Memorandum by the Adviser on Political Relations (Hornbeck) of a Conversation With the President of the Export-Import Bank (Pierson)

Mr. Pierson and Mr. Hornbeck met in Judge Moore’s6 office in response to a call by Judge Moore for a conference which was also to have been attended by Judge Moore and Mr. Hackworth,7 who were called elsewhere at the moment.

Two matters were discussed.

1. Mr. Hornbeck brought up the question of possible assistance by the Bank toward sale of trucks to China. Reference was made to conversations held in May in consequence of which Mr. Hamilton had recorded in reference to a proposal involving sale by the Chrysler Corporation of approximately one thousand trucks (see Mr. Hamilton’s memorandum of May 218) that “After consideration, FE, EA and PA/H9 recommend that the Department’s attitude be that, should the Bank consider the proposition to be a sound one from a business point of view, we do not wish to interpose objection.”

Mr. Pierson said that he had talked as late as yesterday with a representative of the Chrysler Corporation and had given no intimation that the Bank might be in a position to give assistance.

Mr. Hornbeck said that there has been developing an increasing feeling that, from the point of view of the general interests of the United States, it would be undesirable that China be defeated by Japan, and, hence, a tendency to feel that effort should be made toward giving China assistance when, where and as legitimate methods [Page 539] may be available. Mr. Pierson said that he had long since had that view. Mr. Hornbeck said that in some quarters the question of “neutrality” is raised, but that, in his opinion, our whole course thus far in relation to the Chinese-Japanese hostilities has been based on the theory that, “war” not having been declared and the “Neutrality Act” not having been put into operation, there exists no question of neutrals and belligerents and we are entitled to carry on with “business as usual” under limitations of political expediency and appropriateness rather than limitations which would apply in international law if we admitted or affirmed that the Chinese-Japanese hostilities constitute “war”. Mr. Pierson made the comment that on the whole the course thus far has been guided and shaped by the fact that no country has declared, affirmed or admitted that these hostilities constitute “war”. He thought that we should plan our course with a view to our future security.

Mr. Pierson and Mr. Hornbeck were both of the opinion that it would be lawful and legitimate and would serve a useful purpose for the Bank to facilitate sale of trucks, etc.; also, of the opinion that sale and purchase in not too large lots would be the most practicable way of going about the matter.

2. Mr. Pierson said that the Chinese Ambassador had come to him recently with an approach on the subject of wheat and cotton credit: The Ambassador had said that China, due to hostilities, floods, etc., was looking forward to a hard winter and would need food and clothing. Mr. Hornbeck interjected an expression of doubt whether the Chinese Government would want wheat and cotton for purpose of consumption: Whether they did not have in mind selling what they might procure of those commodities toward raising cash with which to purchase arms and munitions. Mr. Pierson said that this possibility had also occurred to him. He continued, however, to the effect that he had replied to the Ambassador that we could hardly consider the question of the wheat and cotton but we might give consideration to a question of flour and cloth.

There followed some discussion, in the course of which Mr. Pierson raised the question whether the old wheat and cotton credit ($50,000,000, of which $17,000,000 were used) might not be revised: By that procedure it might be possible to avoid certain types of adverse criticism and to simplify the consideration which would need to be given to the question of security. Mr. Hornbeck said that it had been his understanding that the old credit transaction had been completely closed. Mr. Pierson said that such had been the understanding,—but he seemed to think that it might be possible to re-open.—There followed some discussion of the point that, if we wish to help China in pursuance of a political objective of our own, the balance between [Page 540] the political and the economic aspects of whatever financial transaction with China may be under consideration must necessarily shift somewhat, with primary emphasis on the political rather than on the economic aspects (objectives and methods) of the matter.

S[tanley] K. H[ornbeck]
  1. R. Walton Moore, Counselor of the Department of State.
  2. Green H. Hackworth, Legal Adviser of the Department of State.
  3. Not found in Department files.
  4. Symbols used in the Department. PA/H stands for Adviser on Political Relations, Hornbeck; EA, Adviser on International Economic Affairs; and FE, Division of Far Eastern Affairs.