Trade Talks Today Mr Williams and I gave a luncheon in a private room at the American Club for the members of the Talks delegation, who are leaving on Friday, and one or two others.
2. Three of the members of the delegation areas I have reported before.  The fourth man (a Customs expert from the Ministry of Finance) has not yet been nominated-apparently because MITI and the Foreign Office do not believe that such a member is necessary.
It is therefore still unclear whether there will in fact be a fourth member. In addition to the three members of the delegation, the others who attended were Mr Udo (concerning whom I wrote to you on 18th October), Mr Kosugi of the Foreign Office, who has recently returned from a term in Canberra, and Mr Yoshino, who is Chief of the Sterling Area Section of the Economic Bureau of the Foreign Office and who will largely be concerned with instructing the delegation.
3. Mr Ushiba (the leader of the delegation),whom I met today for the first time, is an extremely charming, personable, confident and intelligent man. His English is excellent. He well and favourably remembers Mr H.C. Menzies when he occupied this post and is anxious to see him again in Canberra. He is a keen golfer and is taking his golf shoes but not his clubs. I suggest that it would be very good tactics to see that he gets some golf in Canberra.
4. In discussing matters with Mr Ushiba I made a number of points which, I emphasised, represented my own personal point of view and which (even although they may be incorrect) I think I should report to you. These are given just as they occur to me and not necessarily in the order of their importance or in the order in which they were discussed.
(a) Speaking quite frankly I pointed out that the great majority of the Australian population had not forgotten the war and although it might not be apparent on the surface there was a deep distrust and dislike of Japan in Australia. There were, of course, many groups who believed that it was better to let bygones be bygones but nevertheless the feelings which had their origin in the war were important political factors of which any and every Australian Government would have to take account.
(b) There were two broad groups opposing increased Japanese imports- (i) Australian manufacturers; and (ii) Australian exporters to markets (such as India and the United Kingdom) which could be damaged if those countries were forced out of the Australian market by Japanese competition.
(c) Because of both (a) and (b), the Australian Government could not (whatever its assessment of the merits of the case might be) proceed quickly in its liberalisation of trade with Japan.
(d) For these reasons I personally felt that- (i) Japan should be satisfied with a 'first step' which could be allowed to run for a year and which could enable the Australian public to become used to increased Japanese imports. They would then probably find that the consequences were not so serious as they had earlier feared and the stage would then be set for what might be called 'second step' negotiations when Australia might be able to make some further concessions.
(ii) It would be wise for Japan to concentrate upon those commodities in respect of which it might be relatively easy for Australia to make concessions. By way of example, I suggested (and again I emphasised I was expressing my personal view and had not examined the matter in detail) that it might be fairly easy for Australia to grant concessions on canned fish because the Australian fresh fishing industry was unlikely to suffer to any extent and that perhaps the only consequences would be to push South Australian dried fish out of the market. On the other hand, and by way of giving an example at the other extreme, I said that I thought it would be impossible for Australia to give any concessions on rayon yarn-if only because of the special position of Courtaulds.
(e) Our balance of payments problem was extremely difficult and was likely to remain so for some time. For this reason it would not be possible to grant any concessions which increased the total of Australian imports. It would only be possible for us to reduce the present discriminations against Japan (and I frankly admitted that Japan was the only country against which we did discriminate at present) in order to enable Japan to gain a greater share of the Australian import market at the expense of other countries.
(f) Despite these difficulties from the Australian side, we nevertheless recognise that Japan is our second biggest export market-that it is growing and that it has further potential. For these reasons it is in our narrow interest to eliminate the present discriminations against Japan.
5. I realise that making statements of this kind may be considered as 'sticking my neck out' and perhaps as improper. However, I believe that in all the circumstances they are wise-if only for the reason that they tend to establish a favourable and realistic attitude of mind within the Japanese delegation. It was surprising and refreshing (and this applies to similar conversations which I have had in recent months) to find how much Japanese officials realistically appreciate the problems of the Australian side. I do not think that they will push things too hard in these current talks but they will hope for (and they will probably demand with the threat of the wool allocations) some significant concessions.
In my opinion, they are prepared to accept and to regard as a victory something very much less than that for which they are formally asking-but they will only adopt this attitude if they are convinced, firstly, that Australia is genuinely friendly and, secondly, that the present negotiations will be followed at an interval of about 12 months by another set of negotiations at which they will make further advances.