893.659 Matches/10

The Ambassador in China (Johnson) to the Secretary of State

No. 190

Sir: I have the honor to refer to despatch No. 58 of December 30, 1935, from the Consulate General at Shanghai to the Department,12 with regard to the proposed match monopoly, and to enclose for the information of the Department copies15 of: 1) a memorandum, dated January 3, 1936, of a conversation between Third Secretary O. Edmund Clubb and an officer of the British Embassy; 2) telegram No. 25, January 11, 11 a.m., from the Shanghai Consulate General to [Page 601] the Embassy; 3) a memorandum, dated January 17, of a conversation between Mr. Clubb and the aforementioned British official; 4) the Embassy’s instruction of January 18 to the Consulate General at Shanghai; and 5) the Embassy’s communication of January 18 to the Embassy at Nanking.

It will be observed that the American and British Embassies are in agreement in the opinion that the proposed organization would in actual fact be a combine with a monopolistic policy and that this Embassy has therefore instructed the Consul General at Shanghai that he should not associate himself with the negotiations at present in progress. The American company concerned has been considering the proposition with the view of joining the combine, but difficulties have arisen by reason of the fact that, although the Japanese interests have apparently reached a satisfactory agreement with the Chinese side (the precise terms of that agreement evidently not being known to the American interests), the arrangement proposed to the American side would seem to give to all intents and purposes actual control over the company’s production and finances to the monopoly. It is at this point that there is discovered the very practical danger which would await any American company should it associate itself with a monopoly project in which it would have but little, if any, control. The voluntary association of American business interests with such a combine as the one outlined in the proposition for a match monopoly would be a definite invitation to their competitors promptly to impose restrictions which would redound to the benefit of the latter group; the acquiescence of the American authorities in any such arrangement would perhaps irreparably injure their technical position were they to desire to protest at a later date when the character of the combine became somewhat more apparent and American interests were confronted with a concrete threat.

In these circumstances, the Embassy does not intend to offer any support whatsoever to the American company for the purpose of enabling that enterprise to obtain favorable concessions in its negotiations with the monopoly group. As will be noted from the enclosures, it has, contrariwise, requested the Counselor at Nanking16 to take steps to obtain additional information regarding the proposed combine and—if he thinks it desirable at this juncture—to point out to the Chinese authorities the attitude which the American authorities have consistently maintained as regards the general subject of monopolies in China. Where, as in this case, foreign interests are definitely involved and the pertinent provisions of the Nine Power Treaty17 seem clearly applicable, the circumstances seem to warrant the taking [Page 602] of a strong stand for the maintenance of the important principle involved. This the Embassy proposes to do if Mr. Peck’s investigations indicate the necessity. The Embassy will follow the matter closely and keep the Department informed.

A copy of the Embassy’s instruction of January 18 to the Embassy at Nanking has been sent informally to the British Embassy for its information. It would seem highly desirable to obtain the fullest cooperation from the British authorities for the maintenance of the integrity of the treaty provisions involved in the proposal herein discussed.

Respectfully yours,

Nelson Trusler Johnson
  1. Not printed.
  2. None printed.
  3. Willys R. Peck.
  4. Signed at Washington, February 6, 1922, Foreign Relations, 1922, vol. i, p. 276.