611B.9417/196
Memorandum by the Assistant Secretary of State (Sayre)
I had lunch today with Mr. Murchison51 and talked over with him quite informally the textile situation both with respect to Japanese imports into the Philippines and Japanese importations into the United States.
With regard to imports into the Philippines, I gave Mr. Murchison a copy of the accompanying memorandum showing the Japanese importations during April.52 As is apparent from this memorandum, the Japanese cut their direct shipments of February, 1936 (amounting to 4,504,000 square meters) in half during March; and they again cut the March shipments in half during April. As a result, for the first time during the period of the agreement (with the exception of December, 1935 and January, 1936, when the Japanese made practically no shipments), arrivals of United States cotton goods in the Philippines exceeded arrivals of Japanese cotton goods. Mr. Murchison was very pleased with these figures. He asked me whether, in consequence, he had better advise textile representatives in the Philippines to make no further move in approaching Filipino leaders with a view to securing Filipino legislation during the coming session of the Legislature to restrict Japanese shipments. I replied that I did not feel I was in a position to advise the textile groups on what action they should take; but I added that so far as I myself am concerned I had decided to follow a course of watchful waiting since it seemed likely to me that the Japanese were taking active steps to cut down their shipments of textiles so as not to exceed the quotas provided for in the Gentlemen’s Agreement.
With regard to Japanese importations into continental United States, I first told Mr. Murchison that we had been carefully weighing the comparative advantages and disadvantages of limiting Japanese imports (a) by a tariff increase and (b) by quantitative restrictions. I said that we had reached the conclusion that restriction by a tariff increase would not be as advantageous to American textile interests as a limitation by quantitative restriction, for the reason that an increase in tariff would cause considerable uncertainty in the textile business since no one could tell in advance just what the Japanese importations would be under a tariff increase. I also said that a tariff increase might not give sufficient protection to domestic textile interests since the Japanese might manage to go over the tariff wall by means of cheapened production or otherwise. Mr. Murchison [Page 892] responded that the textile industry thoroughly agreed that quantitative restriction would be far more advantageous than a tariff increase.
I then said that in view of this conclusion we had approached the Japanese to secure, if possible, a voluntary agreement on their part to restrict imports for consumption to a definite figure. I went on to say that although no definite agreement had been concluded we hoped to secure a voluntary agreement from the Japanese to restrict their imports for consumption during the year April 1, 1936 to April 1, 1937 covering bleached goods (the most competitive goods), under Section 904(b) of the Tariff Act, to a figure not to exceed imports during 1935, namely 30,000,000 square yards. With respect to printed, dyed or colored goods (coming under Section 904(c) of the Tariff Act), I explained that in order to save the face of the Japanese we were not demanding a specific undertaking but that we were urging an understanding that if Japanese imports should exceed the 1935 figures (namely some 6,000,000 square yards) we would then be free to take action at once under Section 336.
I said that I wanted to explain these matters to Mr. Murchison before the agreement was buttoned up so as to secure his reaction as representing the textile groups.
Mr. Murchison replied that he was delighted to hear of the proposed agreement. He said that we deserved the sincere thanks of the textile interests and that he felt they would thoroughly approve the agreement. At the conclusion of our discussion he became almost enthusiastic about the proposed agreement.
He suggested that if I desired, he would be glad to issue a public statement when we put out our press release endorsing the agreement and adding any particular thoughts which I would like to have added. I promised accordingly to send him our proposed press release a day or two before its release with a suggestion of what I would like to have him say.