Cablegram 18 CANBERRA, 4 June 1948
Overall Sterling Payments Arrangements for Trade with Japan
Following press release is being issued in Canberra to-day (3rd):-
As a result of negotiations between the United Kingdom Government and the Supreme Commander for the Allied Powers, an overall sterling payments arrangement, effective from 31st May, 1948, has been concluded.
2. The overall payments arrangement, which replaced the interim arrangement concluded with S.C.A.P. in November, 1947 [1], provides that trade between Japan and all members of the sterling area who wish to participate, shall be financed in sterling. The interim arrangement covered private trading transactions only. The new arrangement covers both government and private trade payments.
The United Kingdom authorities have been informed of the Commonwealth Government’s desire that trade payments between Australia and Japan be brought within the scope of the new arrangement.
3. For the present, cotton textiles will continue to be excepted from the general rule that trade with Japan will be financed in sterling. SCAP has reserved the right to require dollar payment for cotton textiles at least in part because the raw cotton from which the textiles are manufactured has been and to some extent may continue to be supplied from the United States under credit arrangements.
4. Although trade in other commodities is to be financed in sterling, if SCAP acquires more sterling than he can reasonably expect to be able to spend in the near future, he will have the right to convert such surplus sterling into dollars. A similar convertibility clause was contained in the interim payments arrangement and for that reason it was found necessary to reach an understanding with S.C.A.P. for trade between Australia and Japan to be kept in balance, thus avoiding any accumulation of sterling which might have to be converted into dollars. Trade between Australia and Japan will continue to be conducted within the framework of this understanding for the time being. It is hoped, however, that it may prove possible before long to replace the present bilateral understanding by a wider arrangement providing for the development of balanced trade at a higher level between Japan and the sterling area as a whole.
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1 See Volume 12, Document 427.
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[AA:A1838/278, 479/1/1, iii]