Memorandum by Mr. Eugene H. Dooman of the Division of Far Eastern Affairs

Conversation: Mr. Toyoji Inouye, Commercial Secretary of the Japanese Embassy;
Mr. Otoshiro Kuroda, Attaché of the Japanese Embassy;
Mr. Dooman.

Mr. Inouye said that, pursuant to the conversation which the Japanese Ambassador had with Mr. Sayre, the Japanese Ambassador had instructed him and Mr. Kuroda to discuss with me the details of the proposed arrangement for the voluntary restriction of exports of Japanese cotton textiles to the Philippine Islands.

I then laid before them the terms of the proposal as set forth in the memorandum of May 7, 1935, which was adopted by the Philippine Committee. Having done so, I took up in turn each point in our proposal, and using as a guide the memorandum above referred to explained the reasons for our inability to accept without modification the Japanese proposal. I stressed as strongly as possible our estimate that business conditions in the Philippine Islands this year would not be as favorable as they were last year, supporting this estimate with the comparative figures of cotton imports last year and for the first quarter of the present year; that we would not be warranted in granting the Japanese this year an allotment equal to their trade last year; that we would probably come in for considerable criticism if we were to agree to stabilizing the Japanese share of the Philippine market at a volume greater than that of our own share in that market; that the Philippines would enjoy automony in respect of tariff matters, and that we could not therefore guarantee that the Philippine Government would refrain from increasing the duties on cotton textiles.

Messrs. Inouye and Kuroda expressed great disappointment that we had been unable to accept even one of the points of the Japanese proposal.56 Mr. Inouye said that the Japanese cotton manufacturers took the position that as they purchased large quantities of American raw cotton they should be permitted freely to create credits necessary for the purchase of American cotton; that the proposal which we had presented not only would put Japanese trading with the Philippines in a cage but would handcuff them so they could not move. He felt certain that this proposal would not be acceptable, and that the fact that we had not seen our way clear to accept any part of the Japanese proposal would in itself create hard feeling.

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There then resulted a discussion which extended for more than two hours. The salient features brought out in that discussion were (a) that the terms of our proposal were based on sound and practical reasons and considerations and (b) that the Japanese would not accept any proposal which they believed to be unduly irksome and restrictive. Mr. Inouye brought out the fact that the Japanese placed primary emphasis on obtaining security in respect of their share of the Philippine market, and he said that it was his understanding that the Japanese would require a guarantee against the Philippine Government taking action to raise duties on cotton textiles as a sine qua non to voluntary restriction of their exports. He believed further that if the arrangement were subject to review and modification after one year the desire of the Japanese cotton industry for security would not be adequately met.

Mr. Inouye said that he would of course recommend that the Embassy forward to Tokyo our proposal, but he said that he would on his own responsibility request that the Philippine Committee reexamine the terms of our proposal with a view to modifying it in some way which would make it possible for the Japanese Government to urge their manufacturers to undertake voluntary restriction of exports.

I said to Mr. Inouye that I believed that the discussion had been very profitable in that it had developed certain points of difference and it had made it possible for each side to appreciate a little more fully the attitude and spirit of the other side. I promised to report to the Committee as soon as possible, and I said that I would recommend to Mr. Sayre that he call the Committee together as soon as possible to receive my report on our present conversation.

  1. See memorandum of April 30, p. 960.↩