97 Submission From Shaw To Mcbride

2nd March, 1955

CANBERRA

Trade Talks with Japan On 17th November, 1954, a note was delivered to the Japanese Embassy stating that the Australian Government had been giving careful consideration to the question of Australia's trading relations with Japan and was willing to enter into talks with the Japanese Government to examine mutual trade problems. [1] The note suggested that the talks should commence at a time and place to be mutually agreed upon. No reference was made in the note to the scope of the proposed talks, although in discussions among Departments and in the Cabinet Sub-Committee, it has been envisaged that they would be concerned mainly with tariff concessions to Japan subject to safeguards for Australian industry.

A note verbale was received from the Japanese Embassy on 30th December, 1954 [2], stating that the lack of any concrete references in the Australian note to the subject matter of the proposed talks made it difficult for the Japanese Government to determine its attitude towards the note. The Embassy therefore requested that the Australian Government should elaborate further upon its ideas for the talks. The Embassy's note then emphasised again that the Japanese Government hoped that Australia would fully support Japan's accession to GATT. (The application of the GATT to Australia's trade with Japan would require general non- discriminatory treatment including the mutual accord of M.F.N.

treatment.)

Departments concerned have been consulted about the terms of a reply and the Department of Trade and Customs have now suggested that we should inform the Japanese Embassy that the Australian Government is not in a position to determine its attitude towards proposals involving formal trade or tariff negotiations until the discussions in Geneva on the Review of GATT are completed and the changes in the GATT resulting from the review have been considered by Governments. It is then suggested that, in the meantime, there would be mutual advantages in arranging informal and purely exploratory talks between the Embassy and Australian officials representing the Departments primarily concerned.

Treasury and Prime Minister's Department are agreeable to the draft and are submitting a recommendation to that effect to the Treasurer and Acting Prime Minister. The Department of Commerce and Agriculture agree that the draft reply is rather negative but favour informal and exploratory talks. In order to avoid further delay they are recommending to the Minister of Commerce and Agriculture that he agree to its transmission to the Japanese Embassy.

The Department of National Development wish to go a stage further.

They consider that, in addition to suggesting informal and exploratory talks, our reply to the Japanese note should define more fully the possible subjects for formal talks.

The question of a reply was discussed with Mr Casey before he departed on his visit to South East Asia. [3] He approved the offer of informal and exploratory talks and favoured the more detailed approach suggested by National Development. We have endeavoured to secure acceptance by the trade Departments of this approach but it is unacceptable to them partly on the ground that Cabinet discussions have not advanced far enough to permit definition in a formal note of Australian views on the scope of formal talks and partly on the grounds that the proposed informal and exploratory talks would permit an exchange of views without commitment on either side and thereby facilitate further consideration by Ministers. By not defining items for discussion we obtain the incidental advantage that we and the Japanese will be free to discuss any aspect of Australian-Japanese economic relations which either side might decide to raise.

Departmentally we have some reservations about the Department of Trade and Customs' draft reply. In particular it gives a slightly misleading emphasis to the relation of the GATT review to trade talks with Japan. It was intended, when the offer of talks was conveyed to Japan last November, that these talks should be held before the conclusion of the GATT review. The draft note says in effect that we now do not consider that formal trade talks could take place until the results of the review have been considered by Governments. However the main interest of the Japanese Embassy has been to obtain our agreement to their admission to GATT. They have shown no active desire for trade talks outside that context.

There are advantages in sending a reply to the Japanese Embassy in the near future. Mr Nishi may be visiting Japan in March which would give him an opportunity to consult with his Government. The GATT Review Conference is likely to conclude shortly and the contention that the Australian Government is unable to determine its position ... to formal trade or tariff negotiations until the results of the GATT Review have been considered will appear increasingly thin as time goes by.

Moreover, it is hoped that informal and exploratory talks will provide an opportunity for a fruitful exchange of views and we consider that they should be held as soon as possible, provided the proposal is acceptable to Japan.

In all the circumstances we consider that the best course is to send a note along the lines of the Trade and Customs draft.

Recommendation It is recommended for your approval that subject to the agreement of other Departments concerned (who are clearing with their Ministers), a note be sent to the Japanese Embassy along the lines of the draft proposed by the Department of Trade and Customs. [4]

1 Document 90.

2 Document 93.

3 Casey left Australia on 8 February to visit Singapore, Malaya and Indo-China before attending the first Manila Treaty Council meeting in Bangkok from 23 February. He returned to Australia on 6 March.

4 McBride noted his approval on 2 March and Fadden approved the proposed reply on 4 March (see minute from Durie to Fadden, 2 March 1955, on file AA : A1209/23, 57/5472). Spooner continued to press for a draft demonstrating 'willingness on our part to examine ... difficulties and a desire to find a solution which will be as satisfactory as possible to the Japanese (letter to Casey dated 15 March 1955) and circulated a draft incorporating more definite proposals. Casey replied on 18 March that he thought detailed proposals were unnecessary: the agreed note had been 'deliberately drafted in general terms' and would in no way restrict informal and exploratory talk. Spooner bowed to the consensus but remained 'unconvinced that the existing draft ... is the reply that we ought to make to the Japanese in the present circumstances. My fear is that its tone, rather than its substance, will not conduce to Japanese confidence in our genuine desire for effective trade discussions' (letter to Casey dated 28 March). The Casey-Spooner correspondence is on file AA :

A1838/283, 759/1/7, ii.

[AA : A1838/278, 3103/10/2, iii]