394.1153 Smith Company, Werner G./56: Telegram
The Second Secretary of Embassy in China (Smyth) to the Secretary of State
[Received 9:45 p.m.]
158. Reference paragraph 3 of Tokyo’s 454, July 11, 5 p.m., Nanking’s 134, July 12, 3 p.m., Department’s 435, July 12, 7 p.m. to Shanghai and Shanghai’s 988, July 13, 9 p.m.,80 commercial freight carried by Japanese merchant vessels on the Yangtze. The representative of an American oil firm here has obtained for this office information showing that during the past 10 days there have been brought to Nanking from Shanghai by 3 Japanese merchant vessels several shipments of commercial freight, including 4200 tins of kerosene, 1300 tins of gasoline and 1600 cases of candles. I am mailing to Shanghai a list giving names of steamers, dates, number of cases and brands of goods. I am also reliably informed that some 2,000 cases of cigarettes were brought by [to?] China during August by Japanese merchant [Page 467] vessels. It is understood that nearly all the above-mentioned goods were purchased by Japanese firms in Shanghai for shipment to and sale by Japanese merchants here.
British representatives of the two principal British river shipping firms, who have been investigating conditions here and at Wuhu during recent weeks have now forwarded reports to their head offices in Shanghai. One of them informs me that he has compiled itemized lists of commercial shipments carried on trips of Japanese merchant vessels between Shanghai, Nanking and Wuhu. He states that copies of his reports and lists have been furnished the British Consul General at Shanghai which will doubtless be willing to make the information available to the American Consulate General there.
The British representative mentioned above believes that on trips up river from Shanghai by Japanese merchant vessels to Nanking the Japanese military have first call on space, any remaining being given to Japanese firms for commercial freight. He states, however, that on down river trips practically all cargo carried is commercial. In particular to British he reports that these vessels load up at Wuhu with rice for Shanghai; as rice now sells at Wuhu for between $3 and $4 local currency per unit of 200 pounds and at Shanghai for around $16, the profit made by Japanese firms engaged in the rice business is considerable.
It seems clear from the evidence which has been obtained by American and British business men here that, despite official denial, Japanese merchant vessels are in fact carrying commercial freight for Japanese firms. This being the case, there seem to be no reasonable grounds for Japanese objections to the operation of non-Japanese foreign merchant vessels, including the Standard Oil ships, between Shanghai and Wuhu at least. The Japanese pretext that navigation is dangerous due to floating mines, et cetera, seems to be specious as this office has heard of no Japanese merchant vessel being sunk or damaged on this stretch of the river by such means during recent months.
Until the present unwarranted Japanese interference with American and other foreign trade along the river ceases, and in particular until there is freedom of commerce and navigation on the river, at least as far as Wuhu, American business and other interests will continue to suffer. As an example of losses now being sustained by American business in this area, I am informed by the representative of an American oil company here that under normal conditions there would be sold by the foreign oil companies during the coming fall and winter season in the Nanking, Wuhu and Chinkiang area a monthly average [Page 468] of approximately 200,000 units of kerosene, valued at about $3,000,000 local currency. In addition, there would be an average monthly business of about $1,000,000 local currency in other petroleum products, such as gasoline, candles, lubricating and diesel engine oil. It is understood that much more than a majority of this business would be handled by American firms. However, under present conditions they can do no business here and the only kerosene coming to Nanking now is a small amount, stated to be not more than 6,000 cases monthly, sold by foreign oil companies in Shanghai to Japanese firms for shipment here.
The refusal of the Japanese to permit non-Japanese foreign commercial navigation on the river and their refusal to carry non-Japanese commercial freight on their own commercial vessels [is?] resulting in constant difficulties to Americans engaged in legitimate business and other activities in this area. For instance, if it were not for the courtesy of the commanding officers of the U. S. S. Oahu and the British gunboats, much needed medical supplies for American missionary hospitals here and at Wuhu could not be obtained. Further, this office has been endeavoring for months, without success, to obtain space from the Japanese for the shipment to Shanghai of motor cars belonging to the Ambassador, Counselor Peck and Captain Roberts,81 respectively, as well as personal effects of Paxton82 and Roberts. It would seem that, if for no other reason than international courtesy, the Japanese could find space for the effects belonging to members of the Embassy.
It seems evident that, unless foreign protests are effective, the Japanese intend to place every obstacle in the way of non-Japanese foreign trade along the Yangtze and to retain trade for themselves. It also seems probable that, unless protests are effective, the Japanese will continue to refuse to permit non-Japanese foreign commercial navigation on the Yangtze and, possibly, will endeavor eventually to establish a Japanese shipping monopoly on the river.
It is respectfully recommended that further representations be made to the appropriate authorities at Shanghai and Tokyo, in an effort to bring to an end the present unwarranted interference with legitimate activities of American citizens and organizations in this area.
Sent to Shanghai. Shanghai please repeat to Tokyo.