611B.9417/122: Telegram

The Ambassador in Japan (Grew) to the Secretary of State

23. Department’s 15, January 31, 7 p.m.

1.
The Commercial Attaché and the First Secretary called on Kurusu this afternoon. Kurusu said that the Osaka cotton textiles exporters had accepted his proposal on the following conditions:
(a)
That they be allowed to carry over to the 1936–37 quota year the 4 million square meters not to be shipped this quota year, thus giving them a quota of 49 million next quota year.
(b)
That the Philippine or American Governments endeavor to control transshipments from Hong Kong which in the past have interfered greatly with control of shipments from Japan to the Philippine Islands.
(c)
That no agreement whatsoever be made to control or restrict shipments of rayon to the Philippine Islands.
2.
The Department’s proposals as contained in the Department’s No. 15 were then presented to Kurusu. He accepted 1 a, b and c, and 3, but could not accept 1 d because of 1 a above, or 2 because of 1 c above.
3.
In regard to the rayon question, Kurusu said that he positively could not agree even to negotiate the question as he had used the possible restriction of Japanese rayon imports into the Philippines as a weapon with which to induce the Osaka textile exporters into acceptance of his cotton textiles proposal and to agree now even to negotiate the rayon question would inevitably defeat the present compromise proposal concerning textiles which he had obtained only with great difficulty. He was asked if he would negotiate the rayon question if no adjustment were made of the cotton textiles question (i. e., if the Japanese were permitted to ship 19 million square meters during the second semester of this quota year and were allowed the 10 per [Page 829] cent flexibility privilege) but he replied that he could not negotiate on the rayon question under any circumstances. His attitude at both interviews was that the Japanese textile exporters while willing to negotiate on the cotton textiles question were determined to quote “draw the line” at control of rayon exports.
4.
Kurusu said that his proposal as given in the Embassy’s 20, January 31, 8 p.m. and amended in paragraph 1 above is definite and if accepted by us can be published by the Department in Washington provided that the arrangement be not called an “agreement” but instead be called a “voluntary adjustment by the Japanese exporters”.
5.
Kurusu further indicated that in case of non-acceptance of his proposal as amended and resultant tariff legislation he could see no outcome other than that the Japanese textile trade would have to “fight it out” in unrestricted competition.
Grew