893.5151/692: Telegram
The Secretary of State to the Ambassador in Japan (Grew)
56. Reference Chefoo’s telegram of January 29, 5 p.m., and February 1, 11 a.m.,48 in regard to exchange control restrictions as applied to lace and embroidery exports at Chefoo. The Department desires that unless you perceive objection you call at the Japanese Foreign Office and leave an aide-mémoire along lines as follows:
On several previous occasions the Government of the United States has made representations to the Japanese Government in regard to illegal establishment of exchange and export control in north China [Page 497] by Japanese-sponsored authorities in support of a fiat currency which they had issued there. It was observed that the new currency was linked to the yen at par and that although the exchange value of the Chinese national currency and of the new so-called Federal Reserve Bank currency had declined to a low level in the open market, with corresponding increases in local prices, efforts were being made through the establishment of exchange and export controls to maintain an arbitrary rate of exchange and export purposes which was so high as to be a barrier to trade between north China and countries other than Japan; but, the new currency and the Japanese yen being linked at par, trade between north China and Japan has been carried on with comparative freedom.
The controls were in no respect modified in response to the representations made. The Government of the United States is now informed that the exchange and export controls have been extended to include laces and embroideries exported from Chefoo, products hitherto exempted from the controls at that port. According to reports reaching the Government of the United States, trade in lace and embroidery at Chefoo has been practically paralyzed as a result of the new controls, with no new commitments being entered into.
The lace and embroidery trade of north China has been developed mainly by American merchants over a period of 35 years or more. Much painstaking effort and a large amount of money have been expended in developing that trade. The Americans concerned now find their substantial investments and their livelihood endangered as a result of unwarranted interference by the Japanese-sponsored authorities with their trade.
The Government of the United States desires to point out that the effects which the exchange and export control measures established generally by the Japanese-sponsored authorities in north China have ad upon American trade is clearly illustrated by what has happened to lace and embroidery exports at Chefoo since they were subjected to control in January of this year, and to call attention to the fact that notwithstanding repeated representations by the Government of the United States no effective steps have been taken by the Japanese Government, in so far as the Government of the United States is aware, to put an end to the unwarranted interference with and discrimination against American trade which is inherent in the exchange and export control system which has been established and which is being maintained by Japanese-sponsored authorities in north China.49
Sent to Tokyo via Peiping. Repeated to Chungking, Chefoo, and Shanghai. Peiping please repeat to Tokyo Chefoo’s telegram of February 1, 11 a.m.,50 if you have not already done so.