General Agreement on Tariffs and Trade
Attached for consideration of Ministers are the following papers
prepared by the Interdepartmental Committee.

(1) Commonwealth Talks and G.A.T.T Review. [1]

I. G.A.T.T
II. OTTAWA
(2) Trade Talks with Japan.

Attachment

Trade Talks with Japan
The following are notes on aspects of trade talks with Japan
including negotiations inside or outside GATT, nature and scope of
an agreement and timing of talks and negotiations. There is a
separate section on import licensing.

Negotiations within GATT as it now stands
2. (a) GATT would require general non-discriminatory treatment
including the mutual accord of m.f.n. tariffs and non-
discrimination in quantitative restrictions. Australia would have
to rely on existing escape clauses.

(b) Negotiations with Japan under GATT may enable Australia to
obtain at least part payment by means of concessions in the USA
tariff, in accordance with the recent US proposal.

(c) Tariff negotiations within GATT are not likely to start before
February next.

(d) Tariff negotiations under the GATT aegis would preclude
invoking Article XXXV.

Negotiations outside GATT
3. (a) Negotiations for a bilateral agreement outside GATT but
qualifying our GATT commitments could enable Australia to obtain
appropriate escape provisions.

(b) This would raise no procedural difficulty for Australia in
GATT with or without the proposed United Kingdom amendment of
Article XXXV.

(c) This approach also seems to offer prospects of a solution (at
least for the time being) of the problem of relations with Japan
in the context of GATT.

4. The Canadian Agreement exchanged general m.f.n. obligations,
except that Canada reserves the right to establish (for the
protection of domestic industry) special values for Japanese goods
as the basis for levying ordinary and special duties when imports
occur in threatening volume. Canada received undertakings on
nondiscriminatory treatment for her main exports to Japan.

5. New Zealand. We understand that New Zealand and Japan have reached
agreement in principle on a limited trade agreement involving
m.f.n. treatment in tariff and import licensing for a limited
range of goods not manufactured in New Zealand. New Zealand has
deferred action to implement the tariff side of the agreement
until after the forthcoming GATT meetings.

6. The United Kingdom has suggested discriminatory quotas or
duties to protect domestic industry or the export interests of
other countries against 'disruptive or manifestly unfair'
competition from Japan. The proposals would aim to amend the GATT
to sanction through bilateral agreements these otherwise non-
permissible protective measures.

Australian Approach
7. The Canadian Agreement was negotiated outside the GATT. Canada
is applying GATT between herself and Japan subject to this
agreement. Its protective value for duty provisions operate only
where Canadian industries are affected.

8. The United Kingdom proposal envisages explicit recognition in GATT for bilateral
deals with Japan. The UK envisage that the bilateral agreements
could allow the trade of other Commonwealth countries to be
protected as well as the domestic industry in, say, Australia.

9. Ministers may wish to consider whether an Australian agreement
should include provisions safeguarding imports from UK or other
Commonwealth countries into Australia as well as Australian
domestic industry.

10. If the Agreement contained any provisions inconsistent with
GATT an understanding from Japan should be sought that these
provisions should continue to apply even if the GATT were applied
between Japan and Australia.

Nature and Scope of an Agreement
11. On our exports side we would like to seek from Japan:(a)m.f.n.

tariff treatment, and (b) non-discriminatory import licensing for
our exports. Such requests would of course draw similar requests
from the Japanese.

12. The nature, scope and general form of any possible agreement
affecting tariff cannot be foreseen until broad decisions have
been taken as to the kind of commitments Australia is prepared to
assume, especially of the kind of commitments on major items viz.

cotton piece goods and rayon piece goods.

13. Possible courses (from a technical aspect) in the customs
duties field:

(a) Accord Japan m.f.n. tariff treatment except on cottons, rayons
and other items judged to be vulnerable. This course is not likely
to provide the basis for an agreement with Japan as it assumes
Japan could agree to continued discrimination against her
principal export products.

(b) Accord Japan m.f.n. duties on a specified quantity or value of
the most troublesome goods while applying the General Tariff rates
to importations in excess of the specified amounts (the tariff
quota idea).

(c) Accord Japan m.f.n. duties on a specified quantity or value of
the most troublesome goods and limit imports to that amount. This
would necessitate using special protective import licensing
measures against the particular Japanese goods to keep imports
from Japan within the specified volume.

(d) Accord Japan general m.f.n. treatment in tariff rates with
appropriate escape clauses e.g. the provision in the Canadian-
Japanese Agreement whereby Canada reserves the right to establish
special values as the basis for levying duties if imports occur in
threatening volume. It cannot be foreseen at this stage how far we
would be successful in getting agreement to the escape clauses we
would find necessary.

14. On balance there appear to be advantages and no great
difficulties in saying to the Japanese immediately that we realise
there are unsatisfactory aspects of our trading relations with
them and we are examining the possibility of bilateral trade
talks. It should be made clear that Australia would have to
complete certain studies before actually undertaking discussions.

15. As a necessary preliminary to these discussions Departments
should be requested to prepare schedules, showing the nature of
the tariff or other commitments Australia might contemplate
assuming on items in the import trade from Japan and the requests
we might make on Japan so that Ministers could see the probable
benefits for Australia and the probable effects on Australian
industry and UK exports. At the same time an examination should be
made of the possible escape clauses we should seek.

Commonwealth Consultation
16. We would, of course, keep Commonwealth countries informed of
our action. The UK has asked that no action be taken which would
prejudice discussion of the matter in all its aspects at the
October meeting. The initial moves proposed would not be
inconsistent with this request and no conclusions would in any
case be arrived at with Japan before the Commonwealth talks.

Import Licensing
17. An interdepartmental submission has previously been circulated
to Ministers on this question. [2]

18. The possible courses (from a technical aspect) in the import
licensing field are to assimilate Japan to non-dollar treatment
(a) entirely or (b) with exceptions-the excepted items to be
licensed as at present, i.e. limited to a specified total amount
quarterly.

19. If either of these courses is taken, unilateral action
presents fewer complications since bargaining (and the resultant
acceptance of contractual obligations) in import licensing matters
may lead to complications in administering import restrictions
necessitated by the balance of payments.