893.61331/88: Telegram

The Secretary of State to the Ambassador in China (Johnson)

65. Your No. 138, March 26, 9 a.m., and the Department’s No. 60, March 25, 7 p.m., which apparently you had not received when your telegram was despatched.

The Department has noted the observations in the final substantive paragraph of your telegram under reference (particularly the [Page 652] statement that as the Chinese have definitely entered upon a policy of encouraging domestic agriculture and industry, it will be difficult to find persuasive ground for objecting to such a policy under present world conditions) and in reference thereto desires to amplify the statement contained in paragraph 2 of its No. 60.
Convinced that economic nationalism, which has expressed itself in the constant growth of barriers to international trade, is incompatible with the establishment of our own and world prosperity, this Government has pursued a trade policy the object of which has been and is to induce foreign governments to remove or lower restrictions [upon] an exchange of goods in international trade. We have pursued this policy in the belief that a normal expansion of foreign commerce will improve world economic conditions, raise and enrich living standards, and promote better social and political relations [among] nations. Economic nationalism, manifested through trade restrictions, all too frequently produces the opposite effect.
Our trade policy has been implemented largely through the trade agreements program, and the unconditional most-favored-nation principle which is a feature of the trade agreements negotiated by this Government has resulted in a generalization of concessions to all countries according non-discriminatory treatment to American commerce.
The policy of the Chinese Government to which you refer does not differ materially from policies of economic nationalism in some other countries and runs counter to the trade policy of this Government. An increase of 150 percent in the tax on cigarettes using a large portion of American leaf would not in effect differ from a similar increase in import duty on American leaf. The tax, an implementation of a Chinese policy of economic nationalism, would constitute a burdensome restriction upon the importation of an important American product into China.
It is suggested that you bear in mind the foregoing brief outline of our trade policy in your approaches to the Chinese authorities in regard to the proposed cigarette tax.
Please continue to keep Department informed of developments.