611B.9417/54
Memorandum by Mr. Leo D. Sturgeon of the Division of Far Eastern Affairs
| Conversation: | Mr. Seijiro Yoshizawa, Counselor, Japanese Embassy; |
| Mr. Tsuneo Hayama, Third Secretary, Japanese Embassy; | |
| Mr. Sayre; | |
| Mr. Sturgeon. |
Mr. Yoshizawa, accompanied by Mr. Hayama, called to receive from Mr. Sayre, a reply to certain proposals contained in a memorandum handed to Mr. Sturgeon on July 19, 1935, relative to conversations which have been in progress between the Department and the Japanese Embassy looking toward an equitable apportionment of textile imports into the Philippine Islands.
Mr. Sayre stated that he had asked the Counselor to call in order to inform him of certain conclusions reached in regard to the Japanese memorandum previously submitted, and that he thought it well to repeat, as informative background, the substance of certain statements previously made by Mr. Sayre to the Japanese Ambassador in regard to our general objectives in international trade, and in particular Japanese-American trade.
[Page 988]Mr. Sayre said that he had observed no serious obstacles to a healthy development of trade between the United States and Japan; that in fact this trade continues to be admirably complementary—this country needing Japanese raw silk and Japan requiring American raw cotton. He said he saw no reason why we should not improve the situation, and increase our purchases from Japan, and Japan’s purchases from this country. Mr. Sayre continued that we wished to avoid any unnecessary disturbance to our present admirable trade relations, and said that it was with this in mind that the Department had done all in its power to discourage enactment of the taxes upon Japanese silk recently proposed in the Congress. [Mr. Yoshizawa interposed that in the course of a recent call (July 19) the Ambassador had expressed his appreciation of the assistance of the Department in regard to the silk taxes; reports from Japan also indicated appreciation of the Japanese people.]69
Some broader objectives of American commercial policy were then stressed by Mr. Sayre. He said that we desired to pull down tariff barriers, and to remove other unnecessary restrictions to a natural development of trade; that constructive steps in this direction were necessary to long-view planning. There was, however, the problem of price demoralization created through sudden entry into trade of low-cost merchandise, but Mr. Sayre thought that informal agreements such as were concluded with Japan in regard to lead pencils, and certain types of rag rugs, provided a method of offsetting price disturbances to trade.
While Japanese-American trade relations are, in the main, satisfactory, Mr. Sayre said, there remained what he had termed certain “focal points” of agitation and possible friction. He stated that it was our desire to remove these focal points, and as we believe the Philippine textile situation falls into that category, it is desired to come to some mutually satisfactory agreement with Japan in regard to the matter.
Mr. Sayre remarked that we do not desire the Philippine textile market for ourselves alone, but are quite willing to share it with the Japanese upon some basis that would stabilize the situation with which we are confronted. He thought an agreement with Japan to share the trade on a 50–50 basis would constitute a fair arrangement, and would be preferable to uncertainties of possible tariff legislation in the Philippines. The Counselor indicated assent with this view.
The proposals for an apportionment of imports of cotton textiles into the Philippines contained in the Japanese memorandum70 were then discussed in order (See memorandum).
[Page 989]Tariff Commission data covering imports of cotton textiles into the Philippine Islands for the first two quarters of 1935 (See EA memorandum attached71) were shown to the Counselor. Mr. Sayre then stated that our calculations, based on the statistics presented, indicated that the quantitative share of Japan in the trade in question would amount to about 43,000,000 meters, and that we were prepared to offer this figure, and also to allow a limited flexibility (Shipments up to 25,000,000 square meters in half year period) for adjustments of over-shipments and under-shipments. Mr. Sayre stated that the figure offered was based upon the equal share principle; that it was the most we could do; and that we could not survive press and other attacks that the offer of a larger figure would most certainly bring. Owing to flexibility provided for in the first part of the memorandum, it was agreed that the provision for definite allotments of Japanese imports by half years might be dropped.
In regard to the second paragraph of the Japanese memorandum which requests this Government to obtain an understanding from the Philippine Government not to increase the present duty on cotton piece goods, Mr. Sayre said no promise could be given. He said that we mean what we have said to the people of the Philippines in regard to granting independence, and that it was to be expected that they may have ideas of their own on tariff matters. He thought that we should go ahead with efforts to reach agreement on the understanding that if any tariff action by this or the Philippine Government should result in higher duties being placed upon Japanese textiles entering the Philippines, the Japanese would cease to be bound by the agreement.
The provision for an agreement for two years’ duration, in the third paragraph of the Japanese memorandum, was agreed upon without the provision for the transferring of allotments.
Mr. Sayre said that the fourth paragraph of the memorandum appeared acceptable, but suggested that its meaning might be somewhat clarified. Mr. Hayama stated that it simply meant that textile interests in Japan will control exports, and that it is desired that the Philippine authorities should cooperate in keeping records of shipments, under the agreement being proposed. When there appeared to be no further questions with regard to the memorandum, the Counselor said that he would discuss the matters covered with the Ambassador, and then report to his Government.
Mr. Sayre said that he had been speaking frankly throughout the conversation, and in keeping with this wished to mention another matter. He stated that there had been some suggestion here that [Page 990] the effects of the agreement we have in mind might be annulled by the transfer of Philippine textile orders from Japan to Japanese mills in Shanghai, and that there should be a provision in the agreement to take care of this eventuality. He said he had not favored the suggestion, preferring to regard the arrangement we are working toward as a gentleman’s agreement, and to depend upon the good faith of our two Governments with respect to the obligations assumed under the agreement. The Counselor thanked Mr. Sayre for his attitude in the matter and said that he would not fail to make mention of it in the report to his home Government.
In concluding the conversation, Mr. Sayre urged the necessity of concluding an agreement on the Philippine textile situation at the earliest possible date. Failing this, he thought there was real danger of action by the Philippine Legislature, or of agitation in this country. As indication of this possibility, Mr. Sayre read from a press despatch references by Manuel L. Quezon to possible tariff action in the Philippine Legislature. The Counselor agreed that it was important for Japan and the United States to reach an early agreement. The conversation then ended.