The Australian Embassy has the honour to refer to the Note Verbale No. 270/134 dated 5th November, 1953, from the Japanese Ministry of Foreign Affairs  and to the Aide-Memoire dated 14th January, 1954, from the Japanese Ambassador in Australia to the Department of External Affairs  regarding Japan's trade with Australia.
Whilst the Embassy notes the observations by the Ministry and the Ambassador on the state of trade between Australia and Japan, it believes that the Japanese Government will appreciate that, as Australia is a member of the sterling area, the bilateral balance of trade between Japan and Australia is not as significant for the financing of that trade as the balance of payments between Japan and the sterling area. During 1953, action was taken by a number of sterling area countries which should soon result in greater imports from Japan into the sterling area. In order to sustain the trade until such time as that action became effective, short-term facilities were made available by the United Kingdom Government for financing Japan's trade with the sterling area. The Embassy understands that Japan's capacity to trade in sterling has been further strengthened as a result of the understandings on trade reached with the United Kingdom in January, 1954.
The observations contained in the Note Verbale and the Aide- Memoire on imports into Australia from Japan suggest that the extent of the import licensing relaxations which have been made by the Australian Government has not been fully understood. During the first quarter of 1953, the value of licences authorised for imports of goods of Japanese origin amounted to A730,000. During the second quarter of 1953, this value rose to A1.5 million. In the third quarter, it increased to A3 million and in the fourth quarter to A4.5 million. The level of licensing in the fourth quarter of 1953 is being continued in the current quarter and a relaxation representing a further increase in the level of licensing by about 15% will be made in respect of the quarter commencing 1st April, 1954. This last-mentioned relaxation will permit Japanese goods to be licensed at a rate equivalent to an annual figure of approximately A21 million. Substantial increases therefore should soon become apparent in Australia's recorded imports from Japan.
The extent of the relaxations is also reflected by the increased values of licences authorised for the importation of particular products from Japan. Thus, for the five successive quarters ended 31st December, 1952 and 31st March, 30th June, 30th September and 31st December, 1953, authorisations in terms of A thousands were as follows:
Textiles 207 481 1229 2192 2932 Metals and Metal Manufactures 103 98 94 117 155 Sulphur Nil Nil Nil 105 386 Shell Buttons Nil 15 20 27 57 Canned Fish Nil Nil Nil 176 196 Toys and Fancy Goods Nil Nil Nil 43 89 Crockery and Glassware Nil Nil Nil 51 84
The Embassy also considers it desirable to explain the extent to which licences are granted to importers on a quota basis and on the basis of the case-by-case consideration of applications under administrative control. The position is that, for the six months ended March, 1953, only a quarter of Australia's total imports were licensed on a quota basis. Although the proportion tends to increase with any increase in the quotas, the proportion will still be less than a third in respect of imports in the six months ended March, 1954.
The Australian authorities are aware of delays and other difficulties which sometimes occur unavoidably in determining applications for import licences where the quota system cannot appropriately be applied. The Ministry is assured that it is the constant endeavour of the Australian authorities to minimise these difficulties and, as far as possible, to remove them. It is hoped that the Ministry appreciates that administrative control as distinct from quota control is not applied solely in respect of imports from Japan: it applies to all imports from the dollar area and to many goods imported from all countries.
With regard to the Ministry's observations that the Australian Government recently raised the import duties on Japanese tinplate and plywood, the Embassy wishes to inform the Ministry that the current duties of 12.5% and 57.5% ad valorem respectively now applicable under both the Most-Favoured-Nation Tariff and the General Tariff were enacted in the case of tinplate in June, 1937, and in the case of plywood in December, 1929. The duties on these products were temporarily suspended for limited periods prior to 1953, when world demand exceeded available supplies. These concessions to importers were discontinued in 1953 as a result of the improved supply position.