Memorandum by Mr. Roy Veatch of the Office of the Economic Adviser

The Inter-Departmental Committee on the Philippines recommends that conversations be continued with representatives of the Japanese Embassy with respect to the voluntary limitation by the Japanese of their shipments of cotton textiles to the Philippine Islands, the following position to be taken with respect to the specific counter-suggestions made by the Japanese in the last exchange of views:

Point 3 in the original proposal of this Government (memorandum of May 7, 1935) to be eliminated so that no specific commitment would be requested with respect to limitation of Japanese shipments of cotton piece goods by categories, although the Japanese should be encouraged to give some general assurance that no effort would be made to concentrate shipments in certain categories.
Elimination of Point 5 of the original proposal so that no commitment would be requested with respect to limitation upon quarterly or semi-annual shipments by categories.
Modification of Point 4 of the original proposal, eliminating the suggestion of a maximum quarterly limitation but maintaining the request for a maximum semi-annual limitation, on total shipments, of 25,000,000 square meters.
No modification of the original proposal with respect to total annual quantitative limitation. The figure of 40,000,000 square meters should be insisted upon, in view of the fact that total imports of cotton piece goods into the Philippines during the first quarter of this year show some decline from the first quarter of 1934, indicating that the total consumption this year may be lower than 100,000,000 square meters, the original estimate. In connection with discussions of the share of the Philippine market to be alloted to the Japanese, there should be no suggestion that the Philippine market might be “divided” more or less equally between Japanese and American exporters, since this suggestion might establish an undesirable precedent.
The request that the Japanese Government should exert its influence to prevent the demoralization of the price structure in the Philippine cotton textile market, Point 6 of the original proposal, should be withdrawn, since the quantitative limitation proposal should have the effect of strengthening prices.