36 Cabinet Decision 738

2nd July, 1953

Submission No. 470-Import Policy The Acting Prime Minister referred to the exchange of cables between himself and the Prime Minister on the matter of relaxation of import restrictions. [1]

Cabinet expressed the strong opinion that the balance of advantage lay greatly in favour of further relaxations of import licensing control as from 1st July rather than as from 1st October, and decided to cable its views in some detail to the Prime Minister and Senator O'Sullivan.

Cabinet subsequently approved a cable in the following terms:-

'At Cabinet meeting today we had further discussion on import licensing. I mentioned to the full Cabinet the discussion which took place in the Committee last week and which led to my cable to you. I also put fully to the Cabinet the message from you and O'Sullivan in your cable No. 2339.

While we do not under-estimate the considerations mentioned in your message we are faced with very considerable difficulties here which are likely to grow more acute rather than less. On the other hand, we have seen not the slightest indication that action of the kind we had in view would be ascribed to pressure upon yourself and O'Sullivan in the United Kingdom.

Cabinet was greatly impressed by the fact that our reserves at the moment are up around the 550m. mark and that therefore we could hardly deny that we are in a position to do what we have undertaken to do, i.e. to dismantle our restrictions as and when we can. This figure of 550m. will not, of course, be published but figures will be published within the next few days which will show that in 1952-53 we will have had a trade surplus of 350m.

Exports for the year will be shown as 865m. or thereabouts and imports as 510m. The latter figure particularly will make it look as though very little effective relaxation has so far been done.

This is sure to bring very great pressures upon us. Cabinet's clear opinion is that it would be much better politically to act now with the appearance of doing so on our own volition than to appear later as being forced into action by local and overseas pressures. Press comment on the subject is gathering strength.

Melville has reported by phone that feeling at the Monetary Fund is almost universally against the Australian restrictions and while he is doing his best to avert an adverse determination it is by no means certain that he can succeed in this. While we do not over-estimate the importance of the Fund in itself, it undoubtedly appears to be a sounding board for opinion in many countries on this subject. Furthermore, it is a consideration that if we delay action until October and the Fund has in the meantime reported unfavourably anything we do then will took like an attempt to placate the Fund.

While this is the main problem another difficult aspect is our trade balance with Japan. For the past eleven months our exports to Japan have been 76m. and our imports from there 5m. As I mentioned in my cable last week Japan is complaining and we think is very likely to take some action against our exports. Japan is at present our second largest customer and can seriously influence our wool trade. Other not unimportant items such as barley stand to lose.

We had in mind making relaxations which would have had the effect of doubling the present rate of imports from Japan but we would not of course take this action unless we were also relaxing our general restrictions. On the other hand, by delaying our relaxations and courting Japanese retaliation it will appear when we do eventually relax that we do so on Japanese pressure.

The Cabinet's strongly held and unanimous view is, therefore, that the best course is to proceed with the programme of relaxations, beginning 1st July, which was set out in my cable of last week.

But we have made no firm decision pending the submission of these points to you and O'Sullivan and the receipt of your reactions. We agree with O'Sullivan that a decision to introduce six-monthly licensing could be made most opportunely in October.

Would be glad of early reply as I think the best time to make an announcement, if we are to make it, is within the next couple of days.' [2]

1 On 24 June Fadden sought the opinion of Menzies and O'Sullivan on Ministers' view that as international reserves were increasing substantially and exports exceeded imports by some 200 million per annum, Australia was certain to attract international criticism if import controls were not relaxed. Menzies replied on 30 June (Cablegram 2339) that he and O'Sullivan agreed relaxation was desirable and practicable, but any announcement during their absence would suggest the decision was a response to overseas pressure.

2 This text was dispatched as Cablegram 2315. Menzies' reply, received on the morning of 3 July, accepted the suggested course 'in view of strong Cabinet feeling'. All cables are on file AA :

A4905/1, VOLUME 19.

[AA : A4905/1, VOLUME 19]