Australia's role in Japan's postwar trade strategy : development of Japanese trade under the Sterling Trade and Payments Agreements, 1947-1954

Fukushima, Teruhiko

Australia's role in Japan's postwar trade strategy : development of Japanese trade under the Sterling Trade and Payments Agreements, 1947-1954

Date

1995

Authors

Fukushima, Teruhiko

Abstract

This thesis analyses Australia's role in the re-establishment of postwar Japanese trade networks from 1947 to the mid 1950s. The Sterling Trade and Payments Agreements which stipulated settlement in pounds sterling of Japan's trade with the sterling area was an important determinant of Australia-Japan trade during this period. Under this Agreement, Australia played a significant role in sustaining Japan's postwar strategy of economic self-reliance through trade promotion on a more multilateral basis. Firstly, Australia assumed a pivotal role in shifting Japan's postwar trade strategy, under a worldwide dollar shortage, from dollar-based trade to expansion of more multilateral trade networks. The Supreme Commander for Allied Powers in Occupied Japan (SCAP) did not initially show much interest in stimulating trade with the sterling area, placing higher priority on maximisation of Japan's export sales to dollar markets. From late 1949 onwards, however, SCAP came to emphasise promotion of trade with the sterling and other non-dollar areas as a central strategy for increasing Japan's economic self-reliance and reducing its dependence on US aid. The Sterling Trade and Payments Agreements provided for multilateral settlement in soft currency of Japan's sterling trade, allowing Japan to use its sterling surplus to finance the procurement of wool and other important commodities from Australia. Australia's bilateral trade surplus provided the other sterling area countries with purchasing power to buy Japanese industrial goods. Australia emerged not only as an alternative supplier to the United States but also as the lubricant for Japan's overall sterling trade. Secondly, among the sterling area countries, Australia took the initiative in normalising trade relations with Japan. In August 1951, the Japanese government concluded a revised Sterling Payments Agreement that deprived Japan of the right to convert its sterling surplus into dollars. Japanese government and business had been inclined towards a dollar-based trade strategy, in anticipation of extra dollar income through the US strategic aid program. When the US administration showed that it was not prepared to provide expanded economic assistance, Japan had no alternative but to achieve economic self-reliance through more multilateral trade on an unsubsidised commercial basis. With the new Sterling Payments Agreement, which further facilitated financial settlement of Japan's overall sterling trade, Japan confirmed its commitment to this trade strategy. In these circumstances, it became imperative for the Japanese government to regulate the reduction of trade barriers within the sterling area through diplomatic approaches. Australia responded positively to the Japanese request that it relax its discriminatory import licensing when Japan's serious sterling shortage of 1953- 54 severely affected Australia's export sales to Japan. This paved the way for the 1957 Commerce Agreement, which made Australia the first country to conclude a formal trade agreement with Japan among the fourteen contracting parties (including several sterling area countries) maintaining discriminatory treatment of Japan even after its accession to the GATT in 1955. Success in concluding the Commerce Agreement with Australia impressed the Japanese with the feasibility of pursuing a multilateral trade strategy. The common interest in multilateral trading arrangements has hence been a consistent function of the Australia-Japan relationship in the postwar period.