Trade Talks with Japan This note is supplementary to the one which was sent on to you last night.  I doubt whether the submission will carry Ministers' discussion very far. The attitudes of the various Departments to this matter are pretty rigid and as a result the paper has been prepared by this Department and is pretty colourless in order to avoid active opposition by one or another.
Commerce are anxious to have some Agreement or other with Japan because they think it will help our exports. Customs want to have as little to do with Japan as possible because their past experience tells them that dealings with Japan are invariably headaches for them. Treasury is anxious that nothing should be done until we have a reasonably clear idea of how it is going to work out. Our own view is very similar to Treasury's but we do feel under some obligation to get something to Cabinet.
At the outset, I think we should ask, 'Why do we want an Agreement?' The answer is, I think, because we want to be able to exclude Japan from full participation in GATT. By this I mean that we want a reason for refusing Japan m.f.n. treatment in Australia.
If this view is correct then it excludes what I might call the External Affairs view, that is, that it is time that we welcomed Japan into the Western group of powers and a Trade Agreement is one way in which the welcoming hand can be extended. This view, so far as Australia is concerned seems to me to be purely theoretical at the present time. Any Trade Agreement which would arouse feelings of gratitude in Japanese breasts must give them something and this is precisely what we are not prepared to do. For the same reason I think the Commerce view is unrealistic. We need not expect the Japanese to give us benefits of any consequence in Japan unless we are prepared to give them some. Moreover the conditions of trade seem to be weighted very much in our favour.
On last year's figures, out of something like 70m. worth of exports from Australia to Japan 61m. was wool. There is no tariff on wool and it is difficult to believe that Japan would readily place duty on a raw material like wool just to annoy us when Japan has no local industry to protect.
Theoretically there are perhaps four positions that can be identified, each becoming less preferable from the Australian point of view.
1. Japan having no m.f.n. treatment in Australia under GATT and no agreement outside GATT (present position);
2. An agreement incorporating a quota system;
3. An agreement incorporating the Canadian duty method;
4. No agreement and Japan receiving m.f.n. treatment in Australia under GATT.
Apparently we start with the assumption that 1 and 4 are out. The real issue then seems to be, 'What are the respective merits of 2 and 3?'This seems to me to involve a close examination of (a) vulnerable industries, and (b) important industries. The submission is woefully deficient in this respect. Either Customs do not know the answers or they will not tell. Textiles and toys are traditionally the things most affected by Japanese competition and a precise examination of these at least should be made. It may be possible to get a clearer view by inviting a senior Customs officer along to the Committee Meeting on Tuesday. If so, some mention of it should be made today because not only is Meere away in Europe but the top bracket of Customs people is likely to be in Sydney next week unless Short is warned that his presence will be needed by Cabinet.