File No. 694.119/51

The Ambassador in Japan ( Morris) to the Secretary of State

No. 15

Sir: I have the honor to report that I have observed since my arrival a growing unrest and irritation because of the delay in the negotiations in reference to the United States embargo on steel. I feel that I am not exaggerating when I state that almost one-half of the persons, resident Americans and Japanese, who have called upon me during the last four weeks, have inquired as to the possibility of some satisfactory adjustment of this matter. In all cases I have disclaimed any knowledge of the negotiations, which it is generally understood are being conducted by the Japanese Ambassador in Washington. If the Department deems it advisable, I should be glad to receive advices as to the present status of these negotiations, for my own confidential information.

I was informed by those familiar with Japanese conditions that the Government had been vigorously suppressing any public comment [Page 714] on the steel situation, in the hope that some adjustment could be reached that would allay the growing feeling of irritation. I was assured, however, by the same persons, that the feeling among Japanese business men, and even among Government officials, was very intense.

Then unexpectedly on November 18 the Department of Communications issued to the press an extended statement on the steel situation. I am attaching a careful translation of this statement made by Mr. Ballantine, Japanese Secretary of this Embassy. It reviews the progress of the negotiations, giving the three successive proposals made by Japan and the counter-proposals made to each by the United States. It explains that the acceptance of any of these proposals, notwithstanding the fact that Japan was prepared to make great sacrifices for the common cause of the Allies, would have jeopardized the standard that was necessary to safeguard Japan’s existence as a nation, and therefore it regretted that in view of these circumstances there was nothing else to do but break off negotiations. The result of official investigation as to how far Japan could supply its own shipbuilding material was also included in this report, which showed that it would require an additional 18,000 tons to construct 149 vessels, with an aggregate displacement of 590,000 tons.

Newspaper comment followed and translations of characteristic editorials are also attached.1 The Osaka Mainichi considers it very fortunate that America did not accept Japan’s offer, which was altogether too liberal, and calls attention to the imperative duty of reforming Japan’s industrial system. The Tokyo Mainichi is convinced that America never intended to lift the embargo on steel, inasmuch as the strides Japan is making in its merchant marine on the Pacific are viewed with alarm and jealousy. It thinks that the embargo will give an impetus to domestic manufacture. The Sekai, however, hopes that the negotiations will be revived, for it would not hurt the United States, rich in shipbuilding material, to permit the unconditional export of 175,000 tons of material.

Very few of those who have called upon me to discuss this question, have offered any constructive suggestions. I understand, however, that recently a number of American and Japanese business men have been endeavoring to organize a movement entirely apart from any diplomatic negotiations, and which they hope may result in the tender by private firms and individuals, of a large amount of immediately available tonnage to the Shipping Board, at reasonable prices, in consideration of the issuance of a license by our Government to export a certain amount of steel plates at present American prices, [Page 715] which will be used only for the construction of ships in the interest of the Allies. The thought of these men is that they shall persuade the Japanese Government to discontinue the diplomatic negotiations, which they are confident can reach no satisfactory conclusion, and then open negotiations with American firms, tendering ships at prices to be agreed upon, and obtaining steel by Government license.

I merely report these facts to the Department for its information, but am not sufficiently familiar with the negotiations to express any opinion as to whether such a plan would be practical.

I have [etc.]

Roland S. Morris

Statement to the Press by the Japanese Department of Communications, Issued November 18, 1917, regarding Details of the Negotiations with America in Connection with Prohibition of Steel

Although the Imperial Government is deeply concerned at the scarcity of vessels in this country, it has transferred vessels to meet the demands of the Allied powers and has permitted the chartering of a reasonable proportion of vessels. Last June our ally, Great Britain, expressed the desire to be supplied with a still greater number of ships. Our Government took up negotiations with the principal idea in view that we could assist the Allies in the most advantageous and effective manner if we obtained raw material from Great Britain, utilized our own shipyards and hastened the construction of vessels, but it happened that in August, on account of the pressing demands of its own shipyards, England was unable to supply raw materials. While these negotiations were going on with Great Britain, in America the export of iron materials, especially shipbuilding material came to be prohibited. As it was impossible for the shipyards or the importers of this country to obtain the material which they had ordered or contracted for, a memorial was presented urging negotiations for the release from the embargo of over 400,000 tons already contracted for. Negotiations were immediately commenced with a view to their relief, but the United States declared that its own requirements in shipbuilding material for aiding the European allies was very pressing and that it was utterly impossible to supply anything except what was to be used for the war, so that we negotiated for the release from the embargo of approximately 60,000 tons, which was the amount necessary to complete the construction of those that were most urgently in demand by private individuals. With the exception of some 10,000 tons for which licenses had been issued up to August 15, we have been unable to reach a settlement.

[Page 716]

During these negotiations, as the negotiations for ships with England came to be interrupted, the Japanese Government considering as an entirely different question the negotiations for the release from the embargo of the materials that were ordered by private individuals already mentioned, took steps to suggest to the American Government that if we received about 600,000 tons of material we could within two years construct vessels approximating 1,200,000 tons in gross tonnage, or 1,800,000 tons in displacement.1 A part of them would be retained by us for cooperating in the war as a member of the Allied powers, but the greater part would be turned over to the Allies. The American Government explained that it was very eager to obtain a supply of existing vessels in view of the fact that as it required ships in a great hurry for joint cooperation in the war it was impossible to follow a shipbuilding program for a long period. Accordingly it was proposed that we should supply 150,000 gross tons of our existing shipping in return for which America should supply us with 150,000 tons of material during this year and 300,000 tons during next year, a total of 450,000 tons. From this it was planned that vessels aggregating 1,350,000 tons gross could be constructed, of which 750,000 tons would be supplied to America between January, 1918, and September, 1919, and that of the remaining 600,000 tons, 150,000 tons would be used to make up the amount supplied from our existing tonnage, as already set forth, and the remainder to be applied to our part in the conduct of the war. Inasmuch, however, as the negotiations with respect to the material which had already been contracted for by private individuals are, as has already been stated, a separate question, the said shipbuilding materials being materials for the construction of ships of an exact standard, it goes without saying that they are entirely different articles from those ordered by private individuals.

In reply to the above proposal of our Government, the American Government as a counter-proposal, suggested that in return for a supply of ships by this Government amounting to a total of 1,000,000 tons, 100,000 tons each month for ten months beginning with November, 1917, it would issue licenses for the export of 450,000 tons of materials already contracted for by private individuals up to August of this year, and stated that they would not require to be supplied with any ships after August of next year.2

As this was the American proposal, in view of the rate of ship construction, no matter how much we exerted ourselves, from the materials supplied by America the vessels we could construct and [Page 717] supply would not exceed three or four hundred thousand tons displacement, the greater part of the existing tonnage of Japan would have to be supplied to make up the remaining six or seven hundred thousands tons, which we were utterly unable to stand. The supply of 150,000 tons displacement of existing tonnage originally made by our Government, as has already been stated, was for assisting the Allies, and, after a thorough investigation had been made in regard to adjusting our marine transportation, (we concluded that) this offer was the greatest sacrifice that we could make, and that it was impossible for us to turn over more, in consideration of the present circumstances, of our marine transportation. Since the United States states that it will not require any ships after August next, the portion of our proposal which was concerned with projects subsequent to September of next year was abandoned. We proposed finally to supply 150,000 tons displacement of existing vessels and 200,000 tons displacement from January to August next, a total of 350,000 tons, which should be constructed from materials supplied by America. The United States was to supply us with approximately 150,000 tons of material within this year and 25,000 tons during January and February next, a total of 175,000 tons. From this approximately 525,000 tons displacement of shipping could be built, of which, as had already been set forth, 200,000 tons which would be supplied to America, would be subtracted, and from the remaining 225,000 [325,000?] tons, 150,000 tons would be used to make up the deficit caused by the supply of 150,000 tons of existing vessels supplied to America, and 175,000 tons would be reserved to be freely disposed of by Japan as a member of the Allies. The American Government agreed to the proposal of our Government in respect to the quantity of vessels to be supplied by us and the amount of the material to be supplied by it, but as supplementary conditions it proposed that the ships should be less than 7 years old (10 years in the case only of those in best condition), and that the price of existing vessels should be $170.00 per ton and of new vessels $200.00 per ton. With regard to the supply of materials which were for private orders and contracts, it proposed that the amount should be limited to those which had already been manufactured and kept in the port of export or which had already been shipped, provided that this amount did not exceed 25,000 tons in November, 50,000 tons in December and 100,000 tons during the period ending August next.

From the first our country has not begrudged its utmost efforts to afford facilities as far as it was able, to the cooperation with the Allies in the prosecution of the war, but it is imperative that we do not neglect to maintain the standard which shall not impair the disposition which is necessary to safeguard the existence of our [Page 718] nation and people, and the number of ships as well as the assistance in maintaining communications in behalf of the other Allied powers. If, however, we considered the American proposal, by limiting the ships to be supplied to those under 7 years of age or even 10 years, we should be giving up the majority of our best ships which are used on the regular routes of trade of this Empire. We shall run the risk of creating confusion in our marine transportation system. Even if a part of the materials already contracted for by individuals were to be applied to this project, inasmuch as these materials already contracted for were purchased by the various shipbuilding yards at current prices, and since employed in the construction of vessels of various kinds in compliance with the orders of others, it would be impossible to hasten the construction of vessels with these materials within a definite period under a uniform plan. Furthermore, in regard to the price of vessels, also, there is a great difference in comparison with our current prices, and the new vessels under construction by private individuals in our country have been contracted for at a very high price, so that it would be utterly impossible to supply them at such a low price.

To sum up, our Government was extremely desirous of completing negotiations in a friendly manner with the American Government, which had been so cordial, but we failed. As there was considerable difference in the wishes of each of the two countries, with respect to this question, on account of the difference in the circumstances of the two countries, we were at last unable to reach any unanimity, to our great regret. Nevertheless, in consideration of the conditions of our marine transportation and shipbuilding industry, we deemed that it would not be a good policy to continue the negotiations any further and place our marine transportation and shipbuilding industry in a very uneasy situation for a long time to come, we decided to abandon our negotiations in regard to shipbuilding materials and shipbuilding which we proposed, with the exception, however, of the negotiations respecting the materials, which have already been ordered—this being a separate question.

Investigation as to Whether We Can Supply Our Own Shipbuilding Material

Previous to this in May or June, our shipbuilders had complained of a lack of shipbuilding material. As soon as the American steel embargo was put into effect, the work on vessels which were under construction at that time had to be suspended, and the resulting embarrassment was very regrettable. On the one hand negotiations were taken up, as has been outlined, and on the other a thorough investigation was started with regard to shipbuilding materials available in our own country.

[Page 719]

Even at the time when our shipbuilders used to import their shipbuilding material from the United States, there was great trouble about the importation of steel plate, and it became imperative to relieve the distress of the people engaged in that industry. Therefore, a general development of the shipbuilding industry was planned, and at the same time it was recognized that it would be necessary to facilitate the supply of steel plates. In the latter part of June as a result of a conference of the various ministers of state of the departments concerned, a conference of the heads of the bureaus having jurisdiction, was summoned. At the end of several discussions it was planned to have it manufactured and distributed as far as possible by the Naval Arsenal, and that the Edamitsu Iron Works should be depended upon for a supply of material. Thorough preparations were made and now we are on the eve of putting the project into operation. In the first season, beginning with December, about 800 tons will be manufactured. The Department of Communications will distribute it among the various shipbuilding yards, twelve places in all, to make up the amount of deficiency of material which will be required to furnish 21 vessels of approximately 15,000 tons displacement. A few days ago the Department explained to the persons engaged in the industry the method of distribution, so that the persons who were unable to complete the construction of vessels on account of the lack of material will be able to proceed with their work forthwith. Moreover the Navy Department in order to meet the necessary requirements of shipbuilders which will continue, is planning to provide them with adequate facilities which will enable them to proceed.

In connection with the insufficiency of materials, which has arisen on account of the American steel embargo, for building the hulls of vessels which are at present in course of construction and whose construction is about to be commenced, it has been computed by the persons engaged in the industry that about 60,000 tons would be required. There will also be an importation of materials for which licenses will be obtained from America. According to the latest investigation at building yards, vessels of over 1,000 gross tons of class 1, that is to say vessels which are in the course of construction and whose keels have already been laid down, to the number of 91, of a total displacement of 369,000 tons, can be completed if 7,500 tons of material which is lacking, can be supplied. For vessels of the second class, that is to say, whose keels are shortly to be laid, if over 11,000 tons of material are supplied, 58 vessels aggregating 220,000 tons can be completed. That is to say vessels of the first and second class, under construction in 47 yards, a total of 149 with an aggregate displacement of 590,000 tons can be completed if a little [Page 720] more than 18,000 tons of material can be supplied. Our Department of Agriculture and Commerce is now making an earnest investigation as to how this can be supplied to our shipbuilding yards.

  1. Not printed.
  2. The negotiations herein related were conducted by the War Trade Board and the Shipping Board.
  3. The Chairman of the War Trade Board to the Japanese Ambassador, Oct. 20, 1917. (War Trade Board Files.)