862.9331 Manchuria/16
The Consul General at Mukden (Ballantine) to the Ambassador in China (Johnson)18
Sir: I have the honor to refer to my despatch No. 272 of May 28, 1936, 19 concerning the German-”Manchukuo” trade agreement, and in connection therewith to enclose:20
- (1)
- The text of this agreement as given out by the Hsinking Foreign Office, and,
- (2)
- A translation, made in this office, of Order No. 14 of the “Manchukuo” Ministry of Finance concerning the regulation of German-”Manchukuo” exchange.
In my despatch under reference, estimates were made of the probable value of trade between Germany and Manchuria following the conclusion of the agreement. The Consul General at Harbin also made such estimates in his despatch No. 358 of May 15, 1936, to the Department.19 The publication of the agreement, however, removes the need of conjecture on this point, as the agreement stipulates the amount which each country will buy from the other: Germany Yuan 100,000,000 from Manchuria and Manchuria Yuan 25,000,000 from Germany. These amounts represent the business expected to be done between the two countries under normal conditions, but it is agreed that Germany may reduce her purchases to a minimum of Yuan 65,000,000 (with a proportionate reduction in payment in foreign exchange) in the event of an unforeseen adverse exchange situation in Germany. On the other hand, should Germany’s favorable trade balance with Japan exceed Yuan 63,750,000, such excess “shall be made available for additional (viz. above Yuan 100,000,000) German importation from Manchukuo payable in foreign exchange beyond the amount provided for” (Yuan 75,000,000). It would appear from the somewhat involved wording of this paragraph that two-thirds of this excess will be paid for with foreign exchange and the remaining third with Reichsmarks.
In the “Manchukuo” announcement enclosed in my despatch under reference it is stated (Section 2 e and d) that the fund in Germany made up of the one-fourth payment in Reichsmarks for Manchurian imports into Germany may be used to pay for German patents, salaries of Germans, et cetera, in Manchuria and for German products used and consumed outside of Manchuria by firms “related to Manchukuo”. These arrangements must be based on some private understanding, [Page 194] as the agreement not only contains no provisions for them but stipulates very definitely that “Manchukuo” shall take measures to ensure sufficient importation of German products into Manchuria to utilize the whole amount of the Reichsmark fund in question.
The Consulate General does not feel qualified to comment on the degree of recognition of “Manchukuo” accorded or implied in the agreement. It would call attention, however, to the second paragraph of Article 3, wherein, abruptly and without any explanation for this favor, Germany’s favorable trade balance with Japan is taken into consideration in the trade arrangements of the two contracting “countries”.
Respectfully yours,