223 Agreement On Commerce Between The Commonwealth Of Australia And Japan: Confidential Annexes

6th July, 1957

TOKYO

The Rt. Hon. J. McEwen, Minister for Trade

Your Excellency I have the honour to confirm on behalf of my Government the understanding embodied in the Notes Agreed by and Letters Exchanged between the Japanese delegation and the Australian delegation to clarify the interpretation of and for the purpose of implementing the Agreement on Commerce between Japan and the Commonwealth of Australia signed at Tokyo on [6th] July 1957, which are attached hereto and which shall be confidential.

I have further the honour to request your Excellency to be good enough to confirm the foregoing understanding on behalf of your Government.

I avail myself, Excellency, of this opportunity to renew assurances of my highest consideration.

Minister for Foreign Affairs Tokyo, 6th July, 1957

The Minister for Foreign Affairs, Tokyo Your Excellency, I have the honour to acknowledge receipt of your Excellency's Note dated 6th July, 1957, which reads as follows:

'I have the honour to confirm on behalf of my Government the understanding embodied in the Notes Agreed by and Letters Exchanged between the Japanese Delegation and the Australian Delegation to clarify the interpretation of and for the purpose of implementing the Agreement on Commerce between Japan and the Commonwealth of Australia signed at Tokyo on 6th July, 1957, which are attached hereto and which shall be confidential.

I have further the honour to request your Excellency to be good enough to confirm the foregoing understanding on behalf of your Government.' On behalf of the Government of the Commonwealth of Australia I have the honour to confirm the understanding stated in your Excellency's Note under reference.

I avail myself, Excellency, of this opportunity to renew assurances of my highest consideration.

Minister for Trade

Attachment I. AGREED NOTES Part A.

Part B.

Part C.

II. INTERPRETATIVE NOTES 1. on Article III.

2. on paragraph 3 of the Agreed Notes, Part A.

3. on paragraph 4(b)(i) of the Agreed Notes, Part A.

III. EXCHANGE OF LETTERS' 1. With reference to Wheat quality.

2. With reference to consultation on Wheat.

3. With reference to Surplus Disposals.

4. With reference to the confidential nature of certain documents.

IV. EXTRACTS FROM THE VERBATIM RECORD OF THE PLENARY SESSION OF 14TH JUNE 1957 [2]

1. Relating to Japanese imports of Australian Soft Wheat under normal commercial considerations.

2. Relating to paragraph 4(b)(i) of the Agreed Notes Part A.

3. Relating to paragraph 6(iii) of the Agreed Notes Part C.

I. Agreed Notes

PART A 1. The Agreement provides under Articles I and II that Japan will extend most-favoured-nation and non-discriminatory treatment to imports from Australia. However, in view of the Japanese import system, in order to translate these general provisions into specific undertakings or understandings, the Japanese Delegation indicated the treatment that the Japanese Government intended to accord to certain of the more important imports from Australia.

2. Accordingly, the Japanese Delegation stated that it was the intention of the Japanese Government:

(a) to accord to Australian wool the opportunity of competing in the global quota for wool for not less than 90% of the total foreign exchange allocation for wool each year and, subject to the provisions of Article 11 of the Agreement, not to restrict the total foreign exchange allocation for wool beyond the extent necessary to safeguard its external financial position and balance of payments;

(b) to admit Australian wheat and barley on a competitive and non- discriminatory basis in accordance with the provisions of paragraphs 3 and 4 below;

(c) to accord Australian sugar the opportunity of competing in the dollar and pound sterling common quota or the pound sterling quota for not less than 40% of the total foreign exchange allocation for sugar;

(d) to include Australia as a permitted source of supply for beef tallow and cattle hides on the Automatic Approval list;

(e) to admit Australian dried skim milk on a competitive and non- discriminatory basis in the global quota except for imports for use in the Japanese school lunch welfare programme;

(f) to make provision for the import of 100,000 Stg. of Australian dried vine fruits (raisins, currants and sultanas) in each year of the three year period.

3. With respect to paragraph 2(b) in so far as Australian barley was concerned:

(a) The Australian Delegation stated that the level of Australian barley exports to Japan which amounted in the past three years to approximately 30% of the total barley imports of Japan, had represented reasonable treatment. The Australian Delegation wished to see this treatment of imports of Australian barley into Japan at least maintained.

(b) The Japanese Delegation stated that the Japanese Government would see to it that this was done.

4. With respect to sub-paragraph 2(b) in so far as Australian soft wheat was concerned, it was agreed that:

(a) Australian soft wheat could be expected to secure a substantial share of the Japanese market in the absence of non- commercial purchase arrangements and unfair trade practices by third countries, but it was difficult to define a fair share in precise terms for the following reasons:

(i) the character and capacity of the Japanese wheat market has changed since before World War II when Australia was the major supplier;

(ii) Japanese millers and consumers have had no recent experience of Australian soft wheat due initially to the world-wide post-war wheat shortage and subsequently to imports of wheat under non- commercial arrangements regarding surpluses or to related inter- Governmental arrangements affecting Japan's wheat imports.

(b) (i) If in either of the first two years the opportunity for Australian soft wheat to compete freely in the Japanese market should be impaired by unfair trade practices on the part of a major wheat supplier to Japan, the Japanese Government would take steps within its power to ensure purchase, through commercial channels, of Australian soft wheat in the following quantities on a competitive basis;

a) in the first year-200,000 tons;

b) in the second year-300,000 tons, or the quantity actually imported in the first year, whichever the greater.

The existence of unfair trade practices on the part of a major wheat supplier to Japan would be established through consultation between the two Governments.

When the Japanese Government takes steps as provided above, the Australian Wheat Board would offer wheat to Japan in accordance with its normal commercial considerations.

(ii) If in either of the first two years Japan should enter a special non-commercial purchase agreement the Japanese Government would be ready if the Australian Government so desires to take steps within its power to ensure purchase of the same quantities as mentioned in (i) above to be purchased in the first and second year respectively through commercial channels on a competitive basis.

(iii)In the event of unfair trade practices of Australia's competitors or special non-commercial arrangements in the third and subsequent years of the Agreement, the Japanese Government would ensure, under the same conditions set forth in paragraphs 4(b)(i) and 4(b)(ii) above, the maintenance of an equitable share for soft wheat from Australia in the Japanese market. During these years such equitable share would be determined through consultations between the two Governments, in the light of Japan's actual imports in the previous years of the Agreement. Due account would be taken of any special factors such as crop failure in either or both of the two countries.

(iv) In the context of the present Notes, the term 'Australian soft wheat' is understood to mean Australian wheat of f.a.q. or lower grades. Grades of Australian wheat of high protein content, superior to f.a.q. and sold at a premium shall be regarded as being outside the scope of sub-paragraph (i), (ii) and (iii) above, and Japanese imports of Australian wheat of this type shall be on a competitive and non-discriminatory basis, as provided in paragraph 2(b).

PART B As in Part B of the Agreed Minutes [3] confirmed by letters exchanged today between the Australian Minister for Trade and the Japanese Minister for Foreign Affairs.

PART C 1. During the course of discussions in connection with Article V, the Australian Delegation pointed out that the basis of Article V was the mutual expectation that as a result of the Agreement there would be increased opportunity for expansion of Japanese exports to Australia without serious damage to Australian industry or sudden and serious disruption of the pattern of Australia's imports. This expectation was based on the premise that exports from Japan in particular lines, especially in the products of Australian industries historically or potentially particularly liable to disruption in the event of an undue increase in the volume of imports from Japan, would not be allowed to reach such volume, or to be shipped under such conditions as would cause or threaten serious damage of this kind. Since, in its view, the accord of most-favoured-nation treatment to Japanese goods could result in such a situation, it would welcome the co-operation of the Japanese authorities in dealing with these situations and considered that early and effective arrangements, if undertaken in Japan, could make a substantial contribution to their solution.

2. The Australian Delegation provided the Japanese Delegation with an itemised list of those products in which it was considered difficulties could occur under present conditions. [4] In the light of changing circumstances it might be possible subsequently to remove some items from this sensitive category or it might be necessary to add other items to the list. It was requested that the Japanese Government should pay particular attention to the level, quality and price of exports of these goods to Australia without detracting from the need for attention to other goods.

3. The Japanese Delegation pointed out in reply that under Japanese legislation export was free in principle and that the Japanese Government could take only limited measures to deal with these problems. However, the Japanese Delegation indicated that the Japanese Government would use its best endeavours within its constitutional authority to see that exports from Japan to Australia were conducted in such a way as to avoid or remedy the damage or prospect of damage to which the Australian Delegation had referred. In this connection, the Japanese Delegation has indicated that particular attention will be given to those items which have been mentioned by the Australian Delegation as being particularly sensitive.

4. The Australian Delegation stated that, in its view, the development of the maximum practicable degree of consultation between the two Governments would be essential to the satisfactory solution of any particular problem which might arise. The Japanese Delegation agreed with this suggestion. In this connection it was agreed that:

(a) effective liaison would immediately be established in Canberra between the Japanese Embassy and the Australian Government and in Tokyo between the Australian Embassy and the Japanese Government;

(b) statistical information would be provided by the two Governments on a continuing basis particularly in respect of sensitive items;

(c) if either the Australian Government or the Japanese Government was of the opinion that any product was being imported under such conditions that serious injury is threatened, consultations would be held immediately to endeavour to remedy the situation without resort to special emergency action;

(d) in the event of a situation requiring the application of Article V, the procedure provided in the said Article would be adopted.

5. The Japanese Delegation asked for assurances that the Australian authorities would not unreasonably take special action of the kind envisaged in the Article, stating that the Japanese Government agreed that it was important to the successful operation of the Agreement and was also important in enabling recourse to Article V to be avoided, that export from Japan be conducted in an orderly manner so as to avoid serious damage in the sense referred to by the Australian Delegation.

6. The Australian delegation said that in the light of this statement by the Japanese Delegation and in view of the mutual expectation referred to in paragraph 1 it could say that the following considerations would apply in respect of any action by the Australian Government under Article V:

(i) Such action would not be taken except after consultation. In every case, consultation would be as far in advance as practicable.

(ii) Such action would not be taken lightly; and would be taken only where the consultation process failed to provide a mutually acceptable alternative solution to the problem.

In cases where urgency might require action to be taken before the consultation process was completed, consultation would be continued in an endeavour to find a mutually acceptable solution.

(iii) So far as administratively practicable such action would apply only to those specific goods in respect of which the action was necessary to correct the particular situation.

(iv) Such action would apply only for such time as was necessary to correct the particular situation and would be discontinued immediately this was achieved.

(v) Such action would be limited to cases where serious damage was caused or threatened.

7. The Australian Delegation drew the attention of the Japanese Delegation to the provisions of the Customs Tariff (Industries Preservation) Act as recently amended [5] and mentioned that it was intended to limit any action of the kind envisaged in Article V which might have to be taken to avoid a sudden and serious disruption of the pattern of Australia's imports of certain commodities to measures authorized under the Act.

II. Interpretative Notes

Ad Article III The term 'sales' in paragraph 1 includes re-sales of imported products in the domestic market.

Agreed Notes Part A Ad paragraph 3 In connection with paragraph 3 of the Agreed Notes Part A, 'total barley imports' would include any barley that might be imported under non-commercial arrangements with other countries or under unfair trade practices on the part of competing suppliers.

Agreed Notes Part A Ad paragraph 4(b)(i)

With reference to the consultations for the purpose of establishing unfair trade practices (mentioned in paragraph 4(b)(i), it is agreed that prima facie evidence of such practices would include a case where wheat from a third country, being a major wheat exporting country, was being offered to Japan at a c.

and f. price lower than the c. and f. price at which wheat of comparable quality from that country was being offered for sale in another major wheat importing country.

1 Document 213.

2 See Document 212 and note 2 thereto.

3 See Document 222.

4 Annex A to Document 164.

5 See Document 153.

[DFAT : AUSTRALIAN TREATY COLLECTION]