TOKYO

The Rt. Hon. J. McEwen,
Minister for Trade

Your Excellency
I have the honour to confirm on behalf of my Government the
understanding embodied in the Notes Agreed by and Letters
Exchanged between the Japanese delegation and the Australian
delegation to clarify the interpretation of and for the purpose of
implementing the Agreement on Commerce between Japan and the
Commonwealth of Australia signed at Tokyo on [6th] July 1957,
which are attached hereto and which shall be confidential.

I have further the honour to request your Excellency to be good
enough to confirm the foregoing understanding on behalf of your
Government.

I avail myself, Excellency, of this opportunity to renew
assurances of my highest consideration.

Minister for Foreign Affairs
Tokyo, 6th July, 1957

The Minister for Foreign Affairs,
Tokyo
Your Excellency,
I have the honour to acknowledge receipt of your Excellency's Note
dated 6th July, 1957, which reads as follows:

'I have the honour to confirm on behalf of my Government the
understanding embodied in the Notes Agreed by and Letters
Exchanged between the Japanese Delegation and the Australian
Delegation to clarify the interpretation of and for the purpose of
implementing the Agreement on Commerce between Japan and the
Commonwealth of Australia signed at Tokyo on 6th July, 1957, which
are attached hereto and which shall be confidential.

I have further the honour to request your Excellency to be good
enough to confirm the foregoing understanding on behalf of your
Government.' On behalf of the Government of the Commonwealth of
Australia I have the honour to confirm the understanding stated in
your Excellency's Note under reference.

I avail myself, Excellency, of this opportunity to renew
assurances of my highest consideration.

Minister for Trade

Attachment
I. AGREED NOTES
Part A.

Part B.

Part C.

II. INTERPRETATIVE NOTES
1. on Article III.

2. on paragraph 3 of the Agreed Notes, Part A.

3. on paragraph 4(b)(i) of the Agreed Notes, Part A.

III. EXCHANGE OF LETTERS'
1. With reference to Wheat quality.

2. With reference to consultation on Wheat.

3. With reference to Surplus Disposals.

4. With reference to the confidential nature of certain documents.

IV. EXTRACTS FROM THE VERBATIM RECORD OF THE PLENARY SESSION OF
14TH JUNE 1957 [2]

1. Relating to Japanese imports of Australian Soft Wheat under
normal commercial considerations.

2. Relating to paragraph 4(b)(i) of the Agreed Notes Part A.

3. Relating to paragraph 6(iii) of the Agreed Notes Part C.

I. Agreed Notes

PART A
1. The Agreement provides under Articles I and II that Japan will
extend most-favoured-nation and non-discriminatory treatment to
imports from Australia. However, in view of the Japanese import
system, in order to translate these general provisions into
specific undertakings or understandings, the Japanese Delegation
indicated the treatment that the Japanese Government intended to
accord to certain of the more important imports from Australia.

2. Accordingly, the Japanese Delegation stated that it was the
intention of the Japanese Government:

(a) to accord to Australian wool the opportunity of competing in
the global quota for wool for not less than 90% of the total
foreign exchange allocation for wool each year and, subject to the
provisions of Article 11 of the Agreement, not to restrict the
total foreign exchange allocation for wool beyond the extent
necessary to safeguard its external financial position and balance
of payments;

(b) to admit Australian wheat and barley on a competitive and non-
discriminatory basis in accordance with the provisions of
paragraphs 3 and 4 below;

(c) to accord Australian sugar the opportunity of competing in the
dollar and pound sterling common quota or the pound sterling quota
for not less than 40% of the total foreign exchange allocation for
sugar;

(d) to include Australia as a permitted source of supply for beef
tallow and cattle hides on the Automatic Approval list;

(e) to admit Australian dried skim milk on a competitive and non-
discriminatory basis in the global quota except for imports for
use in the Japanese school lunch welfare programme;

(f) to make provision for the import of 100,000 Stg. of
Australian dried vine fruits (raisins, currants and sultanas) in
each year of the three year period.

3. With respect to paragraph 2(b) in so far as Australian barley
was concerned:

(a) The Australian Delegation stated that the level of Australian
barley exports to Japan which amounted in the past three years to
approximately 30% of the total barley imports of Japan, had
represented reasonable treatment. The Australian Delegation wished
to see this treatment of imports of Australian barley into Japan
at least maintained.

(b) The Japanese Delegation stated that the Japanese Government
would see to it that this was done.

4. With respect to sub-paragraph 2(b) in so far as Australian soft
wheat was concerned, it was agreed that:

(a) Australian soft wheat could be expected to secure a
substantial share of the Japanese market in the absence of non-
commercial purchase arrangements and unfair trade practices by
third countries, but it was difficult to define a fair share in
precise terms for the following reasons:

(i) the character and capacity of the Japanese wheat market has
changed since before World War II when Australia was the major
supplier;

(ii) Japanese millers and consumers have had no recent experience
of Australian soft wheat due initially to the world-wide post-war
wheat shortage and subsequently to imports of wheat under non-
commercial arrangements regarding surpluses or to related inter-
Governmental arrangements affecting Japan's wheat imports.

(b) (i) If in either of the first two years the opportunity for
Australian soft wheat to compete freely in the Japanese market
should be impaired by unfair trade practices on the part of a
major wheat supplier to Japan, the Japanese Government would take
steps within its power to ensure purchase, through commercial
channels, of Australian soft wheat in the following quantities on
a competitive basis;

a) in the first year-200,000 tons;

b) in the second year-300,000 tons, or the quantity actually
imported in the first year, whichever the greater.

The existence of unfair trade practices on the part of a major
wheat supplier to Japan would be established through consultation
between the two Governments.

When the Japanese Government takes steps as provided above, the
Australian Wheat Board would offer wheat to Japan in accordance
with its normal commercial considerations.

(ii) If in either of the first two years Japan should enter a
special non-commercial purchase agreement the Japanese Government
would be ready if the Australian Government so desires to take
steps within its power to ensure purchase of the same quantities
as mentioned in (i) above to be purchased in the first and second
year respectively through commercial channels on a competitive
basis.

(iii)In the event of unfair trade practices of Australia's
competitors or special non-commercial arrangements in the third
and subsequent years of the Agreement, the Japanese Government
would ensure, under the same conditions set forth in paragraphs
4(b)(i) and 4(b)(ii) above, the maintenance of an equitable share
for soft wheat from Australia in the Japanese market. During these
years such equitable share would be determined through
consultations between the two Governments, in the light of Japan's
actual imports in the previous years of the Agreement. Due account
would be taken of any special factors such as crop failure in
either or both of the two countries.

(iv) In the context of the present Notes, the term 'Australian
soft wheat' is understood to mean Australian wheat of f.a.q. or
lower grades. Grades of Australian wheat of high protein content,
superior to f.a.q. and sold at a premium shall be regarded as
being outside the scope of sub-paragraph (i), (ii) and (iii)
above, and Japanese imports of Australian wheat of this type shall
be on a competitive and non-discriminatory basis, as provided in
paragraph 2(b).

PART B
As in Part B of the Agreed Minutes [3] confirmed by letters
exchanged today between the Australian Minister for Trade and the
Japanese Minister for Foreign Affairs.

PART C
1. During the course of discussions in connection with Article V,
the Australian Delegation pointed out that the basis of Article V
was the mutual expectation that as a result of the Agreement there
would be increased opportunity for expansion of Japanese exports
to Australia without serious damage to Australian industry or
sudden and serious disruption of the pattern of Australia's
imports. This expectation was based on the premise that exports
from Japan in particular lines, especially in the products of
Australian industries historically or potentially particularly
liable to disruption in the event of an undue increase in the
volume of imports from Japan, would not be allowed to reach such
volume, or to be shipped under such conditions as would cause or
threaten serious damage of this kind. Since, in its view, the
accord of most-favoured-nation treatment to Japanese goods could
result in such a situation, it would welcome the co-operation of
the Japanese authorities in dealing with these situations and
considered that early and effective arrangements, if undertaken in
Japan, could make a substantial contribution to their solution.

2. The Australian Delegation provided the Japanese Delegation with
an itemised list of those products in which it was considered
difficulties could occur under present conditions. [4] In the
light of changing circumstances it might be possible subsequently
to remove some items from this sensitive category or it might be
necessary to add other items to the list. It was requested that
the Japanese Government should pay particular attention to the
level, quality and price of exports of these goods to Australia
without detracting from the need for attention to other goods.

3. The Japanese Delegation pointed out in reply that under
Japanese legislation export was free in principle and that the
Japanese Government could take only limited measures to deal with
these problems. However, the Japanese Delegation indicated that
the Japanese Government would use its best endeavours within its
constitutional authority to see that exports from Japan to
Australia were conducted in such a way as to avoid or remedy the
damage or prospect of damage to which the Australian Delegation
had referred. In this connection, the Japanese Delegation has
indicated that particular attention will be given to those items
which have been mentioned by the Australian Delegation as being
particularly sensitive.

4. The Australian Delegation stated that, in its view, the
development of the maximum practicable degree of consultation
between the two Governments would be essential to the satisfactory
solution of any particular problem which might arise. The Japanese
Delegation agreed with this suggestion. In this connection it was
agreed that:

(a) effective liaison would immediately be established in Canberra
between the Japanese Embassy and the Australian Government and in
Tokyo between the Australian Embassy and the Japanese Government;

(b) statistical information would be provided by the two
Governments on a continuing basis particularly in respect of
sensitive items;

(c) if either the Australian Government or the Japanese Government
was of the opinion that any product was being imported under such
conditions that serious injury is threatened, consultations would
be held immediately to endeavour to remedy the situation without
resort to special emergency action;

(d) in the event of a situation requiring the application of
Article V, the procedure provided in the said Article would be
adopted.

5. The Japanese Delegation asked for assurances that the
Australian authorities would not unreasonably take special action
of the kind envisaged in the Article, stating that the Japanese
Government agreed that it was important to the successful
operation of the Agreement and was also important in enabling
recourse to Article V to be avoided, that export from Japan be
conducted in an orderly manner so as to avoid serious damage in
the sense referred to by the Australian Delegation.

6. The Australian delegation said that in the light of this
statement by the Japanese Delegation and in view of the mutual
expectation referred to in paragraph 1 it could say that the
following considerations would apply in respect of any action by
the Australian Government under Article V:

(i) Such action would not be taken except after consultation. In
every case, consultation would be as far in advance as
practicable.

(ii) Such action would not be taken lightly; and would be taken
only where the consultation process failed to provide a mutually
acceptable alternative solution to the problem.

In cases where urgency might require action to be taken before the
consultation process was completed, consultation would be
continued in an endeavour to find a mutually acceptable solution.

(iii) So far as administratively practicable such action would
apply only to those specific goods in respect of which the action
was necessary to correct the particular situation.

(iv) Such action would apply only for such time as was necessary
to correct the particular situation and would be discontinued
immediately this was achieved.

(v) Such action would be limited to cases where serious damage was
caused or threatened.

7. The Australian Delegation drew the attention of the Japanese
Delegation to the provisions of the Customs Tariff (Industries
Preservation) Act as recently amended [5] and mentioned that it
was intended to limit any action of the kind envisaged in Article
V which might have to be taken to avoid a sudden and serious
disruption of the pattern of Australia's imports of certain
commodities to measures authorized under the Act.

II. Interpretative Notes

Ad Article III
The term 'sales' in paragraph 1 includes re-sales of imported
products in the domestic market.

Agreed Notes Part A
Ad paragraph 3
In connection with paragraph 3 of the Agreed Notes Part A, 'total
barley imports' would include any barley that might be imported
under non-commercial arrangements with other countries or under
unfair trade practices on the part of competing suppliers.

Agreed Notes Part A
Ad paragraph 4(b)(i)

With reference to the consultations for the purpose of
establishing unfair trade practices (mentioned in paragraph
4(b)(i), it is agreed that prima facie evidence of such practices
would include a case where wheat from a third country, being a
major wheat exporting country, was being offered to Japan at a c.

and f. price lower than the c. and f. price at which wheat of
comparable quality from that country was being offered for sale in
another major wheat importing country.