893.113/109
Memorandum by the Chief of the Division of Far Eastern Affairs, Department of State (MacMurray)
Memorandum of a Conversation between Mr. Craigie of the British Embassy and Mr. MacMurray, Present: Mr. Lockhart.
Mr. Craigie said that he had called to discuss two questions, 1st, that of the Handley-Page Contract, and, 2nd, that of the Arms “Embargo.” He stated that the British Government’s principal objection [Page 547] to the Handley-Page Contract, and one of the prime reasons for its cancellation, was that it seemed a useless and profligate expenditure of money on the part of the Chinese Government. As a secondary consideration, it seemed to violate at least the principles involved in the Consortium. He emphasized the altruistic motives which prompted the British Government to cancel the Contract and deplored the fact that Americans were contemplating taking it over. Mr. MacMurray replied that the Department had no definite or recent information indicating that any American firm was considering this proposition. Mr. Craigie stated that if American and British firms should continue to get such contracts the usefulness of the Consortium, which had been mainly sponsored by the United States and Great Britain, would be seriously impaired, if not entirely destroyed. He seemed particularly anxious that some scheme of Co-operation between Great Britain and the United States should be evolved by which competition for contracts and concessions in China would be reduced to a minimum and he seemed to think that a firm and inflexible observance of the Consortium Agreement was the proper formula. Mr. MacMurray pointed out that many “border line” cases would undoubtedly arise under the Consortium and that the Handley-Page Contract seemed to come within that category. A discussion of the convertibility of commercial airplanes into military planes took place and Mr. Craigie stated that when certain Chinese factions endeavored to convert commercial planes imported into China under the Vickers Contract to military uses during the recent trouble in Peking, the British Legation took the necessary steps to prevent such use of the planes. In discussing the Consortium question Mr. MacMurray called Mr. Craigie’s attention to the action of the British Government in giving its support to the Vickers Contract and in acquiescing in the public flotation of bonds in England to finance the contract, which was in violation of the construction which the British Gov’t now seems disposed to place upon the Consortium Agreement. Mr. Craigie was not in position to argue this point. He asked whether this Government would support the British Government in its attitude on the question of withholding support from contracts which involve useless expenditures by China, such as commercial aircraft contracts. Mr. MacMurray subsequently, and after talking with Ambassador Morris, informed Mr. Craigie that the Department on the eve of a new Administration would not be disposed to fix a policy in this respect, as it might be a source of embarrassment to the incoming administration.
The question of the arms agreement was then discussed and Mr. Craigie read excerpts from reports which the Embassy had received from Peking on the subject and also parts of the note, dated [Page 548] January 22, 1921, to this Government from the British Government52 with reference to the matter. Mr. Craigie stated that the British Government has exerted all possible efforts to prevent violations of the Arms Agreement and he said he doubted if there had been many violations on the part of the Japanese. He referred to the British Government’s protest to the Italian Government on alleged violations and of the Japanese Government’s note to the British Government on the subject of the embargo, whereupon Mr. Mac-Murray remarked that it seemed rather odd that the Japanese Government did not send a note to this Government on the embargo at the same time at which it sent one to the British Government. Mr. Craigie proposed that his Embassy send a copy of the Japanese note to the Department, with the British Government’s reply, and that this Government then address to the Japanese Government a note in substance similar to the British note. Mr. MacMurray said that this would be given careful consideration if copies of the notes should be sent to the Department by the British Embassy.
Mr. Craigie stated that his Government evidently felt that there was lukewarmness on the part of this Government towards the embargo. Mr. MacMurray assured him that there was no lukewarmness but a well grounded fear that Congress might soon abrogate the powers under which this Government was able to adhere to the Agreement. He assured Mr. Craigie that the Department would make every effort to have these powers preserved in some form, but he could not predict with what success the Department would meet. He explained that efforts to perpetuate the existing powers had already been made, but without success. Mr. Craigie referred several times to the importation of American airplanes at Canton and deprecated the fact that some of the planes seem to have been used for military purposes. His Government is extremely anxious to keep the embargo in force as long as possible and urges this Government to co-operate to that end.