Foreign Relations of the United States, 1952–1954, China and Japan, Volume XIV, Part 2

894.10/5–1453

No. 648
Memorandum of Conversation, by the Director of the Office of Northeast Asian Affairs (Young)

secret

[Washington,] May 14, 1953.

Subject:

• Loans to Japan

Participants:

• Mr. Eugene Black, President, International Bank for Reconstruction and Development
• Mr. Harold F. Linder, Assistant Secretary for Economic Affairs
• Mr. Walter S. Robertson, Assistant Secretary for Far Eastern Affairs
• Mr. Andrew N. Overby, Assistant Secretary, Department of Treasury
• Mr. John C. Corbett, Director, Office Financial and Development Policy
• Mr. Kenneth T. Young, Director, Office of Northeast Asian Affairs

Mr. Black began by stating that if the Japanese are to get a power loan from the Export-Import Bank, the IBRD would have to step out of the picture completely. In his opinion there is absolutely no reason for two banks to make long-term development loans to Japan. He stated that there was essentially nothing new in his opinion since he had expressed it recently to Ambassador Araki and to Minister Watanabe last fall. Mr. Black could not understand the Japanese attitude toward both these banks and was anxious that they not take it for granted that they could talk independently to both lending institutions and thus play one against the other. Ambassador Araki had come in to see him recently to state that the Government of Japan considered the IBRD application first priority and that the application to the Export-Import Bank was an initiative of private American companies.¹ Mr. Black stated the Japanese could not have it both ways. He said that he had carefully expressed to Watanabe last fall before the IBRD mission went to Japan that Japan should select one bank or the other and that if it selected the Export-Import Bank as its lending institution, the IBRD would not be able to consider loans to Japan.

Mr. Linder and Mr. Robertson both emphasized complete agreement within the Department of State with Mr. Black’s general position that there could only be one Bank. They both stated that the State Department completely agreed that in general and under normal circumstances the lending institution should be the IBRD. Nevertheless, they pointed out that there are special circumstances which justified an exception to the general principle. Mr. Linder pointed out that a good deal of work had been done on the application for thermal power projects before the Export-Import Bank and that it would be useful to get ahead for complete consideration. He fully sympathized with the World Bank’s position and had made this clear in the meetings of the Export-Import Bank Board. He felt that the time element alone in speedy processing of the applications warranted reconsideration by Mr. Black of his general position.

Mr. Robertson and Mr. Young emphasized that it was important for political as well as economic reasons to move ahead quickly on power projects. Mr. Robertson said that the Japanese are terribly anxious for affirmative action and were frequently calling at the State Department on this matter. He pointed out the sensitive nature of the political situation in Japan and the desirability of the United States as a matter of policy not to intensify that difficulty. He pointed out that a number of critical issues are affecting American-Japanese relations and that one more is to be avoided if it is possible. Mr. Young told Mr. Black that the Japanese are under the impression that the World Bank had understood and not objected to the American companies going ahead in the Export-Import Bank on their power projects. Mr. Black repeated that the Japanese were incorrect and that the Bank had always been concerned over the possibility that the Japanese might try to develop two lending agencies.

Mr. Black then pointed out that under certain circumstances it might be possible for the World Bank to consider loans to Japan favorably. He could not assure the reaction of his Board on this matter but he said he would be willing to undertake it. In reply to Mr. Linder’s question, Mr. Black said that he would do this immediately and that he was sure he could have an answer well within a month’s time.

Mr. Linder, Mr. Robertson, and Mr. Overby agreed that the more desirable next step would be for Mr. Black to consider this question and give his answer as soon as possible. Mr. Overby agreed to call General Edgerton today to inform him of this decision and suggest that he call Mr. Black to direct respective next steps which each bank should take in this regard. Mr. Black said that he did not know whether the Bank had sufficient data on the Japanese application or what stage the Japanese application to the Export-Import Bank had reached. He indicated that he might have to lean heavily on the Export-Import Bank’s preparation.

Following Mr. Robertson’s departure for another meeting, Mr. Linder orally summarized the attached list of answers to the Bank’s six questions.² Regarding question No. 3, Mr. Linder pointed out that State and Treasury both felt that the Bank’s investigation on Japanese financial policy would be more helpful although it might not be decisive.

Kenneth T. Young, Jr.

1. Corbett prepared another memorandum of this conversation. A portion reads as follows: “Mr. Black also quoted Japanese Embassy officials as saying that these [Export-Import Bank loans] had relatively low priority as compared to the $102 million of loan requests submitted by the Japanese Government; the officials referred to the loans as the ‘Westinghouse loans’ even though an agency of the Japanese Government is to be the obligor. There was a strong suggestion that the loans were a commercial promotion.” (Memorandum drafted May 19, 894.10/5–1453)
2. Not found attached; but see the attachment supra.