Japanese Trade Negotiations This morning I attended an inter-departmental discussion of the state of our negotiations with Japan for a trade agreement. The attached re-draft of our proposals  were received from the Japanese on Friday afternoon. You will notice that the sections on wool duties and emergency action under Article V are not covered.
The Japanese had some discussion of these two outstanding but most important points with Mr Warwick Smith on Saturday morning, and after today's meeting he circulated copies of a draft agreed minute about wool duties which Ushiba. has had handed him as being not yet confirmed by his government.
In the attached drafts, there are no substantial points of difference from our drafts except, perhaps, the relationship of the bilateral agreement to GATT, Article IV, the refusal of our request on the tariff on sugar and the scope of unfair trade practices in wheat under the agreement. In this morning's discussion, it was agreed that there would be no problem about forgoing our request on sugar and meeting the Japanese point on wheat or in re-drafting the references to GATT. This, of course, is subject to a satisfactory solution of the wool and emergency provisions.
On wool duties, the Japanese are now prepared not to vary present duty-free treatment for the period of the agreement on the understanding that Australia would consult about the full application of GATT to Japan before the expiration of the proposed three year agreement. It was agreed this morning that we should be able to find an acceptable form of words in this regard.
As to emergency action as drafted by us, this would permit both special duties and/or import licensing quotas. The Japanese do not like the quota provision and have sought the right to take retaliatory action if Article V were applied by us. They apparently could accept a unilateral special duties provision and even the extension of this to protect United Kingdom industries.
However, they certainly could not accept protection of the United Kingdom through quotas. Warwick Smith's opinion was that the Japanese would eventually accept an arrangement under which our freedom to use Article V would be limited by lists of goods and action, etc. without retaliation. Bearing in mind that the Prime Minister had himself suggested some measure of protection for the United Kingdom, Warwick Smith believed that, in most cases, goods produced in the United Kingdom which would require protection, would also be produced in Australia. In discussion, most people felt that we should be prepared to give way on the quota provision but should stick to the special duties. It was recognised that the use of this emergency power to any degree would mean the end of the agreement. If that was so, it was better to have an emergency duty power on which we could take action without retaliation than to have special duties and/or quotas available on the basis of retaliation.
Trade have arranged a plenary session with the Japanese on Tuesday morning at 11.30. This would allow the Japanese to make any formal comments on the drafts presented by them, and possibly to say something about Article V. We would aim to isolate the points of disagreement between us so that these could be referred to the ministerial committee. I said that in our view, the Prime Minister would want to be present at any worthwhile discussion by Ministers of our attitude to the agreement and that, in his present circumstances, this would not seem possible before next week.
Warwick Smith had been contemplating a meeting of Ministers, either Wednesday or Thursday of this week. He said that there would still be time for a final determination of the Government's attitude and that what he was seeking now was reference to, and consultation with, a group of Ministers. However, I felt that there was no point in Ministers meeting unless they could adopt firm attitudes, and Treasury and External Affairs agreed. Warwick Smith undertook to pass on the Prime Minister's Department view.