Memorandum by Mr. Leo D. Sturgeon of the Division of Far Eastern Affairs of a Conversation With the Third Secretary of the Japanese Embassy (Hayama)

Mr. Hayama called at my request to discuss certain questions which have arisen in connection with our negotiations with the Japanese for a division of the Philippine cotton textile import trade on a quota basis. The questions had arisen in regard to the basis of estimated 1935 textile imports into the Philippines, and with respect to possible significance that may attach to the recent message of the Governor General to the Philippine Legislature.

1. Explanation of Basis of Estimated Trade Figures

Mr. Hayama had previously asked for an explanation, which I had partially furnished, in regard to the basis of our estimate of (a) the total 1935 textile imports into the Philippines, and (b) the total imports of third countries other than Japan and the United States.

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I had previously explained to Mr. Hayama that our estimate for the total trade was lower than the 1934 figure, owing chiefly to the fact that Philippine sugar imports into the United States were certain to be lower during the current year than in 1934, due to shipments over quota allotments in 1934 which must be charged to imports for the current year. It was explained that, according to Tariff Commission data, the reduction in the sugar trade for 1935 compared with 1934 may approximate 50 percent. In regard to our estimate of trade for third countries which the Japanese considered too high (12,000,000 square meters), I informed Mr. Hayama that further investigation of this point indicated that an error had been made and that we estimate that third country importations into the Philippines in 1935 will amount to about 6,000,000 square meters.

Closely following a memorandum60 prepared by Mr. Hansen61 and approved by the Interdepartmental Committee on the Philippines, I explained that this estimate was based on figures for 1934 and for the first quarter of 1935, and that on this basis the combined Japanese-American importation in 1935 is estimated at 84,000,000 square meters, of which the Japanese would be allotted 40,000,000 square meters. I further said that, as the Japanese were doubtless aware, an absolute quantity allotment would be more favorable to them than one based upon percentages. It was emphasized that an allotment based on absolute quantity frees the Japanese from risks involved in any decline in the trade in question.

2. Statement in Regard to Governor General Murphy’s Message to the Philippine Legislature

I next referred to Mr. Hayama’s previous inquiry as to the possible significance of Governor General Murphy’s message to the Philippine Legislature on the textile situation. I reminded him that the Japanese had been advised in earlier conversations that unless we could arrive at a voluntary arrangement under which the Philippine market would be fairly divided between the United States and Japan, there would inevitably develop political pressure in the American Congress, and possibly in the Philippine Legislature, to erect tariff barriers against textile imports into the Islands; but that this Government is still prepared to work toward a voluntary arrangement along the lines originally discussed. I added that we stand now as before and that should an arrangement between Japan and the United States be put into effect this Government would take no positive step in support of a tariff in the Philippines, but would utilize as far as appropriate such influence as it possesses to discourage tariff action there looking toward higher duties on textiles.

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I called attention to a recent conversation between Mr. Sayre and the Japanese Ambassador62 in which it was frankly stated to the Ambassador that it was our desire to remove certain focal points of agitation in regard to Japanese competition, and when it was confidentially indicated that this effort was being handicapped by the circulation of a petition in the American Congress designed to influence Philippine tariff legislation. I informed Mr. Hayama that this movement in the Congress had continued, as evidenced by a petition recently submitted by it to the Philippine Legislature; and that the Governor General’s message to the Philippine Legislature may have been influenced in part by agitation in the American Congress and by pressure from American textile interests. I made it clear, however, that the Governor’s message had been initiated in the Philippine Islands, even though probably influenced by sentiment in this country as indicated.

Mr. Hayama interposed a number of questions during the conversation. He wished particularly to know if our attitude of nonsupport and non-encouragement of tariff legislation in the Philippine Legislature meant that we could prevent such legislation. I told him that I believed it had already been made clear that our attitude did not mean this but that it did mean that we were “playing fair” with the Japanese; and that we hoped to continue along lines already begun toward the object of an amicable adjustment of the Philippine trade question. I added that we considered a quota arrangement more likely than tariff legislation to reduce to a minimum possible friction and agitation among trade and other interests concerned.

Mr. Hayama wished to know if he could say in reporting this matter that the State Department was not connected with or behind the Governor’s message. I told him that this was the true situation, and again called his attention to the fact that the message of the Governor was initiated in the Philippines and, so far as we were aware, only indirectly influenced in this country.

3. Information on Situation in Japan

Mr. Hayama stated that he wished to give me some “information” on the situation in Japan in regard to our negotiations on the Philippine textile question. He said that the Foreign Office had held a conference of the government departments concerned, chiefly the Department of Commerce, and manufacturers and exporters, and had attempted to secure some concession to our position. Unfortunately, he said, both the Japanese manufacturers and exporters strongly opposed anything less than the 56,000,000 square meters originally requested as their share of the Philippine trade, and that the Foreign [Page 979] Office is in an embarrassing position. Mr. Hayama said that the Embassy here tentatively was considering some way out of the dilemma. He wished to know, in view of the original proposition of sharing the Philippine trade on a fifty-fifty principle, what our attitude would be toward basing a quota arrangement on the annual average total quantity of imports into the Philippines for the last three years, which he stated would be 110,000,000 square meters, of which third countries secured 10,000,000 square meters. This would leave 100,000,000 for equal division between Japan and the United States, i. e., 50,000,000 square meters for each country. Mr. Hayama pointed out that preliminary figures for the first six months of this year indicated that Japanese exporters had already shipped 40,000,000 square meters of textiles to the Philippines, indicating that even a quota arrangement allotting 50,000,000 square meters would still constitute a large sacrifice on Japan’s part. I replied that I could not give encouragement to this tentative proposal, in the light of past negotiations, but would submit it for consideration if that was desired. This was requested.

  1. Not printed.
  2. Alvin H. Hansen, chief economic analyst, Division of Trade Agreements.
  3. See memorandum of June 19, p. 972.