Canberra, 15 March 1966

Confidential

Submission No. 72¹–Mainland China–Wheat Negotiations

The Cabinet approved the proposal that the China National Cereals Corporation be permitted to send a delegation of four Chinese to Australia to enter into negotiations with the Wheat Board for a contract for purchase by the Corporation of wheat, particularly a quantity of about 50,000 tons of off-grade wheat. The Cabinet appreciated the substantial international and domestic reasons which argue against allowing the delegation to enter Australia, but it felt that the balance of national advantage lay in granting approval.

2. Its understanding of the background to the proposed visit is that the Wheat Board, in the course of its business, approached the Corporation about a sales contract and received, unexpectedly, a reply suggesting the despatch of a delegation to negotiate purchase of the wheat, and at the same time to seek to arrange sales of Chinese goods which would go towards counter-balancing the exchange cost of the wheat.

3. The Cabinet noted that the visas to be granted to the delegation will be granted, subject to check on security grounds of individual applications, for the purpose of negotiating with the Australian Wheat Board and to conduct
other business.

4. The Cabinet indicated that it would wish that the Government and the Wheat Board should each take special care to limit official recognition of the delegation and also the publicity surrounding it. It was indicated further that agreement should be reached on an explanation which all members of the Government could use or draw upon in explaining, as need may arise, the decision to allow the delegation to visit Australia. The Ministers directly concerned –Mr. Adermann, Mr. McEwen and Mr. Hasluck–will draft a statement for this purpose and, subject to clearance by the Prime Minister, the statement will then be circulated by the Cabinet Secretariat to all Ministers.²

[NAA: A4940, C3287]

1 The submission noted that the China National Cereals Corporation, Peking, had made a request to send a delegation to Australia to negotiate wheat purchases and to promote the sale of Chinese goods on the Australian market. It also explained that the situation differed from that of June 1965, when Cabinet had refused to allow the Wheat Board to invite a Chinese delegation to visit Australia (see Document 111); the Board had not taken the initiative but had received an application. Refusal, it was thought, 'would be a direct rebuff to the Chinese which could well be to the continuing disadvantage of the Australian wheat industry'. The submission outlined statistics indicating the importance of China to this industry, including the fact that Australia had supplied more wheat to the PRC than any other country–45% of the total from all sources since 1960. It consequently recommended that Cabinet approve the visit of a Chinese delegation, subject to usual security checks.

2 On 17 May, Cabinet agreed on the text of a statement that could be used to answer the question of why Australia continued to trade with China. The statement pointed out that Australia prevented the export of strategic materials but placed no barriers to private sale of non-strategic goods to the PRC. It argued that Australian exports were only of marginal significance to the Chinese economy while they were valuable to Australia. To cut off this trade would make no difference to China, which would obtain its needs from other sources, but the consequent loss of foreign exchange would affect Australia's economic development and defence. More generally, it noted that there could be 'no weakening of resolve to resist the present aggressive and hostile policies of Mainland China', yet it was not in Australia's interest to 'close the door to patient efforts to establish a basis for living with Mainland China'. Finally, it claimed that the Government policy on trade was 'based on realism and practical facts', and that it was under constant review in light of the 'total facts of the situation'.