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

Conversation: Mr. Hirosi Saito, the Japanese Ambassador;
Mr. Sayre;
Mr. Dooman.

Mr. Sayre said that we had been favorably impressed and gratified nese Ambassador in April, when he had frankly laid before the Japanese Ambassador our views in regard to the adjustment of commercial relations between the United States and Japan; that he had then explained that it was our desire to remove certain focal points of agitation in regard to Japanese competition; and that such focal points had included the Philippine cotton textile situation.

Mr. Sayre said that we had been favorably impressed and gratified by the spirit of cooperation shown by certain groups of Japanese manufacturers and merchants, notably those interested in cotton rugs, pencils and pottery, and we felt that their attitude had been [Page 973] distinctly helpful in the progress toward recovery that has been made by affected American industries during the last twelve months. Unfortunately the attitude of Japanese manufacturers and merchants interested in the Philippine cotton textile market had not been equally cooperative. Mr. Sayre stated that we regretted very much to find from the most recent proposal put forward through the Japanese Embassy that there has been no response to our desire, of which we have given proof, to consider sympathetically the needs of the Japanese. Mr. Sayre further pointed out that the most recent proposal not only was not responsive, but that in one or two respects it went beyond the terms of the original Japanese proposal.

In conformity with the spirit of friendliness and frankness which had prevailed in the conversations which Mr. Sayre had thus far had with the Japanese Ambassador, Mr. Sayre wished to inform the Japanese Ambassador in strictest confidence of a development that was taking place on Capitol Hill. He said that there is being circulated for signature by Senators and members of Congress a petition to the Philippine Legislature that the duty on cotton textiles be increased; and that the petition has already received a substantial number of signatures, with new signatures being added each day. Mr. Sayre thought it possible that the opportune moment for the making of an informal arrangement in regard to the Philippine textile situation had already passed, but nevertheless he was hopeful that the conclusion of such an arrangement would operate to induce the signers of the petition to refrain from approaching the Philippine Legislature.

The Japanese Ambassador stated that according to private advices which he had received Japanese manufacturers and exporters of cotton textiles to the Philippines were taking a very strong position in regard to suggestions toward limiting exports to American territory; that they contended that, as they purchased and consumed large quantities of American raw cotton, and as Japan also had an unfavorable balance of trade with the United States, the Japanese should have unrestricted opportunity to market their cotton products abroad and thus establish credits for the purchase of American raw cotton. Mr. Sayre pointed out that so far as the trade between Japan and the Philippine Islands was concerned, Japan enjoyed a favorable balance, and, therefore, he could not appreciate the force of the contention of the Japanese that their exports to the Philippines should not in any way be limited.

Mr. Sayre went on to say that the proposal presented to us last week by the Japanese was being carefully examined with a view to determining whether it would be possible for us to make further concessions. He thought it possible that some modification might be made, but he emphasized that no agreement could be reached unless the Japanese were prepared to give evidence of a cooperative attitude. If the [Page 974] Japanese manufacturers and exporters can present to us satisfactory evidence of an earnest desire to arrive at an agreement, we would proceed at once to indicate to the Ambassador what further concessions could be made by us.

Mr. Dooman said that he wished to supplement the remarks of Mr. Sayre. He said that at his first conversation with a representative of the Japanese Embassy in regard to the Philippine cotton textile situation, he made it clear that it was our desire not to eliminate the Japanese from the Philippine market but that, on the contrary, we wished to share that market with the Japanese; that he had stated to Mr. Fujii, the Counselor of the Embassy, that we were thinking along the lines either of defining the respective American and Japanese shares in terms of percentages or in terms of actual figures; that Mr. Fujii had in due course stated that the Japanese wished to have the share defined in terms of definite figures. Mr. Dooman pointed out that the allotment of 40,000,000 square meters, which we had proposed as the Japanese share, would probably equal during the next year the figure of American exports to the Philippine Islands, but that if we were to grant Japan 56,000,000 square meters, the Japanese share of the trade would amount to about 70%. Mr. Dooman expressed the opinion that it would be politically impossible for us to agree to any such arrangement.

Mr. Sayre confirmed the opinion of Mr. Dooman as above expressed, and added that any arrangement which was made would have to provide security for American interests as well as for Japanese interests. He hoped that the Japanese Ambassador would make it clear to his Government that we were mindful of the difficult character of the problem, and that we desire to seek in a spirit of good will and friendly understanding an adjustment of the Philippine situation in such manner as to equitably safeguard and promote the interests of both Japan and the United States.

The Japanese Ambassador stated that he would take pains to see that the statement of views and facts expressed by Mr. Sayre were made clear to his Government, and he hoped that he would be in position shortly to confer again with Mr. Sayre.