35 Submission 468 To Cabinet By Mcleay

1st July, 1953

SECRET

Trade with Japan In a Note dated 12th May 1953, the Japanese Government drew attention to its rapidly diminishing sterling holdings and said that further deterioration might force Japan to taper off her purchases of sterling area goods (including, of course, Australian wool).

The Minister for External Affairs has drawn attention to the fact that Australia's trade policy in relation to Japan should take account of the broad political objective of keeping Japan in the non-Communist bloc as well as purely economic considerations.

During the first eleven months of 1952/53 our sales to Japan were valued at 76m, whilst our purchases from Japan were worth only 5m.

The question of our future policy in licensing Japanese imports was referred to a Committee of Ministers which met in Melbourne on 23rd June.

The Committee decided:

(a) that the Department[s] directly concerned should prepare for consideration by Cabinet on 2nd July a further paper on imports from Japan; and (b) that the paper should contain a series of concrete proposals for relaxation, each showing the additional value of imports involved and as far as possible an appreciation of the classes of goods involved.

Attached hereto is a report prepared by the Prime Minister's Department, Treasury and the Departments of Trade and Customs, Commerce and Agriculture and External Affairs. [1]

Attached to the Departmental Report is an Appendix which sets out a list of commodities which are at present being licensed from Japan, together with a list of additional items which, it is suggested, might be licensed and gives ceilings up to which licences might be issued for each item. The total of the ceilings, plus the reserve for unforeseen contingencies, represents an annual rate of licensing of 12 million (c.i.f. & e.). However, because it is not clear how the pattern of imports from Japan would develop, the Comptroller-General of Customs wishes to retain some element of flexibility and to have authority to vary the items and the ceilings within the total of 12 million (c.i.f. & e.).

It would be the aim to extend the list of goods and the ceilings above 12 million (c.i.f. & e.) if and when Cabinet decides on further relaxations of non-dollar, non-Japanese imports. This progressive relaxation would cushion any adverse effects resulting from an increased inflow of Japanese goods.

This report points out that Japan has become the second best customer for Australian exports. She is the second largest buyer of our wool and the largest buyer of our barley. Australia's trade policy towards Japan should take account of the political objective of keeping Japan in the non-Communist world.

The Treasury has no objection on balance of payments grounds to some further relaxation of restrictions on Japanese imports.

The report also draws attention to the fact that for further relaxations on Japan to be worthwhile they must include some types of goods which are likely to be competitive with Australian production and that the UK is concerned that any substantial relaxations should not seriously prejudice the level of her export trade to Australia.

During recent years Japanese costs have risen more than costs in many other parts of the world, so that imports from Japan will not have the same attractiveness on price grounds that they enjoyed pre-war. Moreover, Japanese imports in general attract the highest rates of import duty. If we are not to force Japan to restrict her purchases from us, we must show some willingness to permit the entry into Australia of additional Japanese imports.

For these reasons I support the recommendations contained in the attached report, namely:

(a) The present level of licensing on Japan be extended to provide for an additional import value of 6 million (c.i.f. & e.) per annum only, as from 1st July, 1953.

(b) Approval be given, in principle, to the idea of continuity in the relaxations in step with relaxations approved by the Government from time to time in regard to the non-Japanese, non- Dollar Budget.

(c) The items included in the list of authorized imports from Japan and the budgetary ceilings therefore be subject to variation by the Import Budget Committee if, in the opinion of that Committee, circumstances justify any variations within the limits of the total licensing value of 12 million (c.i.f. & e.) per annum. (This is necessary to provide reasonable flexibility in the administration of the controls). [2]

1 The report comprised a version of Document 34, together with a discussion of the mechanics of licensing.

2 On 2 July Cabinet agreed, conditional upon a decision to relax import restrictions upon non-dollar, non-Japanese imports from 1 July, to double the value of licenses for Japanese goods from 6 million to 12 million, and approved in principle the continuing relaxation of Japanese imports in line with relaxations in non- dollar, non-Japanese imports (Decision 739).

[AA : A4905, VOLUME 19]