194 Australia-Japan Trade Negotiations: Second Plenary Meeting

25th March, 1957

CANBERRA

PRESENT:

For Japan For Australia Mr Nobuhiko Ushiba (Leader) Dr W.A. Westerman (Leader) Mr Atshushi Uyama (Alternate) Mr G.P. Phillips (Alternate) Mr Toshimichi Kajiki Mr A.J. Campbell Mr Kanji Hibino Mr M.T. Farrell Mr Tohru Udo Mr K. Jones Mr Teruo Kosugi Mr B. Meere Mr Hajime Nishimiya Mr D.J. Munro Mr A.L. Senger Mr M.W. Oakley Mr N.R. Lind

MR WESTERMAN: Welcomed Mr Ushiba and the Japanese delegation. [1] He said that the Australian delegation had not felt in a position to seek further instructions from their Government until the Japanese response to Australia's initial requests had been received. However on receipt of the Japanese reactions to the Australian requests a report would be made to Ministers as soon as possible to determine the basis for further negotiation.

MR USHIBA: Explained that to speed the negotiations the Japanese response had been prepared in the form of a draft agreement and appropriate notes and agreed minutes.

[matter omitted)

MR USHIBA then presented copies of the Japanese paper to Dr Westerman and outlined the contents.

The paper consisted of- 1. 'Agreement on Commerce Between Japan and the Commonwealth of Australia' 2. 'Exchange of Notes Regarding Australia's Right to Impose Special Duties on Japanese Goods in an Emergency' 3. 'Exchange of Notes' setting out the understanding on the action to be taken in Japan to prevent damage to Australia's national interest 4. 'Agreed Minute' on treatment to be accorded individual Australian commodities 5. 'Exchange of Notes' reserving Japan's position on the areas set out in Article 3 of the Peace Treaty. [2]

In relation to the draft note on the imposition of special duties,

MR USHIBA pointed out that the Japanese Government would wish to reserve the same right as was reserved by the Australian Government. At the moment Japan had no legislation to enable such special duties to be applied but it was desirable to make the right to impose such duties reciprocal within the agreement.

He also explained that where the Japanese Government reserved the right to take substantially equivalent action should the Australian Government impose special duties, it was intended that such action should be within the limits of G.A.T.T. and that the operation of the reservation would be a matter for consultation between the two Governments.

MR USHIBA said that the draft on the measures to be taken by Japan to prevent damage to Australian industries or sudden disruption of Australia's trade pattern, attempted to set out in a concise form the views of both Governments which had been made clear in the course of negotiations last year.

In relation to the Australian requests on the individual commodities [3], MR USHIBA said that it had been thought desirable to include the final understanding in an Agreed Minute. The Japanese position on each commodity was as follows:-

Wool: Automatic Approval for wool was not possible because of the effect that this would have internally and it was intended to continue the allocation of exchange for wool imports. However, Australia would be given the opportunity to compete for the 90% of this allocation which would be on a global basis. It was intended to import between 1.2 million and 1.3 million bales in the coming fiscal year.

Higher Protein Wheat and Barley: Tenders would be called on a global basis. It was expected that total purchases of semi-hard wheat would be not more than 200,000 tons for fiscal year 1957/58 and hence Australia's expectation of selling some 220,000 tons to Japan would be too high. However tenders would be non- discriminatory. Total purchases of barley were planned at about 900,000 tons in 1957/58 and Australia's share was expected to be something less than one-third of this. Although this would be below the Australian expectation of 35% of total imports, the difference would not be great.

Sugar 60% of Japan's sugar imports would be reserved for Indonesia and Formosa under the Open Account Agreements. At present the remaining 40% was allocated on a dollar and sterling common quota basis but it might be decided to eliminate sugar purchases for dollars altogether. However, a certain amount of dollar sugar was imported through the U.K. and this could continue even if allocation were restricted to sterling. It was intended to import about 1.2 million tons of sugar from all sources in the coming fiscal year.

Beef Tallow and Cattle Hides: Beef tallow and cattle hides would be placed on the Automatic Approval list as requested by the Australian delegation. It was estimated that total imports of beef tallow would be 120,000 tons to 130,000 tons in the fiscal year 1957/58. Also it was estimated that total imports of cattle hides would be 68,000 tons in the fiscal year 1957/58. This should give Australia ample opportunity to compete.

Dried Skim Milk: The two points to be considered here were:

(i) Japan's commitment to Canada, and (ii) The demand for dried skim milk in Japan was limited to the School Lunch Programme, and feed purposes. Tenders were called separately for each. The C.C.C. had offered milk at very low prices for the School Lunch Programme but the purchases for use as feed were fully competitive. Imports of some 4,000 tons to 5,000 tons were planned for feed purposes in the fiscal year 1957/58 and 25,000 tons for the School Lunch Programme.

Dried Grapes: The import quota for dried grapes at present afforded U.K. and colonies was negotiated in exchange for concessions granted to Japan and hence it would not be possible to include Australia in that quota. However, in view of the Australian request it was intended to make a new quota for Australia. Although the figure of 100,000 was mentioned the value would be reviewed each year.

MR USHIBA then commented on those requests which had not been covered in the Japanese draft.

Confectionery and Chewing Gum: The quota given U.K. for confectionery was in exchange for quotas for Japanese goods in the U.K. and no imports of confectionery were made from other sources.

Chewing gum was not even imported from the U.K.

Films: Australian films were eligible to share in non-dollar and global quotas allocated to films. There was no special treatment given to any country.

Wool Duty: A binding of duty-free entry was beyond the scope of these talks but MR USHIBA personally thought that Japan would be happy to enter into tariff negotiations with Australia at any time after the Agreement had been concluded.

Sugar Tariff: Economically and politically it was impossible at this time to meet Australia's request. Although special measures had been suggested by the Australian delegation to facilitate the implementation of this request, the Japanese import procedure and tariff system was not geared to handle the type of operation involved. It might be possible at a later time to discuss this matter again should the Australian Government wish to raise it but within the framework of these negotiations it was not possible to meet this request.

MR USHIBA then went on to explain briefly the Japanese draft on soft wheat. He pointed out that the Japanese paper was based on a similar principle to the compromise suggested in the Australian note of 15th February, 1957. [4] The Japanese view was that before action could be taken to enable Australia to make up sales of wheat to Japan to the agreed level under the circumstances envisaged in the agreement it would be necessary to agree on the existence of such circumstances. For this reason the Japanese suggestion was for consultation to be followed by such action as was agreed to be warranted.

MR USHIBA pointed out that if the trade practice which was the subject of consultation occurred near the end of the year, it might be difficult for the Japanese Government to meet its obligation under the Agreement before the year ended. Hence the Japanese draft envisaged the compensatory action as being undertaken in the subsequent 12 months. The quantity of wheat to be specified in the agreement as a basis for any compensatory action in the first year of the agreement was still to be determined by negotiation.

In relation to any possible future surplus deals with the U.S.A., Japan would be ready to assure the import of Australian wheat up to the quantity actually imported in the previous year. However, if such a deal with the U.S.A. should be considered in the next U.S. fiscal year, it might prejudice the conclusion of the deal if the Japanese were to tell the U.S. Government of any prior commitment to purchase particular quantities of wheat from Australia not based on any actual past record of import. Hence the Japanese draft did not specify any quantity in respect of Australian wheat to be imported in the event of an agreement with U.S.A. on surpluses in the first year of the currency of this Agreement. Although at the moment no such deal with the U.S.A. was contemplated it was necessary for Japan to keep the door open.

Referring to the reference to eventual application of G.A.T.T.

between the two countries MR USHIBA said that while the Japanese delegation understood the Australian position on this it was hoped that there would be no objection to the inclusion of the reference.

DR WESTERMAN thanked MR USHIBA for his statement. He suggested that after the Australian delegation had examined the Japanese draft, it might be desirable to have further discussion between the delegations before submitting the Japanese response to Ministers. There were certain points which might require clarification. For example, the Japanese draft on soft wheat suggested on first glance that the quantity imported from Australia in the first year could become the maximum amount for imports from Australia in subsequent years. (MR USHIBA intervened to say that this was not the intention of the Japanese Government.) This would obviously be an undesirable position from Australia's point of view. For instance, should Australian wheat be in short supply in any year due to an adverse season or other factors, this could restrict our opportunities for next years sales.

DR WESTERMAN hoped that it would be possible to discuss further the Australian requests which Japan had not met in their draft.

The request on the sugar tariff was one example and the request for binding of duty free entry on wool was another. In relation to the latter Dr Westerman pointed out that the granting of m.f.n. to Japan would not only involve substantial lowering of duties but would give in effect, indirect bindings to Japan. Hence the Australian view was that the negotiations were of some importance to Japan in relation to tariffs.

MR USHIBA mentioned that it might be some time before the Japanese Food Agency could be ready to begin the actual purchase of f.a.q.

wheat from Australia. Hence although the agreement might operate from say April or May, the wheat purchases may not commence until perhaps July. Therefore the agreement as regards wheat would run from July to June the following year. This arrangement would also be beneficial to Australia since the quantity of wheat to be imported into Japan in the first year would be important to Australia.

MR USHIBA pointed out that in relation to Dr Westerman's statement on the effect of granting Japan m.f.n., Japan had also bound tariff items under G.A.T.T. and Australia would obtain the benefit of this. Further, Japan's tariff rates were very low and Australia had been receiving de facto m.f.n. treatment. The Japanese view was that the granting of m.f.n. by Australia to Japan was merely balancing the treatment which Australia already received from

Japan.

DR WESTERMAN replied that there was an important difference in the relative benefit obtained by the two countries. Whereas the rates which Australia had bound affected a fairly high proportion of Japan's exports to Australia, the rates bound by Japan were of minor interest to Australia since items such as wool and wheat were not included.

It was agreed that a further meeting would be held as soon as the Australian delegation had examined the Japanese draft.

1 The delegation had returned to Canberra the previous weekend.

2 See note 3 to Document 178.

3 See in particular Documents 161, 162 and 163.

4 Document 191.

[AA : A1838/283, 759/1/7, v]