894.797/11
The Secretary of State to the Chargé in Japan (Neville)
Sir: Reference is made to your despatch No. 1440 dated August 22, 1935,16 in regard to the proposed legislation to place the automobile manufacturing industry of Japan under a system of control by means of licenses. The Department has given consideration to the relation of Article I of the Treaty of Commerce and Navigation of 1911 between the United States and Japan17 to the proposed legislation, and it is of the opinion that the contemplated restriction on the production of motor vehicles by American nationals in Japan would, if enacted, be violative of the terms of that Treaty.
[Page 1049]It is not improbable that the rejoinder of the Japanese Government to a contention that the proposed legislation would be a contravention of that Treaty will be that the rights granted to American citizens under Article I of the Treaty “do anything incident to or necessary for trade upon the same terms as native citizens or subjects”, should be given its literal interpretation in the sense that, as Japanese subjects would not be permitted to operate automobile factories without restriction of output unless such factories are financially and administratively controlled by Japanese, the provisions of the proposed law would similarly require American nationals to operate their factories on the same basis. It would appear to be obvious, however, that such interpretation would not be tenable.
Although the Article under reference might have been more precisely phrased, it is the opinion of the Department that the Article as it stands lends itself to only one reasonable interpretation, and that is that American and Japanese nationals are to be placed on a footing of absolute equality in all matters pertaining to or incident to trade. American nationals appear now to be permitted to operate automobile factories in Japan on a basis of equality with Japanese nationals, in the sense that both American and Japanese nationals are permitted to operate their factories without restriction in regard to output and without condition as to the degree of financial control or of supervision over the factories to be exercised by any nationality. Should the proposed law become effective, Japanese subjects would be permitted to manufacture and distribute motor vehicles without limitation as to quantity whereas such limitation would be imposed on factories operated by American citizens, and there would consequently occur a denial of the right of equality of treatment. The Article under reference of the Treaty of 1911 was intended to prevent discrimination of this character.
Clear evidence of this fact is found in the original draft presented by the Japanese Government of the Treaty of 1911. Article I of that draft contemplated that
“The subjects or citizens of each of the High Contracting Parties …18 shall, in all that relates to … the prosecution of their industrial and manufacturing undertakings, be placed, in all respects, on the same footing as the subjects or citizens of the most favored nation.”
An arrangement of the character proposed was not acceptable to this Government and the present text of Article I of the Treaty, providing for national treatment instead of most-favored-nation treatment, was agreed upon. This circumstance alone should be sufficient to establish the validity of the contention that any law, such as the [Page 1050] proposed law, placing American citizens in a less favorable position than Japanese nationals in the operating of factories, would contravene the treaty provision under reference. However, if further support for that contention is necessary, it may be found in the practical interpretation of the Article independently of any comparison between the agreed upon draft and the original Japanese draft.
It would appear desirable that, in the Embassy’s discussions of the matter with Japanese, the Embassy refrain from gratuitously making reference to the interpretation of Article I of the Treaty by courts in the United States, for the reason that any consideration of such decisions would involve reference to the disability of Japanese nationals to own land in the several States which have prohibited the ownership of land by aliens ineligible to citizenship. However, as suitable opportunities present themselves judicious use might be made of the fact that decisions of the courts in the United States have definitely recognized the treaty right of Japanese subjects to engage in trade in the United States on a basis of full equality with American citizens. Such a decision was made in the case of Tashiro et al vs. Jordan, decided by the Supreme Court of California in 1927 and reported in 256 Pacific, page 545. In that opinion the court referred specifically to part of the treaty article in question and said:
“But the right ‘to carry on trade’ in the specific lines of business mentioned in the treaty, such as conducting manufactories, warehouses, and shops and leasing lands for commercial purposes, is from the very terms of said treaty as extensive and complete as that enjoyed by native citizens or subjects. It would be difficult to frame language much more comprehensive than that found in the following provision of Article I of the treaty:
‘and generally to do anything incident to or necessary for trade upon the same terms as native citizens or subjects’.
This language follows the provision enumerating the different classes of trade or business in which resident aliens are authorized to engage and must be read in connection with such provision, and as so read it gives to such aliens an equal standing with native citizens or subjects in the conduct of those enumerated classes of business which may be carried on by such aliens.”
The judicial opinion above quoted is an express recognition that Article I of the Treaty of 1911 assures Japanese subjects full equality with citizens of the United States in carrying on trade in this country. The courts in the United States having confirmed to Japanese subjects in the United States the right to receive equal treatment with citizens of the United States in carrying on trade in this country, the American Government may with warrant expect that the Japanese Government will reciprocally accord similar treatment to American citizens in Japan.
[Page 1051]The Department authorizes you to discuss orally and informally with the Foreign Office the proposed legislation and to inform the Foreign Office that in the opinion of this Government the enactment and enforcement of the proposed law would be a clear violation of the rights to which American nationals engaged in the business of manufacturing and distributing motor vehicles in Japan are entitled by the treaty article under reference.
Very truly yours,
- Not printed.↩
- Signed at Washington, February 21, 1911, Foreign Relations, 1911, p. 315.↩
- Omissions indicated in the original despatch.↩