611B.9417/122: Telegram
The Secretary of State to the Ambassador in Japan (Grew)
18. Your 23, February 3. The Department is prepared to accept the suggestion of the Japanese Foreign Office regarding a voluntary adjustment by the Japanese exporters of the agreement reached October 11, 1935 to the effect that importations into the Philippines of Japanese cotton piece goods between the present time and August 1, 1936 shall not exceed 15,000,000 square meters. In conveying this information to the Foreign Office, however, you are requested:
- (1)
- To make it clear that this Government cannot consider the Japanese proposal to be a satisfactory adjustment of the agreement. Furthermore, it is felt that the Japanese Government and the Japanese exporters can themselves hardly expect the agreement, so adjusted, to attain fully the objectives which the two Governments had in view when the original understanding was reached last October.
- (2)
- To urge Kurusu very strongly to make every effort to lead the textile exporters to agree that the maximum limitation of 45,000,000 square meters for the second year of the agreement shall not be increased by 4,000,000 square meters.
- (3)
- To secure agreement upon some method of distributing the total amount to be imported into the Philippines during the second year of the agreement proportionately so far as possible over the 12 months of the year, perhaps through monthly or quarterly limitation, with the possibility of a transfer of as much as 20 percent from one period to another to meet seasonal demands if necessary.
- (4)
- To inform Kurusu that it will be impossible, at least for the present, to take the action suggested in 1 (b) of his proposal as submitted in your 23. This Government has no means of controlling such transshipments or arrivals in the Philippines and the Philippine Government has no executive power to take such action. Legislative action in the Philippines would be required to set up the necessary controls, and the Philippine Assembly will not meet again until October 1936. It may be possible later for the Philippine Government to establish some means of controlling arrivals of Japanese goods which have been transshipped. Until some such alternative means of control can be established, however, it is essential that no change be made in the original agreement with respect to the inclusion of transshipped goods in the total amount of imports from Japan; the removal of all control would create new and perhaps insuperable obstacles to the satisfactory operation of the agreement. This Government is of the opinion that general knowledge by the trade that the agreement will continue to cover transshipments will prevent or hold to inconsequential volume such transshipments since this provision removes any advantage which might be gained by rehandling goods in an intermediate port.
- (5)
- To impress upon Kurusu the importance of Japanese rayon shipments to the Philippines in relation to the working of the cotton textile agreement. If the Japanese textile exporters refuse to negotiate any agreement on rayon, then at least it should be made clear [Page 836] to them that their own policy with respect to shipments of rayon goods to the Philippines will be a very important factor in determining whether or not the cotton textile agreement is to work satisfactorily and in determining the attitude of American and Philippine interests with respect to the policy of the Philippine Government regarding textile imports.
- (6)
- To inform the Japanese Government that in agreeing to this adjustment of the original agreement, this Government will adhere strictly to its stated intention to take no initiative toward securing an increase in the Philippine tariff rates on cotton piece goods, and that, as in the case of the original agreement, the agreement as modified implies in no way any limitation upon the full liberty of action of the Philippine Government or upon the freedom of this Government to consider without prejudice any action taken by the Philippine Government.
The Japanese Embassy here has been informed by Kurusu that representatives of the American Embassy have asserted that negotiations on trade matters will in the future be handled through the Embassy in Tokyo. To avoid confusion, please assure Kurusu (in conformity with Department’s No. 12, January 29) that it is not the intention of the Department to transfer to Tokyo general or detailed negotiations in this field. In view of the advanced stage of your negotiations with Kurusu on the present problem, however, it is considered wise for you to arrange the details of a final adjustment.