611.9431/164
Memorandum by the Assistant Chief of the Division of Far Eastern Affairs (Ballantine) of a Conversation Between the Assistant Secretary of State (Sayre) and Mr. Shoji Arakawu of the Japanese Financial Commission Abroad
Mr. Arakawa after making a few introductory observations in regard to his work introduced the topic of the Anglo-American trade agreement.32a
Mr. Sayre said that the agreement was one to which our Government attached a great deal of importance as being in line with our general policy, which is to lower trade barriers and thus bring about a freer flow of goods. He expressed his conviction that this policy will contribute effectively to the promotion of world prosperity and world peace.
Mr. Arakawa said that there were many people in Japan who felt that the interest of Japan lay in increasing trade, as Japan is an insular country and needs access to foreign sources of raw material and foreign markets for her products. He noted, however, that as a result of the conclusion by Japan of the Anti-Comintern Pact with Germany and Italy32b many people in Japan had been influenced in the direction of the German idea of bilateral balancing of trade.
Mr. Sayre affirmed our belief in the principle of triangular trade and felt that it was to Japan’s interest also to favor such a principle rather than that of bilateral balancing.
Mr. Arakawa expressed assent to this view and asked what the prospects were for the conclusion of a reciprocal trade agreement between Japan and the United States.
Mr. Sayre observed that the most important items in Japanese-American trade were the exports of cotton from the United States to Japan and the exports of raw silk from Japan to the United States. These articles were on the free list and only about ten percent of the [Page 812] trade each way consisted of competitive goods. He said that he had discussed this subject a number of times with Ambassador Saito and that both had come to the conclusion that the ordinary type of trade agreement did not fit the needs of Japanese-American trade but that there should be arrangements which would prevent any-dislocation of the markets by any sudden large influx of goods in competitive lines. Five years ago many questions arose between Mr. Saito and Mr. Sayre in connection with the trade between the two countries but fortunately adjustments were made so that during the last two years there has been little need for further discussion of vexatious trade problems between the Ambassador and himself. Mr. Sayre went on to say, however, that even though a trade agreement might be proposed such an agreement at this time was not politically feasible in view of the developments of Japanese policy in China. Mr. Sayre referred to the American note to the Japanese Government of October 6 and said that the conditions which were described in that note were a matter of serious concern to the American Government and people. He said also that the reply which the Japanese Government sent to that note was unsatisfactory and was not responsive to our grievances.
Mr. Arakawa cited the case of a London merchant who he said had told Arakawa that his firm was now able to do normal business in Tientsin and Mr. Arakawa asked Mr. Sayre if he would state more definitely the grounds on which he felt dissatisfied.
Mr. Sayre mentioned as an example Japanese restrictions upon the freedom of navigation on the Yangtze which was being taken advantage of to allow Japanese goods to be transported while goods of American and other nationals were prevented from being shipped along the river. He said that complaints are being received constantly from many quarters concerning the hampering of the activities of American businessmen and concerning the advantages being afforded to Japanese business.
Mr. Arakawa said that Japanese are now engaged in the most serious military conflict in which they have ever taken part, that they are determined to crush the government of Chiang Kai-shek,32c and that during the period of hostilities various restrictions upon trade incidental to the conduct of the hostilities have been made necessary. He felt sure that it was the intention of the Japanese Government to permit trade of all countries to be carried on without discrimination and on an equal footing. He said that Ambassador Horinouchi will soon arrive in Washington and will be able to clear away any misunderstandings that the American Government might have in regard to Japanese intentions.
[Page 813]Mr. Sayre emphasized that what was needed was not any explanation of Japanese intentions but action on the part of the Japanese Government to do away with the causes of our complaints. He reiterated that our complaints were not based upon isolated instances but upon cumulative evidence of widespread practices which have been made the subject of continuing complaints by our businessmen and demands that something be done. Mr. Sayre said that he took a rather serious view of this situation but he could not say what further action we would take in regard to these matters. He thought that it would be a shortsighted policy on the part of Japan to disregard our rights in China or discriminate against our trade, as such a policy would be bound to shut off the possibility of future assistance to Japan, which Japan would very much need for rehabilitation after the termination of hostilities. In conclusion, he said that this Government is of course taking up these matters with the Japanese Government through regular channels and that he had only wished to give Mr. Arakawa in a personal way a frank indication of how he felt. He expressed his conviction that Mr. Arakawa would not have wished that he be otherwise than completely frank in regard to this subject.
Mr. Arakawa thanked Mr. Sayre for having given him the benefit of his candid views which he considered essential to a good understanding and the interview there terminated.
- Signed at Washington, November 17, 1938; Department of State Executive Agreement Series No. 164.↩
- Vol. ii, p. 159.↩
- Chinese Generalissimo; premier, December 1935 to January 1, 1938, and again November 1939.↩