The Japanese Ambassador, Mr Nishi, on his initiative raised the question of a possible new announcement about Australian import licensing on 1st October, 1954. I told him that there had been some discussion on this but that I was aware of no decisions which were to be announced, and I doubted whether there had been a final consideration of the matter yet. I said that because of an unfavourable turn in our balance of trade there was some pressure for tightening import restrictions.
2. Mr Nishi then said that his Government could not understand why there was discrimination against Japan in import licensing. The dollar clause in the Sterling Area Agreement with SCAP was an argument which disappeared, he believed, in 1949, and the Japanese Government regarded the classification of Japan in a category of its own as representing an unreasonable discrimination against a good customer of Australia.
3. I agreed with Mr Nishi that the original purpose in creating a special category for Japan had vanished but I suggested that discrimination might not always be against a country in a special category. We had been making efforts to increase the import licences given to Japan and, as he was aware, actual trade was lagging behind the figures authorised by licensing. A more important factor might be prices or possibly tariffs. We were continuing to examine the import licensing system, especially as it applied to Japan. Mr Nishi said that if it were decided to abolish discrimination in licensing it should also be possible to discuss tariffs. I said that a decision on tariffs was a complicated affair and one that would take a long time to work out. He said that his Embassy would pursue with the Department of Trade and Customs the question of the relaxation of our import restrictions.