Foreign Relations of the United States, Diplomatic Papers, 1933, General, Volume I

550.S1 Washington/603½

Memorandum by the Chief of the Division of Far Eastern Affairs (Hornbeck) of a Conversation Between American and Japanese Representatives

[ Washington ,] May 26, 1933.

Present:	The Secretary of State,
	The Japanese Ambassador,
	Mr. Fukai,
	Mr. Taketomi,
	Mr. Tsushima,
	Mr. Iida,
	Senator Pittman,
	The Under Secretary of State,
	Mr. Feis,
	Mr. Bullitt,
	Mr. Hornbeck,
	Mr. Livesey,
	Mr. Sussdorff,
	Mr. Wylie.

The Secretary of State opened the conversation with a brief interrogation with regard to yesterday’s conversation.

Senator Pittman began a statement on the subject of silver in relation to money and exchange.

The Secretary of State, Senator Pittman and Mr. Feis left for a conference at the White House.

The Under Secretary of State took the chair.

Mr. Livesey, having been introduced by the Secretary, made a statement of the views of the American Government. He said that we would favor any practical method of reducing and removing trade barriers. If a proposal is made for multilateral agreements we will not obstruct. But we doubt whether such will be made. We will offer no solution along those lines. It is our view that the most promising practicable method for removing barriers lies in a program of bilateral trade agreements within the frame of the unconditional most-favored-nation clause, with generalizing of benefits. We have suggested a tariff truce and eight countries are committeed to this. If a truce is agreed upon at the beginning of the conference it will facilitate the work of the conference. Action of one country depends on action of others. The conference must draft on principles and the drafting is important.

Mr. Phillips asked whether the Japanese wished to make comments.

Mr. Taketomi asked for an explanation more in detail of the principle for which the United States stands in reference to the most-favored-nation clause.

Mr. Livesey said that unless the other important countries adhere—or, in the case of most, continue—it would probably be impossible for the United States to continue this practice. The alternative would be a network of discriminations and preferences. We greatly prefer the regime of equal treatment toward the trade of all countries. We do not regard the most-favored-nation principle as a mystic dogma which admits of no exceptions and qualifications for particular situations. There are recognized preferences. He gave examples—including our own special relations with Cuba. We would be prepared to discuss exceptions and possible definition of scope of the clause. The question is technical. It has been much studied by the League. We have not had occasion to take up the details with the various delegations. It is obvious that the existence of agencies authorized to allocate exchange arbitrarily would defeat the benefits of a most-favored-nation engagement.

Mr. Taketomi asked what were our views regarding the Ottawa Conference agreements.⁴¹

Mr. Livesey said that our attitude is one of reservation. We have not raised the question of the principle in reference to British imperial preference; but neither have we waived the provision established in our law, the authority granted the President in reference to discriminations: our definition of a “country” is any political unit that has a separate tariff of its own. The question of the Ottawa agreements will probably be treated as a question of actual trade conditions which must enter importantly into the trade position of the United States. It affects a great group of signatories. It will be important if and when negotiation of a great body of bilateral agreements is undertaken.

Mr. Taketomi said that the Japanese were in complete concurrence with the American position. They favored the most-favored-nation clause not only for customs tariffs but for every other restriction, such as taxes and commercial matters. They favored reciprocal reductions on the basis of the most-favored-nation clause. This was among their standing instructions in dealing with commercial matters and conditions.

Mr. Livesey said that some developments are forced developments. Thus the quota system: its adoption by some countries is defended on particular grounds. Thus, by France. There is a substantial argument for adoption of quota as against chaos of exchanges. Countries which adopt it say that it is temporary and not a desirable permanent basis. While quotas exist they result in a vitiating of the most-favored-nation principle as a basis for concessions by one country to another. There has been a movement in several countries to abandon the principle of the most-favored-nation clause as not best adapted to their particular needs.

Mr. Tsushima understood that at the conference we would propose a tariff truce. Had we any idea of the formula.

Mr. Livesey said that he had not seen any drafts, but the subject had been assigned to specialists within the Department for drafting and recommendation. He did not know what they would present. It is a difficult subject for any one country. Each country has problems of its own. Each wants to take care of its own problems; and its own laws have a bearing thereon. Thus, our recently enacted agricultural act, which provides for a tax upon products of domestic origin and a compensation tax on products produced abroad and imported.

Mr. Livesey asked whether the Japanese had given consideration to the problem of a truce and its formulation. The idea was susceptible of adoption by all countries on immediate notice.

Mr. Fukai thought that certain exceptions to the principle of the truce would be considered necessary—particularly if the conference dragged on. He thought a truce desirable with exceptions that need to be considered.

Mr. Livesey spoke concerning the existing truce (May 12–July 31).⁴² This might be prolonged. There might be the drafting of a more formal agreement. We think the effort should be made for a simple non-legalistic phrasing but as comprehensive as possible. The British have not taken to the appellation “Gentlemen’s Agreement”. Of course there would be reservations by many countries in the light of their existing conditions and circumstances.

Mr. Tsushima said that in relation to this same problem there was a feature to which the Japanese attributed importance: any such agreement to make a tariff truce within a certain period must depend on its embracing many countries. It is essential, if Japan is to agree on a tariff truce, that the countries whose trade is of vital interest to Japan be parties to it; otherwise it would not realize its objectives. If the idea is to prolong the truce, is there to be inserted any ultimate time limit.

Mr. Livesey said that no one had any idea of the length of time that would be required. A tariff truce prolongation for a period longer than that of the conference, changing from a “truce” to a “peace”, will be dependent on there being made considerable progress on the monetary and economic side. If a downward movement of tariff rates is started it should be a general downward movement.

Mr. Tsushima said that regarding the method of reducing tariffs by reciprocal bilateral treaties, the Japanese would not expect much from a general agreement. So, in fixing a tariff truce they would have to take into account the question of the period required to conclude treaties. They think it advisable to delimit the period to the period of time necessary to make treaties. He considered it a great contribution on the part of Japan toward revival if Japan accepts the principle of a truce—for Japan was a very low tariff country [?] as compared with other countries. The Japanese tariff policy was a moderate one. Its low tariff during the truce would not be raised, whereas other countries already have very high tariffs. They desire that such agreement be for a limited period. Therefore they consider it a vital point that those countries which are of interest to the Japan trade adhere to the truce.

Mr. Taketomi asked what was our idea regarding reductions.

Mr. Livesey said that we had considered the idea of general horizontal reductions but we did not contemplate making a gesture in that direction.

Mr. Tsushima said that the Japanese did not favor the idea of general reduction.

Mr. Fukai said that the Japanese tariff was comparatively low and general horizontal reduction would not be fair.

Mr. Livesey said that there would certainly be some proposals from some countries. If there were such, that might be one way. But we could hardly expect that all countries would come in. Thus, there would be groups. To any proposal, the United States would listen. But it was our opinion that multilateral proposals would not obtain enough consents to be effective. We would not wish, however, to be in the position of obstructing any practical proposal.

Mr. Tsushima said that, turning to the question of abolishing restrictions on international trade, the Japanese experts had suggested study of the treaty concluded at Geneva in 1927.⁴³ Had we any ideas on that subject?

Mr. Livesey said the United States was a party to that convention. We would like to see it generalized, to see the countries of the world adhere. It provided for the necessary exceptions.

Mr. Tsushima inquired whether we had any idea of retaining Article 5 of that Treaty or making amendments in accordance with the Article.

Mr. Livesey said that proposals presumably would be made by some countries. He believed there had been no technical preparations of such here.

Mr. Tsushima said that Japan wanted to preserve the principle of that Article. The Japanese Government had never imposed trade barriers, etc. They thought this Treaty should become a basis—on which all countries should join to abolish restrictions.

Mr. Fukai said that he was going to make some repetition. The Japanese in general are quite in accord with us in regard to reduction of trade barriers. They are prepared to contribute whatever possible. But the problem is complicated. He thought the question of the interpretation and application of the most-favored-nation clause was one of the vitals of the problem. Reciprocal agreements on the basis of the unconditional most-favored-nation clause are most desirable. The Japanese would like to start from that ground.

Mr. Livesey said that the question had been much explored in all these conferences. Our point of view is affected by our long established practice and laws and the interpretation which we have given in practice to the scope of the clause. He mentioned mandatory antidumping provisions. We assume that the lines of discussion will be fairly well defined. Our attitude will be to cooperate.

Mr. Taketomi asked how about the quota system as a matter of principle.

Mr. Livesey said we thought that there could be no reconciliation between it and most-favored-nation treatment. Our experts have drafted studies. Quotas, if used, would have to be based on figures of previous imports. This runs into the question of most-favored-nation; it involves the question of equitable treatment.

Mr. Taketomi mentioned the French position.

Mr. Livesey said the French provisions constitute a serious intrusion into the field of competition.

Mr. Taketomi said Japan had no quota system and would rather that that system be abolished. For instance, the French and others.

Mr. Fukai said that as to the application of the most-favored-nation clause, Japan had a conventional tariff with France and none with the United States; but that Japan imported more automobiles from the United States than from France; thus the United States had the trade without giving the compensations which the French gave.

Mr. Livesey said the position of the United States had been that we make our tariffs autonomous, make the rates uniform, and are not in position to negotiate for reductions with other countries. Now we contemplate a change; but we do not contemplate that this shall be to establish preferences: our reductions would be generalized.

Mr. Taketomi said that the United States and Japan had similar views in regard to the unconditional most-favored-nation clause. So we might stand unitedly at the Conference. We could make a united front a matter of principle.

Mr. Debuchi asked whether we had any other questions to discuss.

Mr. Fukai said that if the Secretary wished to have another conference the Japanese would be glad to attend.

Mr. Livesey said that we had discussed with them the general questions which we had discussed with the others. There might be added certain economic matters, such as special consideration of the question of wheat. We now possessed powers enabling us to participate in discussions looking toward regulations of production and exchange of such commodities.

Mr. Taketomi referred to the processing tax.

Mr. Livesey said he had mentioned that in connection with the Agricultural Act, which Act he explained further. Mr. Livesey said that no one of us had sat in all of the sessions of all of the conversations. There might be some questions which had been discussed in some of them which had not been brought up in these. But he thought that we had covered all of the important points that had been covered in any of them.

Mr. Fukai said we should approach the Conference in a spirit of cooperation.

Mr. Livesey expressed concurrence.

The meeting then adjourned.

After the conclusion of the above-recorded conversation, the Japanese Ambassador drew Mr. Hornbeck aside and asked that, inasmuch as the Secretary of State had been called away from the conference, Mr. Hornbeck give the Secretary a message on the Ambassador’s behalf. The Ambassador said that he had listened with close attention to all that had been said in these conversations, today and yesterday, and he had been very agreeably impressed with the fact that the American and the Japanese delegations concurred in their views upon so many points. He felt that at the Conference the United States and Japan should stand together. He was very happy over the whole matter.

41. Great Britain, Cmd. 4174 (1932): Imperial Economic Conference at Ottatva, 1932, Summary of Proceedings and Copies of Trade Agreements (Appendices published separately in Cmd. 4175
42. Post, p. 605.
43. Convention and Protocol for Abolition of Import and Export Prohibitions and Restrictions Between the United States and Other Powers, signed at Geneva, November 8, 1927 (on the part of the United States, January 30, 1928), Foreign Relations, 1928, vol. i, p. 336.