611B.9417/148a
The Assistant Secretary of State (Sayre) to the High Commissioner in the Philippines (Murphy)99
It is our impression that the extreme lag in the Philippine customs reports of imports is chiefly responsible for the fact that Philippine imports of Japanese cotton goods now show, and probably will continue to show for next two or three months, large excesses over quota set in agreement with Japanese. If this is true, it is our thought to [Page 1030] absolve the Japanese from blame as far as the actual situation will warrant. At the same time, in the light of our present information, we intend to hold to the published Philippine statistics as the measure of imports from Japan to date since the agreement specified these statistics. To use statistics of arrivals instead of the published statistics based on liquidation of duty apparently would have the effect of increasing the Japanese quota for the first year of the agreement by some 28,000,000 square meters and would be undesirable from many points of view and impossible from a political standpoint. It may be desirable later to shift to statistics of arrivals as a more convenient measure of imports for the second year of the agreement and also to adopt some adjustment or compromise regarding Japanese shipments during the remainder of the first year, but in any case, it seems probable that Japanese shipments of cotton cloth to the Philippines, halted November 16, will not be resumed for several months.
It will be helpful if you can place this explanation of our position before Dorfman, Richards1 and Waring and any others who have been giving consideration to this matter so that there may be no misunderstanding and so that no intimation shall reach the Japanese that any other basis than the published statistics is being considered.
You will be informed as soon as a definite adjustment has been worked out with the Japanese. In making this adjustment, it is essential that we be fully informed of the actual situation in the Philippines, and it will be appreciated, therefore, if you will refer the following inquiry to Dorfman, Richards and Waring:
Your radiogram December 32 appreciated. In addition need early reply by radio to following questions:
Amount of Japanese goods actually arrived and awaiting liquidation of duty on August 1, or amount of goods awaiting liquidation of duty at present time, or on any other particular date since August 1? Would your answer to this question check with computation here that 11,400,000 square meters Japanese goods which arrived in 1934 was included in published Philippine customs statistics of imports for 1935 (note your radiogram of November 123), that in addition there arrived in the Philippines January–July 1935, inclusive, roughly 47,000,000 or 48,000,000 square meters, that published Philippine statistics showed only 30,500,000 square meters as imported (duty liquidated) during January–July, and that as a result there must have been roughly 28,000,000 square meters of Japanese cotton piece goods in the Philippines on August 1 which had not yet appeared in the Philippine customs statistics of imports because the duty on these goods had not yet been liquidated?
Assuming no more shipments of Japanese cloth after November 15, what is estimate of total amount of Japanese cloth to appear in [Page 1031] Philippine liquidation figures from August 1 on? Also what is best estimate, even though rough, of amount of Japanese cotton cloth actually on the market and in competition August 1, and also amount in square meters of stocks of Japanese cotton cloth on the shelves at the present time (equivalent of your estimate of four to five months’ supply)?
In what kinds of cloth does rayon compete with cotton and what is importance of these kinds in relation to total consumption of cotton cloth? To what extent is it felt in the market that rayon cloth may be substituted for cotton cloth when Japanese cotton cloth may not be secured so easily?
What is present situation with respect to imports of cotton cloth from Hong Kong and Shanghai or placing of orders in these markets? Is it expected that importers in the Philippines will place large orders in Shanghai or elsewhere when adequate supplies of Japanese cloth are no longer available? Is there likely to be any way of discouraging such importations short of legislative action in the Philippines? (Inquiries on this point should be particularly guarded.)
We hope to reach an understanding with the Japanese as soon as possible with regard to administration of the agreement in the future and adjustment of the present situation. You can assist us by sending us via naval radio as soon as possible and in as much detail as possible a statement of all information and opinion which appears to you to be pertinent.