711.94/21628/14

Memorandum of a Conversation

Mr. Hamilton and Mr. Ballantine met Colonel Iwakuro and Mr. Wikawa at the latter’s apartment in pursuance of an arrangement made earlier in the day after the Japanese Ambassador had expressed to the Secretary the wish that such a meeting might be held as soon as possible for further conversations. Mr. Matsudaira was also present.

The Japanese asked whether we could base our conversation upon a paper42 which they said they had received the previous day … and which we found to be a redraft of the Japanese draft of June 8.43 As the paper was one which we had not previously seen, it was suggested to the Japanese that we defer discussing it until a subsequent occasion after we had had an opportunity to have copies made and to study the paper. This was agreed to and the Japanese let us have the paper to keep overnight.

The discussion then turned to the subject of the application to Japanese practices in China of the principle of non-discrimination in international commercial relations. We emphasized that we were not trying to argue points which had been under discussion between our two Governments, but we thought it necessary to explore the subject in order that we might be sure that we had an identity of understanding as to what this principle meant. We referred to the special companies which the Japanese had organized to carry on operations of a monopolistic character, to the system of exchange, currency, and trade control which the Japanese have established in north China and which operates to place Japanese trade and enterprise in that region in a preferential position over the trade and enterprise of third countries, and to the restrictions upon trade and travel in China imposed by the Japanese authorities which operate to interfere with the trade of third countries. The Japanese denied that the two special Japanese companies which we mentioned (the North China Development Company and the Central China Promotion Company) had a monopolistic character, as they averred that there was no restriction upon [Page 473] the purchase of shares of those companies by foreigners; they did not deny that subsidiaries of these companies had exclusive privileges in certain fields of economic activity, but they said that these companies were Chinese with not more than fifty percent Japanese participation. We said that we were not making any point as to whether Japanese companies permitted foreign capital to invest therein, but our contention was that so long as enterprise of third countries was prevented from competing there existed preference in favor of Japan which was contrary to our conception of non-discrimination.

The Japanese admitted that owing to hostilities there were restrictions upon the movement of goods, but they said that these restricttions would be removed as soon as hostilities should cease. They would not admit that there were general restrictions upon the trade activities of American firms. When we raised the point in regard to difficulties experienced by American firms in obtaining raw silk because of the preferential position occupied by the Central China Silk Company, one of the special Japanese-supported companies to which we had referred, Mr. Wikawa said that he was sure that this company, in the formation of which his bank had had a part, was not monopolistic in character and that there was no reason why its operations should preclude American participation in the silk business in China.

Further discussion was postponed until the following day.

J[oseph] W. B[allantine]
  1. Infra.
  2. Japanese draft of June 8 not printed.