611.9431/115
Memorandum by Mr. Eugene H. Dooman of the Division of Far Eastern Affairs
| Conversation: | Mr. Saburo Kurusu, Japanese Ambassador to Belgium; |
| Mr. Sayre; | |
| Mr. Dooman. |
After an exchange of amenities, Mr. Kurusu stated that he had looked forward to an opportunity to meet Mr. Sayre, whose book, America Must Act, he had repeatedly read. He associated himself with Mr. Sayre in virtually all of the views expressed in that book, and he felt confident that there would be no important difference of opinion between the two with regard to international economic problems.
Mr. Kurusu went on to say that, although the economic policies of the United States and of Japan are identical, unfortunately there had occurred developments which had created in Japan a feeling that the United States was acting with less generosity toward imports from Japan than the facts seemed to warrant. He referred to the fact that the United States is plentifully endowed with natural resources and is less dependent upon outside trade than is Japan, which is obliged to import most of the raw materials necessary for industry and to export the products of its labor. It had seemed to him that it would be essential for Japan to oppose, as does the United States, the tendency towards bilateral trade balancing, for the reason that trade balancing has the effect, not of increasing trade, but of decreasing trade.
Mr. Kurusu stated that Japan was being faced on all sides with barriers designed to limit and reduce Japanese imports. He referred to the quotas established against Japanese textiles in the British colonies and to the various measures adopted for such purpose by countries in Latin America. Nevertheless, he said, those countries that were busily engaged in restricting imports from Japan are at the same time demanding of Japan that she increase her purchases from those countries. There were, Mr. Kurusu observed, several countries which enjoyed a considerable and favorable trade balance against Japan, and it was the general feeling in his country that Japan could reasonably and with warrant expect those countries to refrain from taking action to restrict imports from Japan. Mr. Kurusu remarked that the circumstances would serve to explain the dissatisfaction which had been created in Japan by the successive acts of the American Government toward curtailing imports of Japanese commodities.
[Page 898]Mr. Sayre stated that he was glad to receive from Mr. Kurusu this frank statement of views. He welcomed this opportunity to make known to Mr. Kurusu that this Government does not look with disfavor upon increased purchases by Americans of Japanese goods, and that it would, in line with its basic economic policy, welcome increased imports from Japan, provided that such increased imports do not seriously harm or endanger established American industries. This Government has strenuously opposed the tendency toward bilateral balancing, for the reason that, as Mr. Kurusu had remarked, the effect of such a policy is to reduce the volume of international trade. He cited as an example of multilateral trade the excess of exports of the United States to European countries, of European countries to Latin America, and of Latin American countries to the United States, and he showed how the trade between these three areas would be reduced if the principle of bilateral balancing were effectively carried out.
Mr. Sayre then reviewed the numerous conversations which he had had with Mr. Saito during the past two years with regard to Japanese competition. He had explained to the Japanese Ambassador that it was the fundamental policy of this Government to liberalize trade throughout the world, but that practical considerations made necessary certain exceptions to this policy; that in certain cases goods had come in from Japan in such quantities and at such low prices as to endanger the existence of established American industries; and that in such instances it had been necessary to approach the Japanese Government with a view to shipments from Japan being regulated in such manner as to relieve the pressure upon affected American industries. Where the Japanese Government had found itself unable to exercise the necessary measures of control, this Government had reluctantly imposed additional duties.
Mr. Kurusu remarked that Japan is in a difficult position. Most countries which had an unfavorable balance of trade with Japan made no effort to find markets for their products in Japan, insisting that Japan come to them and buy more of their products. Mr. Kurusu said that Japan is carrying a double burden—it is endeavoring to expand its exports, and at the same time it is making every effort to increase its purchases from those countries that are insisting upon the principle of bilateral balancing. He added that certain Latin American countries followed the practice of raising a hue and cry over Japanese competition; that merchants closely associated with government officials would rush to buy Japanese goods and restrictions would be imposed as soon as a large stock of Japanese goods had been accumulated; and that the effect of restrictions would be an immediate increase in the value of such stocks, thus giving the [Page 899] merchants an opportunity to make unwarranted profits. Mr. Kurusu added that as soon as the stocks showed signs of depletion, proposals would be made to the Japanese Government with regard to a fresh start.
Mr. Kurusu then referred to the various items of Japanese imports into the United States upon which restrictions had been imposed, and he wondered whether the American Government understood how the Japanese people as a whole had reacted to the restrictions. He stated that the amounts involved were small in most of the instances to which he referred, and that the Japanese people could not understand why they should be repeatedly called upon to forego opportunities to cut down the large amount owing to the United States on trade balance. As to cotton cloths, Mr. Kurusu stated that the amount involved is negligible when compared with Japan’s purchases of raw cotton. He said that about five-ninths of Japan’s total textile output is sold to foreign countries, and that if the restrictions that are being imposed on all sides against Japanese cotton textiles continued Japan will have no alternative but to reduce its purchases of raw cotton. He referred again to the large favorable balance of trade of the United States with Japan, and he stated that the imposition of restrictions by the United States on Japanese goods placed Japan in an awkward position when dealing with countries, with unfavorable balances of trade with Japan, which are restricting imports of Japanese goods. He stated that very frequently representations of the Japanese Government to governments of such countries were met by the rejoinder that Japan had a more serious grievance against countries like the United States.
Mr. Sayre remarked that the Japanese viewpoint with regard to recent American action on cotton cloths as presented by Mr. Kurusu did not seem to take sufficiently into account the discussions which had extended over more than a year between the Department and the Japanese Embassy before the action was finally taken. He said that he had urged Mr. Saito to persuade his Government to regulate exports to the United States of cotton cloths, and that toward the end of last year the American Government had received an assurance which had been interpreted to mean that exports to this country would be kept down to last year’s levels. Unfortunately, however, the figures for imports for consumption for the first three months of the present year were far in excess of the figures for the corresponding period of last year. Mr. Sayre then showed to Mr. Kurusu a table of statistics. Mr. Sayre went on to say that in all fairness to the Japanese he should say that the actual arrivals of cotton cloths were not much larger than they were for the corresponding period of last year, but that as the Japanese had overshipped last year there were [Page 900] in bonded warehouses substantial stocks, which were drawn upon and added to the amounts arriving from Japan. The result was that the amount of cotton cloth cleared through the customs was so great as to profoundly agitate the American textile industry. The Tariff Commission had been directed to make an investigation on the basis of Paragraph 336 of the Tariff Act to determine costs of production in the United States and in Japan, and the Tariff Commission had found that additional duties were required in order to equalize such costs of production. Before taking action on the report of the Tariff Commission, a final opportunity was given the Japanese Government to regulate shipments from Japan, and when the Japanese Government found itself unable to enter into any arrangement, this Government reluctantly increased the duties on competitive cotton cloths.
Mr. Sayre said that unfortunately in instances of this character there are available only the two alternatives either of an arrangement being concluded with the Japanese Government or higher duties. It might appear to the Japanese that a gun was being held to their heads, in fact the Japanese Ambassador had remarked in the case of cotton cloths that the American Government was issuing to the Japanese Government an ultimatum. Mr. Sayre said that such was not in fact the case. The circumstances required that some form of action be taken at once.
Mr. Sayre said that there was another case now before the American Government. There had been in recent months a large influx of snap fasteners60 from Japan, and he feared that it would be necessary that action be taken. The position taken by the Japanese Government in the cotton cloth case did not hold out much promise of the Japanese Government responding favorably to a proposal, if made, with regard to the conclusion of a gentlemen’s agreement on snap fasteners, but no decision had been taken whether or not the Japanese Government would be approached. Mr. Sayre said that there are now in the offing a considerable number of other cases which involve the possibility of further action against Japanese goods.
Mr. Kurusu stated that the procedure followed by the American Government is of such character as to accentuate the difficulties caused by Japanese competition. He stated that as soon as reports appear that there is possibility of the American Government taking cognizance of imports from Japan, the tendency of exporters in Japan and importers in the United States is to rush in a large volume of the commodities concerned, and at any price which may yield a profit, before duties are raised or before any restriction as to quantity [Page 901] has been imposed. It is his opinion that most of the damage was done before restrictive action has been taken. He had come to the conclusion that the only satisfactory method of dealing with questions of this kind would be to prevent the difficulties from actually arising, and with that purpose in mind he believed that it would be advantageous if there were set up in the United States some governmental agency whose primary function it would be to watch market prices and trends of imports from Japan, so that the business men concerned would be apprised beforehand of the possibility of Japanese imports unduly affecting the American market.
Mr. Dooman said that thought had been given on the American side to the setting up of some such body as that suggested by Mr. Kurusu, but that the weight of opinion seemed to be that the body should be non-governmental in character. He explained to Mr. Kurusu that there had been set up a few years ago an association to protect American holders of foreign bonds. It had been determined that the functions of such an association could not be properly carried out by the Government, but that the Government could give such an association its “blessing” and render it assistance in various ways. Similarly, it is thought that the American Government could properly place the information available to it at the disposal of a private agency whose function it would be to render advice to merchants engaged in trade between the United States and Japan.
Mr. Sayre remarked that before the conversation was concluded there were certain points affecting American interests which he desired to bring to the attention of Mr. Kurusu.
Mr. Sayre then explained briefly the situation with regard to the red salmon fishing industry in Alaska.61 He expressed the hope that Mr. Kurusu could see his way clear to advise his Government how this Government is concerned over future developments and hopes that the Japanese Government can enter into some arrangement which would serve to preserve the red salmon for American interests. Mr. Kurusu said that the matter lay outside the scope of the Commercial Bureau of the Foreign Office, but that he had some knowledge of the conversations which had taken place during the past few years between officials of the American and Japanese Governments. He recalled that several years ago the American Embassy, in collaboration with Japanese officials and private individuals, had formulated a certain arrangement, and Mr. Kurusu thought it a pity that the arrangement had not gone through. He said, however, that he would transmit to his Government the remarks of Mr. Sayre in this connection.
[Page 902]Mr. Sayre then referred to the recently enacted Japanese law for the control of the automobile industry.62 He said that in the gentlemen’s agreements concluded with Japan it was the intention of the American Government to assure to the Japanese a share in the American market. When the cotton rug agreement was renewed, the American Government had taken cognizance of the beneficial effects of that agreement and had voluntarily offered the Japanese an increased share of American business. He thought it important that the Japanese Government should similarly grant to American business increased participation in Japanese markets as such markets developed. He could realize that the Japanese Government would naturally try to foster a native automobile industry, but at the same time he thought it important that the Japanese Government should not restrict for all time the American automobile industry to its present share of the Japanese market, but that as the demand in Japan for automobiles increased American manufacturers should be permitted to supply a portion of that increase. Mr. Kurusu remarked that the point of view expressed by Mr. Sayre interested him very much, and that he would not fail to present it to Tokyo.
The next point presented by Mr. Sayre was the Japanese Petroleum Control Law.63 Mr. Sayre stated that it was the view of this Government that several features of that law would operate to affect adversely and inequitably American interests, and that although this Government had not thus far made any representations to the Japanese Government on a basis of the legal considerations involved he thought it necessary that the Japanese Government should realize that developments with regard to the petroleum situation in Japan were being followed by this Government attentively and with much concern. He hoped that the Japanese Government would realize that important American interests were involved and that the manner in which the controversy is dealt with by the Japanese Government will inevitably affect the thought and feelings of the American people toward Japan. Mr. Kurusu stated that he was on the whole optimistic with regard to the final outcome. He said that the foreign oil interests had stressed three desiderata: first, that they be given a guarantee that they will be permitted to operate in Japan for a specified period of time; second, that they be given a guarantee as to the quantity of petroleum products that they will be permitted to sell; and, third, that the price of gasoline be increased. Mr. Kurusu went on to say that the Japanese Government had no difficulty in meeting the first two of these points, but it was reluctant to raise the price of gasoline for the reason that the livelihood of taxicab drivers would [Page 903] be adversely affected. He understood, however, that just prior to his departure from Japan it had been decided that the price would be raised. Mr. Kurusu added that certain negotiations were in process between the foreign oil interests and certain private Japanese interests, and that he had reason to anticipate that the negotiations will be brought to a successful conclusion without any great difficulty.
As the conversation had continued for almost two hours, Mr. Sayre suggested that Mr. Kurusu accompany him to lunch.