Memorandum by Mr. Roy Veatch of the Office of the Economic Adviser

Conversation: Mr. Sayre
Mr. Claudius T. Murchison, President of the Cotton Textile Institute
Mr. Frank H. Hillery, President, Cotton Textile Exporters Association
Mr. Alexander Collon, Neuss-Hesslein and Company
Mr. Fox, Tariff Commission
Mr. Dooman
Mr. Veatch

Mr. Murchison, together with Mr. Hillery and Mr. Collon, representing the exporters of cotton textiles to the Philippines, called by appointment to discuss the present status of the agreement between this Government and the Japanese Government regarding control of Japanese textiles shipped to the Philippine market and the possibility of modifying or extending that agreement.

Mr. Murchison expressed the conviction of the exporters that the present voluntary control by the Japanese industry is not sufficient to protect American textiles in the Philippine market and that, therefore, the Philippine Government itself must be brought into the picture if the arrangement is to work. It was their desire, either directly or through this Government, to request the Philippine Government to establish a quota system limiting textile imports from other countries as well as Japan.

As a background for the discussion, Mr. Sayre explained present plans regarding the adjustment of trade relations with the Philippines including the appointment of a joint Philippine-American committee of experts to recommend a program for the adjustment of Philippine economy in preparation for the final termination of preferences for Philippine goods in the American market. In view of the conversations now being held with President Quezon and of the agreement between President Quezon and this Government that preferences in this market shall be terminated after a period of economic adjustment, Mr. Sayre was of the opinion that the present is not an auspicious time to request favors from the Philippine Government.

Mr. Murchison was of the opinion that the Philippine Government might institute a quota system based upon the present quota with the Japanese, action which would not result in any increase in price, and which the Philippine Government might not regard, therefore, as a concession requiring some return. Mr. Sayre pointed out, however, that such legislation would require the approval of the President of [Page 791] the United States, and that it would be very embarrassing to the President to be asked to approve the institution of a quota system in the Philippines in view of this Government’s strong opposition to quota systems throughout the world.

Mr. Murchison asked if it would be helpful at all to Mr. Sayre, in his discussions with President Quezon with respect to trade relations, if the textile leaders interested in the Philippine market should talk with President Quezon regarding their problem, seeking to acquaint him with their difficulties without suggesting legislation by the Philippines to establish a quota system. Mr. Sayre replied that there would not appear to be much that could be gained from discussions with President Quezon at this time but that, of course, the textile people were entirely free to approach the Filipinos at any time they desire. Mr. Murchison asked if Mr. Sayre would prefer not to be present at such discussion and Mr. Sayre replied that he would not wish to be present.

The imports into the Philippines of Japanese cotton piece goods under the terms of the existing agreement were discussed and it was agreed by all present that direct negotiations between the American industry and the Japanese industry would be most likely to achieve a desirable adjustment of the present situation and a continuation of a workable agreement beyond July 31, 1937, when the present agreement expires. It is felt that the success of the American group negotiating an agreement regarding Japanese textiles in the American market has created a favorable opportunity to transform the present governmental agreement with respect to the Philippines into a private agreement. The American industry might find it possible now to secure limitation upon the shipments of Japanese rayon to the Philippines as well as an adjustment of the amounts of Japanese cotton piece goods to be furnished that market.

In the course of the discussion Mr. Hillery said that the American exporters had not been so active recently in their opposition to Japanese goods in the Philippines because the domestic market for American textiles has been very profitable. He said, also, that, in view of the fact preferences in the Philippine market are not to be retained permanently, the American industry might well reexamine the Philippine problem with a view of deciding whether the amount of goods that might be sold there during the next few years would justify the industry in making very great effort to save that business. He was of the opinion, however, that even the present business would be worth an effort to secure a private agreement with the Japanese industry.

It was agreed that Mr. Murchison would inform Mr. Sayre regarding any decision which the industry reaches respecting initiative by the industry to secure a private agreement with the Japanese.