611B.9417/158
Memorandum by Mr. Roy Veatch of the Office of the Economic Adviser
| Conversation: | The Japanese Ambassador; |
| Mr. Seijiro Yoshizawa, Counselor of the Japanese Embassy; | |
| Mr. Sayre; | |
| Mr. Coville;12 | |
| Mr. Veatch. |
The Ambassador called to deliver the response of his Government to the suggestion presented to the Ambassador by Mr. Sayre on December 14, and to discuss the situation further.
Before setting forth the details of his Governments’ reply, the Ambassador wished to say that he regretted that the Japanese Government had not agreed unconditionally to issue a statement that shipments to the Philippines would not be resumed before February 1, 1936. Irrespective of the discussion today or of action by the American Government, he intended to telegraph Tokyo immediately urging his Government to make such a statement.
The Ambassador said that apparently from the beginning there had been confusion with respect to the interpretation of the agreement, the United States having in mind the actual Philippine statistics based on liquidations, whereas the Japanese had taken it for granted that the Philippine statistics were based on arrivals. The Japanese Government, therefore, had requested him to ask the American Government to recognize arrivals of Japanese goods in the Philippines to the present time as the basis governing the agreement. Japanese export statistics checked substantially with the Philippine statistics of arrivals since August 1, showing a total of approximately 26,000,000 square meters already entered the Philippines and leaving, therefore, if this basis be accepted, a maximum of 23,500,000 square meters which might be shipped during the rest of the first year covered by the agreement.
In response, Mr. Sayre referred to the extreme position which this Government might take if it chose to hold to the letter of the agreement and emphasized the willingness of this Government to waive this position and to reach some adjustment of the agreement. American textile exporters were pressing this Government to demand strict [Page 1046] adherence to the letter of the agreement, keeping the Japanese out of the Philippine market for the rest of the year so that American textiles might have the advantage during the next few months which Japanese textiles had already had during the first few months of the agreement.
The Ambassador presented a sheet of statistics, copy of which is attached,13 analyzing the statistical position and showing that Japanese shipments might continue throughout the first year on the basis of arrivals, leaving the same total to be liquidated on August 1, 1936 which existed on August 1, 1935. Whereas, he recognized this was undesirable, he would like to stress the opportunity for the Japanese to ship textiles into the Philippines heavily during the last three or four months of the agreement period without such shipments being charged against the maximum amounts established by the agreement. He was quick to agree with Mr. Sayre, however, that such heavy shipments at the end of the agreement would be embarrassing to both countries if the agreement were to be extended past the two-year period, an objective which he felt the Japanese Government would wish to have in mind.
The Ambassador said “our trouble” is that Japanese exporters had been told that the agreement assured them the right to ship a maximum of 90,000,000 square meters during the two years. It would be difficult now to gain their assent to any other interpretation of the agreement. Speaking for himself, however, he thought it might be possible to divide the amount of Japanese textiles awaiting liquidation on August 1, 28,000,000 square meters, charging a total amount of 14,000,000 square meters against the Japanese for the first year of the agreement—adding the 14,000,000 to the total of 26,000,000 square meters which had arrived since August 1. A total of 40,000,000 would be considered as entered against the maximum amount allowed for the first year, 49,500,000 square meters. He wished to stress that he spoke only for himself and that this idea would have to be taken up with Tokyo before it could be advanced officially.
Mr. Sayre felt that agreement along this line might be quite possible and he suggested that this Government might be able to make some further concession to the Japanese by providing that the 50,000,000 square meters remaining, according to this reckoning, of the total quota of 90,000,000 square meters, might be divided equally over the next eighteen months, allowing one third of this amount, 13,333,000 square meters, to enter the Philippines during the second six months of the agreement, thus easing the rate of restriction which the Japanese would have to bear during the rest of the first agreement year. He urged, [Page 1047] however, that the Japanese should agree to a regulation by quarters of total shipments remaining so that the charge could not be made that the Japanese would flood the market with large amounts of goods at the beginning of a semester or a year. Limitation by months would be even more satisfactory from the American point of view, but in view of seasonal fluctuations Mr. Sayre felt that quarterly restriction would be satisfactory.
U. S. Imports of Cotton Velveteens
Mr. Sayre said that there was one further problem with respect to imports of textiles into the United States which he wished to place before the Ambassador. Imports of cotton velveteens from Japan have increased at such a rapid rate and have become so large in comparison with United States requirements that domestic producers have become very much alarmed. It is understood that they intend to appeal to the President for restrictive action against velveteens imported from Japan under Section 22 of the Agricultural Adjustment Act, and at the same time there is a distinct possibility that Congress will be asked to demand an investigation by the Tariff Commission under Section 336 of the Tariff Act.14 Mr. Sayre was bringing these matters to the attention of the Ambassador because of his previous request that he be informed in advance if restrictive action against imports from Japan was to be contemplated. An investigation by the Tariff Commission under Section 336 would be particularly dangerous from the standpoint of the Japanese, since it is probable that such a cost-of-production study would show Japanese costs so much below American costs that an increase in duty would result, or possibly a shift to the American valuation of these imports as a basis for imposition of duty.
The Ambassador mentioned the fact that he had seen Mr. Murchison’s statement in the paper, a statement which stressed the present competition of velveteens imported from Japan and mentioned the fear of increasing imports of corduroys. He stated that he would bring the situation to the attention of his Government. He then inquired as to the position of the American Government with respect to corduroys, the other cotton textile mentioned by Mr. Murchison. In response it was suggested that we did not wish to press the Japanese Government for any more restrictive action than was absolutely necessary and that we might be able to handle the corduroy question if an agreement on velveteens could be arranged.
A memorandum of statistics of imports into the United States of cotton velveteens, prepared in the Tariff Commission, was handed to the Ambassador (copies attached15).
[Page 1048]On leaving, the Ambassador reasserted his intention to telegraph to Tokyo his suggested agreement regarding readjustment of the Philippine agreement and said that he would come again to discuss the matter as soon as he received a reply.