740.00/184
The Under Secretary of State (Welles) to
President Roosevelt
Washington, May 27, 1937.
My Dear Mr. President: You will remember that in
response to an oral inquiry on the part of the Secretary of the Treasury,
communicated to him by the Financial Counselor of the British Embassy here,
Mr. Chamberlain25 sent a memorandum to the Secretary
of the Treasury about March 30 last. The original of this memorandum is in
the possession of the Secretary of the Treasury and I understand that you
have read it. In the belief that you may not have a copy in your own files,
I am enclosing a copy thereof in the event that you want to refer to it.
The Secretary of State believes that the reply to be made by this Government
to Mr. Chamberlain’s memorandum should be in the form of an informal
memorandum to be handed to the British Ambassador here with the request that
the latter see that it is communicated to Mr. Chamberlain.
Before Secretary Hull left the Department last week, he went over the general
outline of our reply which has now been placed in final form and which I
submit herewith for your approval. I have gone over it personally with the
Secretary of the Treasury who tells me that he would prefer not to make any
observations with regard thereto because of his feeling that the matters
discussed in the suggested memorandum are outside of the scope of his
jurisdiction. He does feel, however, that the reply should be made in the
manner indicated.
I shall appreciate it if you will let me know whether the suggested reply
meets with your approval and in that event, I shall hand it at once to the
British Ambassador for transmission to Mr. Chamberlain.
Believe me [etc.]
[Enclosure 1]
Memorandum From the British Chancellor of the
Exchequer (Chamberlain) to the Secretary
of the Treasury (Morgenthau)
The Chancellor of the Exchequer has received Mr. Morgenthau’s important
message with the greatest interest. He has discussed it
[Page 99]
with the Prime Minister and the Foreign
Secretary and wishes to say how warmly they all three appreciate this
evidence of Mr. Morgenthau’s and—as they understand—the President’s
earnest desire to find some way in which the United States—possibly in
conjunction with the United Kingdom—could help in preventing the
outbreak of another war. Beset as they are with the difficulties and
risks inherent in the present political situation in Europe, the
Chancellor and his colleagues have given their most anxious
consideration to this message.
In order to arrive at a proper appreciation of the possibilities of
averting war it is necessary first to consider where the menace lies,
and what are the causes which keep it alive. These causes are both
political and economic and it is sometimes difficult to disentangle them
from one another. But Mr. Morgenthau is undoubtedly right in saying that
the needs of armament programmes are responsible for a good deal of the
economic troubles in Europe and those programmes are in turn the result
of political considerations.
The main source of the fears of war in Europe is to be found in Germany.
No other country, not Italy, since she has her hands full with the task
of consolidating her Abyssinian conquest,26 not Russia with all her military
preparations, certainly not France, England or any of the smaller
Powers, is for a moment credited with any aggressive designs. But the
fierce propaganda against other nations continually carried on by the
German Press and wireless under the instructions of Dr. Goebbels, the
intensity and persistence of German military preparations, together with
the many acts of the German Government in violation of treaties,
cynically justified on the ground that unilateral action was the
quickest way of getting what they Wanted, have inspired all her
neighbours with a profound uneasiness. Even these islands which could be
reached in less than an hour from German territory by an air force
equipped with hundreds of tons of bombs cannot be exempt from
anxiety.
The motive for this aggressiveness on the part of Germany appears to
arise from her desire to make herself so strong that no one will venture
to withstand whatever demands she may make whether for European or
colonial territory.
With this intention in her heart she is not likely to agree to any
disarmament which would defeat her purpose. The only consideration which
would influence her to a contrary decision would be the conviction that
her efforts to secure superiority of force were doomed to failure by
reason of the superior force which would meet her if she attempted
aggression.
[Page 100]
It is because of the belief that British forces would be available
against German aggression that British rearmament plans have been
welcomed by so many nations in Europe with a sigh of relief, and if they
still feel anxious, their anxiety arises from their doubts whether this
country’s rearmament will be adequate or will be completed in time to
act as a deterrent to German ambitions.
This being the situation in Europe as His Majesty’s Government see it,
they have no doubt whatever that the greatest single contribution which
the United States could make at the present moment to the preservation
of world peace would be the amendment of the existing neutrality
legislation.27 Under this legislation an embargo
would be imposed on the export from the United States of arms and
munitions, irrespective of whether a country is an aggressor or the
victim of an aggression. It is obvious that the existing neutrality law
and, a fortiori, any extension of it so as to include raw materials,
suits the requirements of a country contemplating an aggression, which
can and would lay up large stores of war materials with the knowledge
that its intended victim will, when the time comes, be precluded from
obtaining supplies in one of the greatest world markets. The legislation
in its present form constitutes an indirect but potent encouragement to
aggression, and it is earnestly hoped that some way may be found of
leaving sufficient discretion with the Executive to deal with each case
on its merits. Mr. Chamberlain realizes that this question is, apart
from its international aspect, a matter of domestic controversy in the
United States, and that it may well be impossible for the U. S. A.
Government to take such a step even if they desired it, but in view of
Mr. Morgenthau’s request for the Chancellor’s views he has thought that
the U. S. A. Goverment would wish to have them expressed without
reserve.
There is however another aspect of the same question. Japan in the Far
East is another Power with far-reaching ambitions which affect the
interests of this country in that region, not with the same intensity as
those which touch her very existence, but in highly important respects.
The strain upon our resources is therefore seriously aggravated by the
necessity of providing for the protection of our Far Eastern and Pacific
interests, especially as the most favourable moment for any enterprise
in that region injurious to our position there would be precisely when
we were engaged in hostilities in Europe. The conclusion of the recent
German-Japanese agreement28 is an indication, if one were needed, that
if we were seriously involved in Europe we could not count even on the
neutrality of Japan. Anything therefore which would tend to stabilise
the position in the Far
[Page 101]
East
would pro tanto ease our position there and
safeguard us against added embarrassment in the event of trouble in
Europe.
The advent of the new Government in Japan may herald a change of
attitude, and there are other signs that the Japanese may realise that
the recent trend of their policy has not been to their advantage, and
that they are contemplating a change in the direction of better
co-operation in the Far East and with the Powers which have great
interests there. We would therefore welcome an exchange of views on the
possibility of taking this opportunity to try to put relations between
the U. S. A., Japan and Great Britain on a footing that would ensure
harmonious co-operation for the protection and development of their
respective interests.
Although Mr. Chamberlain believes it to be true that the political
ambitions of Germany lie at the root of the economic difficulties in
Europe, he is by no means blind to the advisability of trying by all
practicable means to ease the economic situation, and in various
directions His Majesty’s Government is now engaged in exploring the
possibilities of finding some relief. The conclusion of a commercial
agreement with the U. S. A. Government would in the opinion of His
Majesty’s Government have far-reaching effects both by its practical
advantages to the two countries and by the example it would set to
others. Furthermore, the State Department will by now have been informed
in confidence by H. M. Ambassador of a step which His Majesty’s
Government contemplate taking in concert with the French Government for
the purpose of exploring the possibility of securing a relaxation of
quotas and other restrictions on international trade. It is proposed to
invite the Belgian Prime Minister to undertake for this purpose
preliminary investigations in various European capitals, and possibly
also in the United States.29 M. van Zeeland has
expressed his willingness to accept this mission, if invited, and would
propose in the first instance to ask M. Frère, the Belgian economist, to
make the first unofficial enquiries.
In connection with economic questions, there is a further matter that
should be mentioned. Dr. Schacht last autumn had discussions with French
Ministers on a number of topics and has more recently exchanged views
with Sir F. Leith-Ross. The subject matter of these conversations (and
so far as His Majesty’s Government are concerned, the fact that the
discussions have taken place at all) have been and are for the present
to be kept secret. It is possible that these conversations may lead to
more formal contacts with the German Government through the normal
channels. This question is still under careful consideration by His
Majesty’s Government, and if no progress has been made up to date, it is
because the matters raised by
[Page 102]
Dr. Schacht have concerned not so much purely economic matters, with
which of course he is fully qualified to deal, but rather matters of
wider political scope, more particularly the retrocession of the
ex-German colonies, which have necessarily wide ramifications.
Mr. Chamberlain hopes that this frank exposition made in response to Mr.
Morgenthau’s message may prove helpful in clarifying the position and
showing how it is regarded by His Majesty’s Government. He earnestly
trusts that some form of collaboration may be found possible between our
two countries since he is profoundly convinced that almost any action
common to them both would go far to restore confidence to the world and
avert the menace which now threatens it.
[Enclosure 2]
Informal Memorandum From the Department of State to the British
Embassy30
The message recently transmitted by the Chancellor of the Exchequer to
the Secretary of the Treasury has been read with interest. The
confidence shown by Mr. Chamberlain in thus communicating his appraisal
of the international outlook as seen by the British Government and his
observations in regard to the bearing of various policies of this
country upon that situation are greatly appreciated.
Deeply concerned over the absence of a trustworthy basis in international
relations and the presence of a constant menace to peace, this
Government has been doing its utmost to formulate and to bring about
effective application of a program which might serve to bring countries
together on a more satisfactory basis than that which now obtains. If
this Government emphasizes somewhat more than does Mr. Chamberlain the
economic aspect of the matters which he discusses, it does so because it
genuinely believes that if trade relations between nations can be
broadened on lines and under conditions where it serves to advance
economic welfare, existing political tensions would be thereby
eased.
We therefore welcome the affirmation of Mr. Chamberlain that, although he
believes that certain political ambitions lie at the root of the
economic difficulties in Europe, he recognizes the advisability of
trying all practicable means to ease the economic position. We realize
that because of the intertwining of economic and political aspects of
the present-day situation the British Government feels that it must at
all stages keep its actions in the two fields closely related to each
other.
This Government welcomes and of course wholly agrees with Mr.
Chamberlain’s statement as regards the far-reaching effects that would
[Page 103]
follow the conclusion of a
commercial agreement between the United States and the United Kingdom.
In its reply to the British Government’s memorandum of April 13,31 the Government
of the United States gave full indication of its willingness to examine
every feasible possibility of arriving at satisfactory terms for such an
agreement. This Government believes that it is wholly within the range
of practical possibilities to negotiate a comprehensive trade agreement
between the two countries of such a character as would have a most
beneficial effect upon Anglo-American trade and would, at the same time,
serve as a model of the type of contractual arrangements among nations
that can and will make for stable and prosperous trade conditions. This
Government is convinced that the memorandum transmitted by it to the
British Government on May 1832 provides a fair and feasible basis for such an
agreement.
In this general field we see an opportunity for the two Governments to
work together without delay in making a constructive move toward world
peace, and nothing is of more paramount urgency at this stage.
With regard to the situation in the Far East, we concur in the opinion
that orderly stability is desirable and we believe that measures which
may be expected to contribute toward ensuring harmonious cooperation for
the protection and development of the interests of all the powers
concerned in that area should be sought, and, when and where discovered,
be given support.
There are various matters in and with regard to the Far East in relation
to which rights and obligations of the United States and those of Great
Britain are alike; also, various matters in relation to which the
interests, concerns and objectives of the two countries have many
aspects in common. The principles of policy of the two countries are
expressed in the Washington Conference treaties,33 most of which treaties we regard as being
still legally in effect. One of the most important of those principles
is that of equality of commercial opportunity. That principle has always
had and continues to have this Government’s hearty support.
In the event of resort by any country or countries to measures of
aggression in the Far East, we would expect to endeavor to afford within
the limits of our general policy appropriate protection to our
legitimate interests, but we are not, as we assume the British
Government would not be, in position to state in advance what methods of
protection this country would employ. It is the traditional policy of
this country not to enter into those types of agreement which constitute
or which suggest alliance. We feel that the governments
[Page 104]
principally interested in the Far East
should endeavor constantly to exercise a wholesome and restraining
influence toward conserving and safeguarding the rights and interests of
all concerned, and toward preventing friction and development of
tensions. We believe that consultation between and among the powers most
interested, followed by procedure on parallel lines and concurrently,
tends to promote the effectiveness of such efforts. As regards
impairments or threatened impairments in the Far East of common or
similar interests of the United States and of Great Britain, we shall
continue earnestly to desire that there may be found satisfactory means
for collaboration as in the past between our two Governments.
We note the statement that in the opinion of the British Government there
are signs that Japan may realize that the recent trend of its policy has
not been to its advantage and that Japan is contemplating a change in
the direction of better cooperation with her neighbors in the Far East
and with the powers which have great interests there. It appears to us
that developments within and among the principal countries of the Far
East are producing a trend toward or favorable to stabilization of the
general situation there. We feel that with regard to Japan and China
there are now actively at work within and between those two countries
forces operating in the direction of peace. We are not oblivious to the
fact that developments in the Far East may in due course call for the
making of new political agreements, but we are of the opinion that if
and when the time comes to proceed with the negotiation of such new
agreements, the principles upon which they should advantageously be
based could not deviate far from those to which the interested powers
are already committed in treaties at present in existence.
During recent years the United States has faced—as has the British
Empire—serious problems arising out of the sudden and marked expansion
of Japanese trade. It has been our aim and effort to devise means
whereby the interests of our own producers may be safeguarded and at the
same time there may be avoided, as far as possible, restraint upon
natural and reciprocally beneficial trade. We have made substantial
progress toward solving in a mutually satisfactory manner some of the
problems involved, and we are currently devoting constant attention to
that subject. It is our firm belief that progressive adjustment of trade
problems in the Far East, and elsewhere, would contribute to an
improvement in political relations in that region.
In general, it is our belief that the powers can in all probability best
contribute toward bringing about conditions of stability and security in
the Far East by endeavoring to cultivate good will and confidence by
promoting healthy trade relations and while closely observing the trend
of events which from recent developments may
[Page 105]
indicate that the peoples of the Far East are
approaching a state of mind wherein those peoples will themselves be
able to perceive that pathways of cooperation are the pathways of
advantage. As circumstances permit we shall be prepared as heretofore to
give hearty support to measures which may appear to give substantial
promise of contributing toward stabilization of the situation in that
part of the world.
In regard to the Chancellor’s observations as to the possible trends and
results of pending neutrality legislation in the United States, the
Chancellor is of course informed of the recent legislative
enactment.
It may be pointed out that the Joint Resolution of May 1, 1937 (Pub.
Res., No. 27, 75th Cong., 1st Sess.),34 does not provide for the imposition of an embargo
on exports of any commodities other than arms, ammunition, and
implements of war. This legislation does not prohibit exportation of
other commodities; it merely provides that if the President shall find
that the placing of restrictions on the export of articles from the
United States to belligerent states, et cetera, is necessary to promote
the security or preserve the peace of the United States or to protect
the lives or commerce of citizens of the United States and shall so
proclaim, it shall thereafter be unlawful to export such articles until
the American interest therein shall have been divested, i. e., until
title shall have passed to the foreign consignees. Similarly the
President is authorized to prohibit the transport of [to] belligerents by American vessels of commodities designated
by him.
The resolution gives the President considerable discretion. It allows him
to determine whether, in view of the then existing situation, these
provisions should be invoked and permits him to make exceptions as to
commerce on lakes, rivers and inland waters, and on or over lands
bordering on the United States. It also permits him to change, modify,
or revoke in whole or in part any proclamation or proclamations
previously issued by him in the given premises.
The Government of the United States is convinced that, as regards all of
the points raised in the Chancellor’s message, the crucial problem
confronting the world today relates to the guiding principles which
will, in the immediate future, underlie the basic policy and action of
the important nations in their international relations. The possibility
is clearly not precluded that the ideas of national exclusiveness and
its inevitable concomitant of international hostility and strife, may
become dominant over a sufficiently large part of the earth to engulf
the entire world in a possible succession of destructive conflicts. On
the other hand, the Government of the United States firmly believes that
an opportunity exists today for directing national policies
[Page 106]
into a channel of political
and economic cooperation, based upon a common-sense harmonization of
national interests and upon a spirit of mutual friendliness and
fair-dealing. In the achievement of this aim the Government of the
United States is prepared to collaborate in every way compatible with
its legitimate sphere of action. It is convinced that the British
Government, actuated by the same desires, is equally concerned with the
imperative need of exploring all possible avenues that may lead to the
same end.
