765.94/92: Telegram

The Ambassador in Japan ( Grew ) to the Secretary of State

404, 1. We obtained from a confidential and trustworthy source copies of drafts of various agreements now under negotiation between Japan and Manchukuo on the one hand and Italy on the other.6 These projected agreements are:

(a)
Treaty of Commerce and Navigation between Italy and Manchukuo supplemented by
(b)
Barter arrangements between Italy, Japan-Manchuria.
(c)
Arrangement for exchange clearance.
(d)
Protocol of signature.

These drafts were prepared by Japan–Manchuria and were presumably presented to the Italian commercial mission as a basis for discussion. We do not know what changes have been agreed upon. According to the most recent press reports, the chairman of the mission returned to Hsinking on June 21 to propose certain textual changes in the agreed upon drafts, and he is to return to Tokyo for further discussions, after which the agreements are to be signed.

2. Draft (a) above substantially follows the standard form for treaties of commerce and navigation. Among the points which might be specially noted are:

(a)
There is no reference to extraterritorial privileges of Italian nationals in Manchuria. Access to courts is guaranteed.
(b)
Unconditional most-favored-nation treatment in respect of imports is provided, but exemption from that provision of special privileges accorded by either party to an adjoining state, special privileges arising out of any customs union, and special privileges accorded to colonies and possessions is stipulated.
(c)
“An equitable share” is guaranteed in the laying down of import and export quotas.

3. Draft (b) provides that all commercial exchanges between Japan and Italy and Manchuria and Italy are to be regulated by the agreement, which is to run for a period of 1 year, subject to extension for a further period of 1 year. The draft contemplates a balancing of trade between Japan–Manchukuo and Italy, and requires to that end [Page 454] compilation of exports by categories from each party to the other. A statistical summary attached to draft (b) indicates that Japan–Manchuria were prepared to accept Italian goods to the total value of yen 34,000,000 including yen 19,000,000 for arms and munitions and yen 3,000,000 for motor vehicles, and that Japan–Manchukuo proposed exports to Italy, largely of primary and semimanufactured commodities, to the value of lira 200,000,000, as against lira 150,000,000, acceptable to Italy.

4. The other two drafts are not of exceptional interest.

5. Our informant states that the discussions included the possible purchase by Japan from Italy of airplanes to the value of 30,000,000 yen, but that this transaction has fallen through.

Please furnish paraphrase to Navy Department.

Grew
  1. Signed at Tokyo July 5.