Foreign Relations of the United States, 1958–1960, Foreign Economic Policy, Volume IV

69. Memorandum of Conversation⁰

June 5, 1958.

SUBJECT

• United States–Japan Trade Problems

PARTICIPANTS

• Mr. Koichiro Asakai, Ambassador of Japan
• Mr. C. Douglas Dillon, Deputy Under Secretary for Economic Affairs
• Miss Thelma E. Vettel, Acting Officer in Charge of Economic Affairs, Office of Northeast Asian Affairs, FE

Ambassador Asakais said that in his belief perhaps the most important problems in United States-Japanese relations were those related to trade between the two countries and he had requested this opportunity to discuss certain pending trade problems with Mr. Dillon.

The Ambassador said that since textiles was one of the most important Japanese exports to the United States this subject has become a political as well as an economic question and one to which the Japanese Government must give continuing attention. Making reference to the Japanese cotton textile export program, the Ambassador said that in 1956 his Government had pressed the Japanese industry to accept restrictions on its exports, especially on ginghams and corduroys (sic). [Note: The Ambassador was undoubtedly referring to velveteens.]¹ He said that the Japanese had thought that during the review of the program, which began in late 1957, they might negotiate some increase on those items. At the same time, he said, they realized the difficulties on the United States side and held their requests for changes in the program to the minimum, presenting only proposals which they considered to be quite reasonable. However, after exchanges of views by representatives of both sides, an agreement had not yet been reached and the discussions remained in deadlock. The Ambassador said that he had been concerned about the situation and he strongly believed that it would not be good for relations between the two countries to carry on these discussions further without hope of reaching a compromise. Therefore, he had personally recommended to his Government that the review be postponed until some time in the fall when the climate in the United States for possible adjustment might be more favorable. Meanwhile, he suggested that the Japanese program revert to the status quo ante, except for two small items: 1) the technical change in the measurement of the table damask quota from denomination in dollars to denomination in quantity; 2) the exclusion from the program of the Japanese-type items.

Mr. Dillon replied that he quite agreed with the Ambassador that if the discussions were indeed in deadlock it would be desirable to postpone them until later in the year. He said that since he was not familiar with the details of the program or of the discussions, he could not respond directly with respect to the two items mentioned by the Ambassador. However, he said that immediate consideration would be given to the Ambassador’s suggestions in an effort to respond as quickly as possible.

The Ambassador referred to the proposed Payne Amendment to the Mutual Security Act, now pending before the Congress, which is designed specifically to limit the amount of offshore procurement with Mutual Security funds.² He pointed out that if the proposed limit of 50 percent were applied item by item rather than overall, it would be a serious blow to Japan which depends greatly upon procurement under the Mutual Security Program to close its dollar payments gap.

Mr. Dillon said that he could not respond on this matter at this time since the Amendment is now in debate on the floor of the Senate. He said that the Payne Amendment was originally intended to limit such offshore procurement to 50 percent overall, but that certain elements may be trying to apply the 50 percent limitation item by item. Should the Amendment carry in either form, he pointed out, the bill would go to conference and the Executive Branch would have an opportunity to comment upon it. He could assure the Ambassador, however, that the Executive Branch does not favor the limitation in either form since it believes that offshore procurement does not greatly affect the domestic economy because it is so small, whereas it means a great deal abroad, and in any event the dollars expended come back to the United States in the form of payments for purchases from the United States.

The Ambassador then referred to the general concern in Japan over restrictive movements on the part of certain members of Congress and others against Japanese imports. He said that these movements are widely reported in the Japanese press. He pointed out that the Japanese Government is under constant pressure to increase trade with China and that, although the Japanese realize that the Communist Chinese mix trade with politics, this question was invariably associated in the Japanese press with restrictive movements in the United States against Japanese imports. He referred specifically to the King Bill, now pending before Congress, regarding tuna imports.³ He said that it was rumored that the Reciprocal Trade Agreements Act had been “bartered” with the tuna situation and that restrictions on tuna imports would be granted in exchange for support of the Trade Agreement Act. He pointed out that Japanese tuna exports to the United States amounted to $35 million. He said that tuna is typical of Japan’s efforts toward orderly marketing of its exports to the United States. The Japanese had imposed floor prices and quotas on tuna exports. They had tried to contribute money to a common advertising campaign with the United States industry but this had not been successful. He said that the United States tuna market was a growing one and therefore important to Japan, and that it was for this reason that the Japanese had carried out an orderly marketing program in this field in order to “live and let live.” He said that the imposition of such a control program was designed primarily to avoid the necessity for United States trade restrictions but that it would be extremely difficult for the Japanese to understand the imposition of trade restrictions even after they had conducted a strict program of orderly marketing. In response to Mr. Dillon’s inquiry, the Ambassador pointed out that the King Bill would establish United States import quotas on tuna as well as large increases in import duties.

Mr. Dillon responded that, as the Ambassador knew, the Executive Branch was opposed to import quotas and to increased duties. He said that he would look into this matter.

The Ambassador continued that the President’s acceptance of the Tariff Commission’s recommendation for a 100 percent increase in the import duties on clinical thermometers⁴ had been accepted by the Japanese Government as necessary in the campaign to obtain approval of the Trade Agreements Act. Although the imports amount to only a few hundred thousand dollars, and might be considered, therefore, as insignificant, the increased duty would drastically affect the Japanese industry itself. He referred also to the bill recently passed by both Houses of the Congress changing the definition of rubber-soled shoes⁵ and pointed out that this, in effect, resulted in a large increase in the tariff on such shoes. He also referred to the concern in Japan over the umbrella frame case now pending before the Tariff Commission.⁶ With respect to all of these items, the Ambassador stressed that while in each case the imports were small they added up. These were the products of small business in Japan and in each case the industry involved was drastically affected. He pointed out that the owners and workers of small businesses in Japan were among those who strongly supported a conservative Japanese government and who were not Leftists, as was the case of some of the workers in large industries in Japan. He thought that this might not be fully understood in the United States and expressed the belief that indications of continued movements toward restrictions on these small items had a cumulative adverse political effect in Japan.

Mr. Dillon said that the most important thing for world trade and for Japanese and United States trade agreement was of course the renewal of the Trade Agreements legislation, which is now before the Congress. The Executive Branch is now concentrating its efforts largely on obtaining passage of that legislation. If we are successful, he said, it will be the result of an intensive effort on the part of the President and all of the Departments of the Executive Branch, and it will be much more to our mutual benefit than actions on thermometers and various small items. Mr. Dillon said that he could understand, however, that an accumulation of actions on these small items was of serious concern to the Japanese and he pointed out in its efforts to obtain renewal of the Trade Agreement legislation, the Executive Branch had Japan very much in its mind.

The Ambassador closed his remarks on this general subject with the observation that trade was the most difficult problem between the United States and Japan. He said that questions such as those related to Okinawa could be discussed between the two governments and he believed that such discussions could result in mutually satisfactory conclusions. However, in the case of tariffs, once a tariff had been increased, there would be no further opportunity for discussion.

0. Source: Department of State, Central Files, 411.9441/6–558. Confidential. Drafted by Vettel and initialed by Dillon.
1. Brackets in the source text.
2. This amendment was incorporated in the bill reported by the Senate Foreign Relations Committee on May 26; see Document 75.
3. Not further identified.
4. For text of the April 21 announcement of this decision, see Department of State Bulletin, May 26, 1958, pp. 882–883.
5. P.L. 85–454, June 11, 1958; 72 Stat. 185.
6. On March 12, the President asked the Tariff Commission for a supplemental report on the effect of umbrella-frame imports on U.S. manufacturers. See Department of State Bulletin, April 28, 1958, pp. 696–697.