893.6583/35

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

No. 1348

Sir: I have the honor to refer to the Embassy’s despatch No. 1148 of March 23, 1937, with which there was transmitted a copy of the Embassy’s note of March 10, 1937, to the Foreign Office73 in regard to the vegetable oil monopoly, and to enclose for the Department’s information and consideration a copy in translation of the Foreign Office’s note73 in reply thereto of May 29, 1937.

The Department will recall that in its note to the Foreign Office of March 10, 1937, the Embassy expressed the hope that it might have a clear and concise assurance, based not only upon such treaty rights as might be applicable but upon amity and traditional good will, that the China Vegetable Oil Corporation had not been and would not be vested with any prerogatives which would constitute a monopoly or which would lead to the application of restrictions upon the legitimate trade of American citizens in China now or hereafter engaged in the purchase, sale, storage, refining, financing, testing, or transportation of oil products. The Embassy added that an assurance [Page 660]to this effect would do much to remove the deplorable uncertainty that now existed.

The Foreign Office states in its reply of May 29, 1937, that:

“… There is certainly nothing to be said to the effect that there has been violation of the essence of the treaties and of former international relationships. In summary, since the Chinese Government does not give the China Vegetable Oil Corporation any monopoly rights and at the same time does not limit the enterprises of foreign merchants, the while trade matters of price, method, and transportation are business liberties of the merchants and are not encompassed by the treaties, it is difficult to give such assurances (as you have requested) …”

This statement of the Foreign Office is somewhat ambiguous, not only in the English translation made by the Embassy but in the original Chinese text as well. The Foreign Office states that the Chinese Government does not grant any monopoly rights to the China Vegetable Oil Corporation and does not limit the enterprises of foreign merchants. The Foreign Office appears to point out, however, that matters of price, method and transportation are “business liberties” of the merchants, not encompassed by the treaties, and for this reason the Foreign Office apparently finds it difficult to give the clear and concise assurance requested by the Embassy.

The Foreign Office note is not as satisfactory as might be hoped for, but I do not see what good purpose would be served by requesting an elucidation of the ambiguous statement in question. I consider that it would be sufficient for the Embassy to address a communication to the Foreign Office, stating that the Embassy is gratified to receive the assurance of the Foreign Office that the Chinese Government does not grant any monopoly rights to the China Vegetable Oil Corporation and does not limit the enterprises of foreign merchants. Before doing so, however, I will appreciate receiving the comments of the Department on the Foreign Office note and its instructions in regard to any further action which it considers the Embassy should take in the matter.

There is also enclosed75 for the Department’s information and consideration a copy of despatch No. 458, dated June 19, 1937, from the Consul General at Hankow76 to the Embassy, with which there is transmitted a copy of a memorandum dated June 17, 1937, prepared for Mr. R. C. Mackay77 by Mr. A. E. Marker, a British subject and Hankow manager of the Arnhold Trading Company, Limited, a British concern. The memorandum, which deals with the history and aims of the China Vegetable Oil Corporation, is written from the [Page 661]viewpoint of a private exporter who is faced with the possibility that his export business will be seriously curtailed by the operations of the corporation. It is understood that a copy of the memorandum was sent by Mr. Marker to Mr. Mackay before the latter’s departure from China for the United States. The Embassy commends the memorandum and Mr. Josselyn’s covering despatch to the careful consideration of the Department.

The Department will note that in the last paragraph of Consul General Josselyn’s despatch mentioned above he states that “if there is no truth in the report of negotiations between the China Vegetable Oil Corporation and the Import-Export Bank, I believe it might be well for the Embassy to authorize me to inform Mr. Marker to that effect in response to his inquiry”. The Embassy informed Mr. Josselyn in its instruction of July 17 that it had received no reports of any negotiations between the Import-Export Bank and the China Vegetable Oil Corporation and that he might confidentially inform Mr. Marker to that effect.

Respectfully yours,

Nelson Trusler Johnson
  1. Note not printed.
  2. Note not printed.
  3. Enclosures not printed.
  4. Paul R. Josselyn.
  5. Of the Division of Far Eastern Affairs.