Foreign Relations of the United States Diplomatic Papers, 1936, The Far East, Volume IV

611B.9417/146

Memorandum by Mr. Roy Veatch of the Office of the Economic Adviser of a Conversation With the Counselor of the Japanese Embassy (Yoshizawa)

[Washington,] March 23, 1936.

Imports Into the United States

Mr. Yoshizawa said that the Embassy had received no comment from the Foreign Office in Tokyo upon the information which had been cabled to the Foreign Office regarding the statistics of imports of Japanese cotton piece goods into the United States in January. Mr. Yoshizawa was in New York over the last week-end, however, and he found that on Friday night the importers of Japanese cotton textiles had planned a dinner to discuss their interests and he asked, therefore, if he might attend and discuss the matter with them. They welcomed him and he talked at some length with this group, which included two representatives from each of the important import firms.

At this dinner Mr. Yoshizawa attempted to explain carefully the attitude of the Department of State and the concern of the Department over the pressure which would be brought upon the American Government to take restrictive action as a result of heavy importations of cotton piece goods from Japan. He urged upon the importers, therefore, the desirability of not importing “in a rush” and he explained to them the fact that the Japanese Government had given assurances to this Government (he commented that they were informal but, nevertheless, assurances) that it would be unlikely that imports of Japanese cotton piece goods should again be as high as they were during the first months of last year. (Mr. Yoshizawa used practically these exact words and left no doubt but that the interpretation of the assurances expressed by the Ambassador to Mr. Sayre on December 21⁴⁰ were interpreted by the Japanese Embassy in the same way that they have been interpreted in the Department.)

Mr. Yoshizawa said that he would be very glad to send another cable to the Foreign Office stating that this Department was feeling the pressure of the domestic textile interests as a result of the publication of the January import statistics. It was agreed, however, that it probably would be better to withhold such a cable until after the Ambassador calls upon Mr. Sayre.

Philippine Textile Agreement

Mr. Yoshizawa said that the Embassy had received several days ago a reply from the Foreign Office discussing the memorandum of conversation which Mr. Sayre had proposed for initialing by the Ambassador and himself. This reply from Tokyo had raised a number of questions regarding which Mr. Yoshizawa had then sent a further cable. Mr. Yoshizawa now had the final comment of his Government upon this matter and wished to place it before Mr. Veatch so that the Department might have an opportunity to discuss it before the Ambassador and Mr. Sayre should go into the matter again.

The Foreign Office felt that there had been some misunderstanding between the American Embassy in Tokyo and the Department of State because the Foreign Office had the impression that the discussions had not reached a stage in which a memorandum of agreement could be initialed. The Foreign Office had succeeded in securing the agreement of the Japanese exporters to a limitation of imports into the Philippines during the six month period ending July 31, 1936, to a total of 15,000,000 square meters, but this agreement was on the condition that the American Government would do something regarding the imports into the Philippines from Hong Kong and that the 4,000,000 square meters which they would sacrifice by accepting such limitation should be added to their quota for the second year of the agreement. The Foreign Office had passed on to the Exporters Association the American proposal that the 4,000,000 square meters be sacrificed but it had received no definite response from the Association. He might say, however, (and I took this statement down almost verbatim) that the Foreign Office understands that the Exporters Association might be agreeable to the American suggestion that the 4,000,000 square meters should not be transferred to the quota for the second year if the whole agreement can be carried out satisfactorily, particularly if transshipments from Hong Kong can be dealt with satisfactorily. The Japanese Government and the exporters are making an effort to satisfy the “requirements” of the American position and they feel that the American Government should try to do something to meet the difficulties Japanese exporters are experiencing because of the transshipment problem.

In discussing again the draft memorandum of conversation which Mr. Sayre had handed to the Japanese Ambassador and which had been transmitted to Tokyo, Mr. Yoshizawa said that, of course, at that time neither the Department of State nor the Japanese Embassy here knew that the question of the 4,000,000 square meters and the question of transshipments were interdependent. This remark emphasized the point that the Japanese exporters have made this direct suggestion although no formal proposal of this sort has yet been presented to this Government by the Embassy. The Embassy appears to be informed of this position but not instructed to present the proposal in so many words.

Mr. Veatch asked if Mr. Yoshizawa had secured any information regarding the effect of the working of the agreement upon the wholesale and retail textile trade in the Philippines. Mr. Yoshizawa replied that he did have information on this point. The Exporters Association had pointed out that in the course of the natural working out of the agreement importers in the Philippines having direct connection with Japanese exporters had been “benefited.” The Exporters Association allots quotas to the exporters and exports cannot be made without permits secured from the Association. Naturally, therefore, importers in the Philippines who have established direct connections with the exporters in Japan holding these permits have been the first ones to secure goods—thus Mitsui, Mitsubishi and a few other large firms handle a considerable part of the business with the Philippines directly with their own representatives. The Exporters Association stressed the fact, however, that one or two Chinese firms with headquarters in Osaka and Kobe have been given export permits. Mr. Yoshizawa stressed the fact that it would not be correct to say that Chinese merchants have been deprived of Japanese goods “altogether”. He recognized that probably many Chinese dealers had found it impossible to secure cotton textiles directly from Japan but this was not the result of any deliberate attempt on the part of the exporters to discriminate against them. Even small Japanese traders in the Philippines who do not have direct connections with exporters have been “complaining” and now are probably looking for chances themselves to import goods from Hong Kong. When asked for his opinion, Mr. Yoshizawa said that he did suppose that the natural working out of limitation of shipments under the agreement probably was an important reason for the growing demand of Chinese importers for Japanese goods in Hong Kong.

During the discussion Mr. Yoshizawa brought out one point which serves to clarify the reason for the strong interest of Japanese exporters to the Philippines in cutting off the trade from Hong Kong. Although he did not have official information from the Japanese Exporters Association, he said that he understood that exporters had to pay the Association 4 sen, 5 rin per square meter for permits to export to the Philippines. (This amounts to about 1⅓ cents per square meter and if Mr. Yoshizawa is correct in this figure it would represent an important item in the exporters’ calculations.) As a result, the exporters are particularly concerned about market conditions in the Philippines and they are irritated when their attempts to raise prices in the Philippines are defeated or endangered by the importation of Japanese goods from Hong Kong at lower prices.

Mr. Yoshizawa said that he did not wish to say this officially or to make the statement to Mr. Sayre, but he thought it might be helpful to be perfectly frank and to say to Mr. Veatch that the Japanese Government was having considerable difficulty in getting the exporters to be reasonable about the agreement since they have been calculating that they would be able to sell as much as 90,000,000 square meters to the Philippines in one year (rather than 90,000,000 square meters in two years as provided by the agreement) if the normal trends of the trade had continued uninterrupted. Hence, now that transshipments via Hong Kong have become an important factor and one which the exporters feel they cannot control in any way, many of them are inclined to counsel letting the agreement go into the discard, taking their chances without voluntary restriction. Mr. Yoshizawa then said that, of course, his Government joined with this Government in a sincere desire to avoid this eventuality. Mr. Yoshizawa himself had been greatly relieved when the agreement had been initialed last October because he thought the matter was then settled. It was very unfortunate that the agreement had not worked well. He felt that it was neither the fault of this Government nor of his Government nor of the Japanese exporters. The original difficulty was a lack of understanding of Philippine statistics and now this difficulty with transshipments, which he was bound to admit, appeared insoluble.

40. See memorandum of December 21, 1935, Foreign Relations, 1935, vol. iii, p. 1037.