Papers Relating to the Foreign Relations of the United States, 1925, Volume I

893.74/502

The Japanese Embassy to the Department of State

Memorandum

In February and March 1918, the Mitsui Bussan Kaisha Ltd. entered into contracts with the Chinese Ministry of the Navy for the establishment of a high power wireless station in China and these contracts were duly approved and accepted by the Chinese Government. Subsequently, in January and September, 1921, the Federal Telegraph Company signed with the Chinese Ministry of Communications contracts of a similar nature conflicting in many ways with China’s prior commitments to the Mitsui Company.⁹⁹ The anomalous situation thus created gave rise to protracted discussions between the Governments of Japan and of the United States, without, however, any appreciable result. Attempts were made at the Washington Conference to find a more comprehensive plan of settlement, with the participation of other Powers interested in China. Once more these efforts proved unavailing.

2. The points at issue between Japan and the United States on the subject may be summarized as follows:

(a) In the judgment of the Japanese Government, the exclusive right granted in 1918 to the Mitsui Company by the Chinese Ministry of the Navy respecting external wireless communications of China cannot be abridged or revoked by any arrangement which the Chinese Ministry of Communications may have made subsequently with the Federal Telegraph Company. On the other hand, it is contended by the American Government that the Mitsui’s monopoly is inconsistent with the treaty provisions between the United States and China respecting the principle of equal opportunity, and that the conventional obligations of China preclude her from creating such a monopoly in favour of any foreign nationals. Without entering into a detailed examination of the treaty provisions in question, it will be conceded that international precedents are not wanting in support of an exclusive right of the nature now under review, which, in the conduct of certain undertakings, and more particularly in the case of radio enterprise, is necessary to ensure, for a definite period of time, a reasonable profit on the investment. The contract of September 1921 of the Federal Telegraph Company seems to afford in itself an example of such right, since under Article 14 of that contract the Company is to be exclusively authorized to handle radio communications between the United States and China during twenty years.

(b) It is further held by the American Government that the claim of the Mitsui Company in question is incompatible with the basic principle of equal opportunity laid down in Article 3 of the Nine-Power Treaty of Washington.¹ It should, however, be observed that the Mitsui contracts had been concluded long before an agreed definition of the principle of equal opportunity was adopted at the Washington Conference. Moreover, the prohibition of monopoly or of preference contained in the first paragraph of the cited Article of the Nine-Power Treaty is qualified by the provisions in the second paragraph of the same Article, which permit the acquisition of such properties or rights as may be necessary to the conduct of a particular commercial, industrial or financial undertaking, and which, in the opinion of the Japanese Government, properly cover the case of wireless enterprise.

(c) The Japanese Government are not unmindful of the needs of the United States to secure an efficient radio service across the Pacific, to supplement the present inadequate cable service. The plan of the Mitsui Company is intended exactly to supply such needs, and if any exclusive authorization to the nationals of one foreign country to work a wireless station in China should appear objectionable to the United States, the Japanese Government have already manifested their readiness to see the abandonment of the system of such exclusive operation by Japanese of the station constructed by the Mitsui Company. With this feature of exclusive operation definitely eliminated, there should remain no grounds for apprehension of discriminatory treatment, as among nationalities, in the working of the station.

3. It is reported that the cost of construction fixed at U. S. $5,417,500 in the original contract of the Federal Telegraph Company was, under the supplementary agreement, raised to U. S. $13,000,000, one-half of which is to be charged to the liability of China. She has already incurred obligations to the Mitsui and the Chinese National Radio Telegraph Company to an amount of approximately $7,000,000 Silver. Upon the completion of the undertaking now contemplated by the Federal Telegraph Company, the whole indebtedness of China on account of wireless installations will thus reach the substantial figure of some $20,000,000 Silver. This would surely aggravate the financial difficulties of the Chinese Government, which are already assuming serious proportions. It is also believed that the general conditions in China do not require or justify the immediate establishment of two high power wireless stations in that country. The unwisdom of such an extensive program will be evident when it is considered that even in the whole region of the highly commercialized Pacific Coast of the United States, there is only one trans-oceanic wireless station open for public use.

4. The Japanese Government are unable to bring themselves to the conclusion that they are in any way precluded from extending support to the present claim of the Mitsui Company. It has, however, now become manifest that any longer delay in the adjustment of the controversy will serve no useful purpose, either for the contending parties themselves or for China which is primarily responsible for this situation. Holding to the principle of international co-operation instead of international competition, and desiring to help China out of her present difficulty, the Japanese Government are willing to approach the question from a new angle that may lead to a speedy and practical settlement of the dispute.

5. Accordingly, without prejudice to the legal merits of the case, the Japanese Government now desire to propose that the principles governing the Consortium be applied to the contracts secured by the Mitsui Company and the Federal Telegraph Company.

These contracts are thus to be pooled and superseded by a loan agreement for wireless enterprise in China of the same nature as ordinary railway loans that may be undertaken by the Consortium.

The parties to the proposed loan agreement shall be, on the one side, the Chinese Government and, on the other, a financial group representing American, British, French and Japanese interests. The financial group is to consist of the Federal Telegraph Company, the Marconi Company, the French General Wireless Telegraph Company and the Mitsui Company, and is to be constituted upon full communication and understanding with the Consortium.

The operation of wireless telegraphy in question shall be placed under the exclusive control of the Chinese Government, while the financial group is to supply the services of engineers and accountants, in order to assist China in the enterprise.

6. The proposed solution is believed to be in line with the known policy of the American Government to promote international co-operation, and with all basic principles embodied in the Nine-Power Treaty of Washington. It provides, at the same time, for a lightening of China’s indebtedness, as much desirable for herself as for all nations interested in the stabilization of that country. If, as is confidently hoped, the plan outlined is found acceptable, the Japanese Government will be happy to suggest further particulars of the measures for making it effective. They are also prepared to give serious and friendly consideration to any counter proposals that may be advanced by the American Government in order to compose the pending differences. In any case, they attach great importance to an early settlement of the question, which so long as it remains unadjusted, tends to disturb the relations of solidarity and mutual confidence among all the Powers concerned.

Washington , December 24, 1924.

99. For texts of the contracts, see List of Contracts of American Nationals With the Chinese Government, etc., annex viii (Washington, Government Printing Office, 1925).
1. Foreign Relations, 1922, vol. i, p. 279.