To Menzies

22nd August, 1956

TOKYO

The news that your visit to Japan has been cancelled disappointed the Japanese people not to a small extent, but we understand the serious nature of circumstances that necessitated this. [2]

We only hope that the day will come not at a distant date when we shall have the honour of welcoming you to this land.

The business circle in Japan closely related with Australia in trade and commerce has submitted to this Society, in expectation of your visit, various points of importance for the furtherance of trade and other relations between Australia and Japan.

We took up some of these points of common interest to us and prepared the attached draft so that you might go through it beforehand, in order to save any preliminary talk at the interview and carry on the discussion efficiently and effectively within the limited time.

Although this privilege of the interview has been denied us this time, we wish to submit to you the text for your sympathetic consideration.

Attachment Whilst Japan is closely related with Australia in economy, commerce and many other aspects and enjoying friendly relations with her, there are still some points left to be desired from our standpoint to further improve the present situation, particularly with respect to the trade between the two countries.

We venture to enumerate hereunder some of these points for your sympathetic and favourable consideration.

(I) We most earnestly look forward to the conclusion of the Treaty of Commerce and Navigation, with as little delay as possible, but if early realisation of such a treaty between Australia and Japan were impossible, we wish that as a tentative measure. some special arrangement be made between the two Countries to attain the same purpose as aimed at by the formal treaty. Various points of importance, for which your consideration is solicited, are as follows.

a. Entry to Australia of Japanese businessmen and their families, and their permanent domiciliation, establishment of branch offices in Australia of Japanese trading firms, and also freedom of lawful trading.

b. During the 1955-1956 Wool Season, Japan's purchases of Australian Wools ranked as high as the next to the U.K. This has manifested the fact that Japanese economic activities have now recovered the most important position in the international commerce as in the pre-war years.

In view of this actual fact, we now wish that the Japanese Wool buyers be allowed to operate in their own names in the procurement of Wools in Australia, as if the formal treaty of Commerce and Navigation were in force.

(II) As regards the Wool marketing policy of the Australian Authorities concerned, we wish that the Japanese wool trading firms' position be regarded as important as all other Wool buyers abroad.

As aforesaid, Japan is one of the most important buyers of Australian Wools, and in view of this fact, Australia may well give due consideration to the position of Japan, and it may be very important for Australia to give weight to the voice of the Japanese Wool operators. For instance, at the Newcastle Wool Sales in June this year, if the Auction had not been held, giving due consideration to what the Japanese buyers had advised, the sudden fall of prices would not have taken place: the Japanese buyers' position was such that at the Brisbane Sales just before the Newcastle Sales, they had covered all their immediate requirements, and were ready to wait until the New Season's Opening Sales at the end of August, and there was no necessity for them to take part in the purchase competition at the Newcastle Sales.

In consequence, the prices had fallen 5 to 7% and such a sudden fall in price could not be beneficial at all either for the suppliers, or the buyers.

(III) Strike troubles in Australia very frequently cause shipping disturbances from which the Japanese traders as well as the Japanese shipping lines cannot help suffering serious inconvenience.

The Harbour workers' strike at the end of January this year, and Wool shearers' strike which had started in March had caused serious damage to the Japanese firms as under:

a. Shipping Companies had to cancel their regular liners' schedule altogether, and had to bear considerable demurrage charges.

b. Arrivals of Wool from Australia having been considerably delayed, or held up for a long period, all the Japanese Wool Consumers (Woollen Mills and Spinners) had to change their seasonal production plan, whereby suffering enormous monetary losses.

c. In the case of Australian Wheat and Barley charter party contracts, it is quite usual that these contracts are based on the 'Austral Form' in which case, the shipping companies should bear the risk of strike, and the Japanese Wool importers have had no difficulty in chartering the Japanese vessels on the same Austral Form, but the recent strike troubles in Australia have taught them bitter experiences in meeting considerable difficulty in chartering any vessel on this condition, unless chartering is done at an excessive rate of chartering fees.

In Australia, in the case of strike troubles, emergency measures of chartering vessels cannot be taken as in the U.S.A., or Canada, and for this reason, the Japanese Shipping Companies will have to resort to some safety measures.

At present, in our country, foodstuff procurement for the domestic consumption is solely undertaken by the Government, and in Australia export of wheat and barley is in the hand of monopolistic Wheat or Barley Board. None of these will bear any risk of strikes, with a result that all our importers must take the responsibility, which means that purchase in Australia of wheat or barley is subjected to this handicap compared with purchases in other countries abroad.

In the sale for export of main agricultural products in Australia, therefore, the Australian Authorities should exert their efforts in giving due consideration to these problems.

(IV) The next question we would like to bring to your kind notice for serious consideration is the striking unbalance of trade between the two countries.

The history of trade between Australia and Japan shows almost always remarkable unbalance of trade, Australia's export to Japan showing by far the excess over her import from Japan.

While we appreciate that it would not be practicable to realize the balanced trade between our two countries under today's conditions, perhaps it would not be too much to ask for your special consideration so that this unbalanced trade position may be rectified to a reasonable extent.

You will agree with us that the present trade balance between our two countries is far too unnatural and unreasonable, and that no one can expect such a state of things to last long.

It is, therefore, about time that something had to be done to rectify it.

We only appeal to your sense of fairness and farsightedness to invent such measures as to reasonably satisfy the Japanese business community.

As one of the practical means to ensure for Japanese goods a fair and reasonable share of Australia's import, the issuance of single licence on Japan in economic unit may be suggested for the important items such as Iron and Steel, Cotton Piece Goods, etc.

In this connection a few words may be added with reference to Import Tariff of Australia.

Whilst Australian goods into Japan are enjoying the treatment of the most-favoured-nations, Japanese goods into Australia are subjected to the highest rate of import duty, viz. 'General Tariff, despite Japan's membership to GATT. Perhaps you will understand the reason why we have to ask you to consider the application of at least 'Intermediate Tariff' on the Japanese goods so that fair treatment may be accorded to them in view of the fact that Japan is one of the best customers of Australia.

(V) Establishment of direct wireless communication system between Australia and Japan.

In spite of the very important economic relation between Australia and Japan, there is no direct wireless communication system being established as yet. In the case of telegrams, it has to go via Singapore, and for telephone we have to depend on connecting services in Hong Kong.

For this reason, cable fees are more expensive, and service less efficient with no time saving as in wireless communications.

This inefficient telegraphic service is quite disadvantageous for both Australian and Japanese Traders. In fact, the present system is obsolete.

Should a direct wireless system be established between the two Countries, it will effect considerable saving in money and time, which will help strengthen the Australia-Japan relation, not only in economy, but also in political as well as cultural intercourse.

(VI) Establishment of branches of Japanese banks in Australia with a view to promoting the mutual trading, and ensuring its smooth operation between the two countries.

It is most earnestly desired that establishment of branch offices of leading Japanese banks in Australia be permitted.

In pre-war years, the Yokohama Specie Bank Ltd., had a branch office in Sydney and served well to help promote the mutual trading and financial facilities.

The advantages of offices of Japanese banks established in Australia would be as follows:-

a. Trade news and information service. This is quite essential in all trading, especially in international trading, and quick and efficient news or information exchange service is most indispensable for all traders. For all the leading Australian banks, Australian-Japan trading is only a small part of their concern, and services in this direction cannot be expected to be concentrated on the Australian-Japan trade interest, whereas branch offices of the Japanese banks in Australia may be able to concentrate their attention on the importance of rendering such information services as desired by all the Japanese traders.

b. Australian banks have no intimate connections with the Japanese traders, and lack of proper knowledge of their actual trading activities would often fail them in grasping the most reliable news of credit standing and/or general trading reputations-these will naturally prevent the Australian banks from extending their financial assistance to the Japanese traders.

On the other hand, the Japanese banks are fully conversant with the actual financial status or position of the Japanese trading firms, and are therefore ready to give their support or assistance to them as fully as they can afford to do.

In the case of any Japanese trading firm who has had no actual experience in Australian business, should they wish to operate in Australian-Japan business, they can seek adequate assistance from the Japanese banks who have full knowledge of the business activities in Japan of such a firm.

c. When Japanese traders desire to seek financial assistance from Australian banks, it is quite necessary that they have to deal with the matter through a Japanese bank, in which event, it will entail some extra expenses, whereas should they seek a loan from a Japanese bank alone, such extra charges as in the former case will not incur, whereby lessening burden on the Japanese trader's shoulders.

d. In seeking financial assistance from the Australian banks by the Japanese traders, some considerable time will have to be spent until they can reach an agreement, whereas by dealing with the Japanese banks, such a matter can be settled very quickly.

The foregoing are just the few points that have direct concern for all the Japanese trading firms deeply interested in the trade between Australia and Japan.

We sincerely hope that they will be given your serious consideration so that both nations may come to better understanding and see far happier economic and trade relations.

1 Tatsuo Kawai, President of the Japan-Australia Society. In commenting upon arrangements for Menzies' visit following its cancellation, Watt had noted 'the very strong influence which business interests appear to have over the Government' and his impression that these interests had 'decided to avail themselves of the opportunity...to press Mr Menzies strongly on various aspects of trade between Australia and Japan (Memorandum 668, 8 August 1956, on file AA : A1838/278, 3103/10/11/2/1, i).

2 Menzies was in North America, on the second leg of his overseas itinerary, in the early days of the Suez Crisis. After talks in Washington he decided to 'defer' his visit to Japan in order to return to London to attend the international conference convened to discuss the situation by the United Kingdom, the United States and France. The decision was conveyed to the Japanese Government on 6 August.

[AA : A463/17, 56/984]