1. See no prospect of delaying announcement of Japanese Agreement which it is planned should be signed on 5th July.
2. Gray has discussed the question fully with us over the last week or so. We have let him know we will require convincing evidence of threatened or actual serious damage and will be at pains to satisfy ourselves through consultation with the Japanese that no alternative solution is available before we take action on behalf of the Australian industry under the emergency or escape provisions. It would be only realistic for United Kingdom to recognise that we would be even more reluctant to move under those provisions to protect United Kingdom traders' interests than to protect the interests of Australian industries. However, the power is there and it may be that we will come to use it in a really critical situation. We do not at this time foresee the occasion.
United Kingdom authorities must realise that whereas Japan might have been brought with great difficulty to accept the notion that we retain rights to protect our own industry and even to tolerate the possibility of action on behalf of the trade interests of a preferential supplier, emergency action to control imports from Japan would be a much more difficult pill for them to swallow if taken in the trade interests of the United Kingdom than if taken in the interests of an Australian industry. Moreover, the Japanese have some rights under the proposed agreement to terminate it under certain conditions of action under the emergency clauses.
3. We have told Gray that he can if he wishes give us a list before the Minister reaches Tokyo (July 3rd) of the items in which United Kingdom has a special interest. This does not necessarily mean that we will take up their list or any items on it with the Japanese during the Minister's visit or later. The contrary is probable.
4. We have also told Gray that what United Kingdom chooses to say about the Agreement is a matter for them, but we have no objection to their saying, for example, that they have put certain points to us whilst the negotiations were in progress. We are, however, not prepared to say anything to the United Kingdom authorities which could be quoted as an expression by Australia on the lines of the exchange you mention.  When the details are published United Kingdom authorities will be able, if they wish, to point to a reference in the published papers as an indication that trade interests of preferential supplier have not been overlooked (see 2(d) our 1517 ). However, we will work towards totally avoiding action under the emergency provisions and it would be unwise for the United Kingdom to make any statement which encouraged United Kingdom manufacturers to hope or believe that Australia would in any particular case take action to protect their special interests. Excluding the colonies Australia is one of the few countries (and probably the largest market) in which United Kingdom goods particularly textiles have enjoyed an entirely fortuitous shelter against Japanese competition.
5. Percival will remember that among the principles we put forward at beginning of Ottawa Review negotiations last year was mutual protection from low cost competition. This along with the other principles then proposed they rejected. In discussion they referred to the difficulties of action along these lines (see minutes of July 10). It is also fair to recall that we gave notice of our negotiations with Japan and invited comment, which, however, has at no time then or since been forthcoming.
6. It was a feature of our case last year that United Kingdom had done nothing to protect Australian trade, particularly in wheat, against heavy subsidies, much less against 'legitimate' low cost competition. United Kingdom on the other hand continued to enjoy substantial advantages from our treatment of Japanese trade.
7. In any case what we do about Japanese imports could not shield United Kingdom trade from competition in this market from India, Hong Kong and perhaps other low cost suppliers.
8. We do not understand the reference to this question becoming an issue at the Prime Ministers' Conference. It would presumably only arise at the instance of United Kingdom, and we do not see it as a subject of great common interest among Commonwealth countries generally.
9. We are giving copy of foregoing to Gray.
10. See also McEwen's cable to Menzies.