(c) crown copyright
Catalogue Reference:CAB/129/77
Image Reference:0009
SECRET
C . P . ( 5 5 ) 109
COPY NO.
[%
24th A u g u s t , 1955"
CABINET
JAPAN:
TRADE AND P A Y M E N T S
NEGOTIATIONS
M e m o r a n d u m b y the S e c r e t a r y of State f o r F o r e i g n , A f f a i r s
In t h e i r d i s c u s s i o n on 15th A u g u s t o f the C h a n c e l l o r of the
E x c h e q u e r ' s note C . P , ( 5 5 ) 103 t h e C a b i n e t a s k e d m e t o r e c o n s i d e r the
d e c i s i o n that the shipping q u e s t i o n should n o t b e r a i s e d a g a i n in the c o u r s e
of the n e g o t i a t i o n s f o r a n e w T r a d e and P a y m e n t s A g r e e m e n t ( C . M . ( 5 5 ) 28th
C o n c l u s i o n s , Minute 7 ) ,
O f f i c i a l s w e r e a c c o r d i n g l y a s k e d to l o o k a t t h e
p r o b l e m a g a i n in the l i g h t of r e c e n t d e v e l o p m e n t s .
The following a r e their
v i e w s with which I a g r e e ,
2,
T h e f a c t o r s w e m u s t t a k e into a c c o u n t a r e : ­
( a )
Our a i m i s t o g e t Japan t o stop s u b s i d i s i n g the o p e r a t i o n o f h e r s h i p p i n g s e r v i c e s and not t o build up h e r m e r c h a n t f l e e t t o an u n e c o n o m i c extent.
This is a long-term problem. Shipping i s a v i t a l national i n t e r e s t t o Japan, W e a r e not g o i n g t o b e a b l e t o g e t s a t i s f a c t o r y l o n g - t e r m a s s u r a n c e s f r o m h e r in the c o n t e x t of a s h o r t - t e r m a g r e e m e n t unless w e a r e r e a d y to m a k e the q u e s t i o n a b r e a k i n g p o i n t o r i n d e e d t o go further, ( b )
F o r if w e b r e a k and do nothing f u r t h e r , the United
K i n g d o m w i l l suffer m o r e than Japan,
Our o b j e c t
i n the p r e s e n t n e g o t i a t i o n s i s t o p e r s u a d e the
Japanese t o spend m o r e in the s t e r l i n g a r e a and t o
reduce her present discrimination against imports
f r o m the s t e r l i n g a r e a .
If w e w e r e t o confine our
a c t i o n t o b r e a k i n g off n e g o t i a t i o n s the Japanese
would be f r e e t o d i s c r i m i n a t e e v e n m o r e h e a v i l y
a g a i n s t s t e r l i n g a r e a i m p o r t s w h i l e the s t e r l i n g
a r e a continued t o i m p o r t f r o m Japan a t the p r e s e n t
level.
H e r sterling balances would i n c r e a s e rapidly
and w e should h a v e f a i l e d t o b e n e f i t United K i n g d o m
and s t e r l i n g a r e a t r a d e w h i c h i s our o b j e c t in t h e s e
talks,
( c )
W e should thus be pushed to i m p o s e r e s t r i c t i o n s on
Japanese e x p o r t s .
If t h e s e w e r e l i m i t e d t o
e x p o r t s t o the United K i n g d o m the e x t e n t t o which
w e could h u r t Japan's t r a d e without d a m a g i n g our
own e c o n o m y ( p e r h a p s £10 m i l l i o n s a y e a r ) would
not be enough t o m a k e Japan change h e r mind and
m o r e o v e r w o u l d be c e r t a i n t o i n c u r r e t a l i a t i o n a g a i n s t
our own e x p o r t s ,
( d )
I f w e w e r e p r e p a r e d t o t h r e a t e n the i m p o s i t i o n
of s e v e r e r e s t r i c t i o n s o f c o l o n i a l i m p o r t s f r o m
Japan ( r o u g h l y £100 m i l l i o n s a y e a r ) t h i s m i g h t
i n d e e d be d e c i s i v e .
But t h i s w o u l d i n v o l v e the
u s e - o r the t h r e a t - o f i m p o r t r e s t r i c t i o n s
on the C o l o n i e s f o r o t h e r than b a l a n c e of p a y m e n t s
r e a s o n s which would be contrary to established
policy.
M o r e o v e r , i t s e e m s v e r y u n l i k e l y that the
C o l o n i e s p r i n c i p a l l y i n v o l v e d w o u l d a g r e e , i n the
i n t e r e s t s o f B r i t i s h s h i p p i n g , t o d o without i m p o r t s
which they need.
( e )
T h u s w e m i g h t find o u r s e l v e s not o n l y without a t r a d e
and p a y m e n t s a g r e e m e n t , w h i c h w e n e e d m o r e than
t h e J a p a n e s e , but f u r t h e r d r a w n into a kind of t r a d e
w a r w i t h the Japanese and on an i s s u e w h i c h t h e y
could r e p r e s e n t a s i n t e r f e r e n c e w i t h t h e i r d o m e s t i c
policies.
E c o n o m i c a l l y t h i s could do both s i d e s g r e a t
h a r m and p o l i t i c a l l y i t w o u l d b e c a l a m i t o u s .
We
a l r e a d y d i s c r i m i n a t e a g a i n s t Japan; w e h a v e i n v o k e d
A r t i c l e X X X V of the G e n e r a l A g r e e m e n t on T a r i f f s and
T r a d e a g a i n s t h e r : i f w e n o w p i c k a q u a r r e l w i t h the
J a p a n e s e on the shipping i s s u e the Japanese m a y w e l l
c o n c l u d e that w e a r e i r r e c o n c i l a b l y h o s t i l e t o t h e m and
d e t e r m i n e d not t o l e t t h e m r e - e s t a b l i s h t h e m s e l v e s .
W e w o u l d b e pushing t h e m into the hands of the
Communists.
A n d w e should not s u c c e e d i n h e l p i n g
o u r shipping i n t e r e s t s .
3.
M i n i s t e r s a g r e e d l a s t month (on i n d i v i d u a l s u b m i s s i o n s ) that
our r e p r e s e n t a t i o n s on shipping should b e m a d e t h r o u g h the d i p l o m a t i c
channel b y H . M . A m b a s s a d o r in T o k y o in a f o r m a l N o t e and that i n the t r a d e
t a l k s , w h i l e the d e l e g a t i o n should r e f e r t o t h i s N o t e and s t r e s s the i m p o r t ­
a n c e o f the shipping q u e s t i o n , t h e y should state that t h e s e q u e s t i o n s w o u l d
not b e f u r t h e r p u r s u e d in t h e t r a d e and p a y m e n t s n e g o t i a t i o n s .
Action was
taken a c c o r d i n g l y .
It would be e m b a r r a s s i n g t o g o b a c k on i t w h i l e w e a r e
a w a i t i n g the Japanese r e p l y .
T o postpone the r e s u m p t i o n of n e g o t i a t i o n s
until t h e Japanese h a v e r e p l i e d t o our N o t e w o u l d gain us nothing u n l e s s w e
w e r e p r e p a r e d t o do w i t h o u t an a g r e e m e n t i f the r e p l y w a s not f u l l y
satisfactory.
Conclusions
4,
W e could not e f f e c t i v e l y n e g o t i a t e on the shipping i s s u e in
t h e s e t r a d e t a l k s without making it a b r e a k i n g point and t o m a k e it a b r e a k i n g
p o i n t w o u l d h a v e the g r a v e e c o n o m i c and p o l i t i c a l c o n s e q u e n c e s s e t out a b o v e .
Recommendation
5.
I r e c o m m e n d that the shipping i s s u e should not b e r a i s e d
f u r t h e r i n the c o u r s e o f t h e s e n e g o t i a t i o n s but should b e p u r s u e d s e p a r a t e l y
t h r o u g h the d i p l o m a t i c channel and on o t h e r s u i t a b l e o c c a s i o n s ,
H.M.
F o r e i g n O f f i c e , S . W . 1 .
24th A u g u s t , 1955.
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