162 Australia-Japan Trade Negotiations: Second Meeting Of Commodity Commitiee [1]

2nd November, 1956

CANBERRA

Wheat MR. UYAMA asked for confirmation on the details of Australia's request on wheat viz. opportunity to compete for at least eight million bushels per annum of higher protein wheat and opportunity to supply fifteen million bushels or one-sixth of Japan's total imports of F.A.Q. wheat.

He said that his understanding was that the request did not commit Japan to buy but to give Australia the opportunity to supply.

MR. PHILLIPS confirmed the details of the request. He explained that this meant opportunity to supply on semi-hard wheat but no commitment to supply. On F.A.Q. wheat it meant opportunity to supply, but no commitment to supply.

In the light of our understanding of Japan's method of purchase, opportunity to supply a reasonable share on a commercial basis could only have real meaning if there was a commitment to purchase providing supplies were available.

MR. UYAMA pointed out that the Japanese made it a rule not to commit themselves to purchase but may commit themselves to make foreign exchange available. A few ad hoc commitments had been entered into but not many.

MR. PHILLIPS pointed out that Australia's problem was to translate 'opportunity to compete' in terms of Japan's purchasing framework.

MR. UYAMA said that a reply to their urgent cable on Food Agency wheat specifications was expected in a few days. If the Wheat Board could adjust specifications then Australia will be in a position to compete freely in the market. It would be possible to give a commitment to allow Australia to compete in Japanese tenders but difficult to give a commitment to purchase.

Japan had given Canada an assurance that wheat will be purchased on a global basis and in the light of this Japan could not give any country an undertaking to purchase wheat. Japan was trying to reduce the irregularities in its purchasing.

MR. PHILLIPS pointed out that the delegation could only see non- discrimination in wheat as a commitment to purchase, in view of Japan's state trading. Wheat was of political and economic importance to Australia. He felt that the question of assurances could be left to plenary.

Wool MR. PHILLIPS asked for details of wool allocation for the current year.

MR. UYAMA advised that allocation was 350,000 bales for October 1956-March 1957 period on global basis-20-25,000 to Argentine. The allocation was, of course, a monetary allocation. In the case of wool, the current sterling holdings were a very important factor in determining the quota.

In reply to a question from Mr. Phillips, Mr. Uyama said that F.E.F.A. funds for wool were handled by direct allocations to consumers who make arrangement to import either direct on their own behalf or through an importer. This was done to avoid speculation. Cotton was handled similarly and for all other goods the funds were made available to importers. (But see sugar.)

Sugar MR. PHILLIPS outlined the case for sugar along the lines of Dr.

Westerman's statement in plenary. [2] He detailed our request as being for amendment of Japanese tariff to allow sugar of below 99 polarisation to qualify for the lower tariff and for an import quota of up to 100,000 tons for Australian sugar.

MR. UYAMA said that the instance of dollar sugar being purchased for sterling referred to the time when Japan's sterling holdings had been high. To save dollars Japan had called tenders on a global basis, payable in sterling. Cuba had been the successful tender. It had not been the intention to purchase dollar sugar for sterling.

There was a problem in altering the tariff as requested. After the war Japan encouraged her refining industry and it would be politically difficult to remove protection at this stage.

MR. CAMPBELL explained that we understood that the selection of 98 polarisation as the point of operation of the Japanese differential tariff was essentially for protection of Japanese refining industry. Other countries had the same problem. U.K. and Canada and probably others managed with 99 as the standard for protective duty and these were important markets for our sugar which at 98.5 polarisation was still a true raw sugar.

MR. PHILLIPS pointed out that while we could produce lower pol.

sugar and had in fact run off a batch recently especially for the Japanese market, the higher cost involved was in fact tantamount to paying a higher duty.

MR. UYAMA asked whether, if Japan continued the duty as at present, Australian mills could change their standard to below 98 pol.

MR. PHILLIPS said that they may be able to but in terms of return it may not be worth it. He asked to what extent the suggested change would affect Japanese industry.

MR. UYAMA explained that in Japan lower grades of sugar were preferred in some cases for cooking and confectionery and among the country people. He would refer Mr. Phillips' enquiry to Tokyo as a normal routine enquiry rather than in connection with the negotiation. The Minister for Agriculture is particularly powerful and where a question of this nature is put in connection with the negotiations an unfavourable reply would certainly be given.

In response to a further question by Mr. Phillips Mr. Uyama said that sugar allocation was divided 80% to refineries, 20% importers. The allocation to importers was sold to refineries in accordance with normal buying.

Refineries also import their 80% through importers.

MR. PHILLIPS suggested that if all sugar goes to refineries Australian sugar could not go direct to consumers and hence protection to refineries would be maintained.

MR. UYAMA said that 98.5 pol. sugar or even lower grades could be used for cooking etc. and were not always treated as raw.

Hence they could compete with refined sugar from refineries by going straight to the consumer.

MR. UYAMA did not think this diversion could be prevented. He asked for a figure of Australian availability.

MR. CAMPBELL explained our position under the International Sugar Agreement and pointed out that sales within our export quota depended on price and relative value of the market to the Australian Sugar Board. There was obviously room for selling to Japan in view of the recent sales of 110,000 tons.

MR. UYAMA asked for this to be broken down into grades and for the cost of the low grade sugar sent to Japan.

MR. CAMPBELL advised that all the exports recorded were 98.5 polarisation. To get into the Japanese market, the Australian industry had run off a special run but the cost of doing this seemed to limit the annual availability to some 50,000 tons and even so it was doubtful whether it would be considered worthwhile.

The cost could not of course be passed on to the Japanese buyer as the market was competitive. It was agreed to obtain the cost of the low pol. sugar sold to Japan if possible.

Beef Tallow and Cattle Hides MR. PHILLIPS explained the Australian position as outlined by Dr.

Westerman in plenary. [3]

MR. UYAMA explained that the presence of U.K. and colonies under A.A. was a result of concessions exchanged in the U.K.-Japan Trade Agreement.

Japan was concerned at the prospects of over-supply of tallow and the tendency was to cut down if possible.

MR. PHILLIPS pointed out that Thailand, a bigger supplier than Australia in 1954 and 1955, was on A.A. for cattle hides.

MR. UYAMA explained that this was because of trade agreement obligations.

MR. PHILLIPS pointed out that as regards tallow the dollar area appeared to have the greatest share of quotas although we understood our prices were comparable.

MR. UYAMA explained that since October, 1956, allocations for both cattle hides and beef tallow have been on a global basis.

Commitments on bides will be abolished soon and no commitments now exist with Brazil and Indonesia.

It was agreed that cattle hides and beef tallow could be referred to plenary.

1 This meeting commenced at 10 a.m. Attendance was that same as that recorded in Document 161, except that Robertson was not present. This record is marked 'Confidential: for use of Australian delegation only'.

2 See Document 159.

3 See Document 159.

[AA : A1209/23, 57/5474]