693.001/521a: Telegram
The Secretary of State to the Ambassador in Japan (Grew)
55. Reference the Department’s 52, March 4, 3 p.m. The following is suggested as argumentation to be included in the approach to the Japanese Foreign Office suggested in the telegram under reference, in case such approach has not been made, or in a supplementary memorandum to be presented to the Foreign Office.
The Government of the United States regards the export restrictions which have been announced in North China as the most comprehensive discrimination against the United States and other foreign countries and in favor of Japan which has yet been established in North China by Japanese authorities, and as a virtual nullification in that area of the Open Door so far as import and export trade is concerned. The proposed measures would automatically increase the price of exports by a large margin in terms of foreign currencies, and probably have the effect of reducing markedly exports to foreign countries other than Japan, and pari passu of reducing imports from those countries while leaving trade between that area and Japan virtually unrestricted. During the past year the exchange value of the currencies in circulation in North China has been considerably depreciated and prices in that area have become more or less adjusted to this depreciated value; if exports are quoted suddenly in terms of a new currency whose value is maintained by exchange control at an artificially high level in terms of foreign currencies North China’s foreign trade will tend to suffer and imports to decline along with exports. Meanwhile it is clear that [Page 376] Japanese trade will not only not be damaged by the proposed restriction but be benefited by the new measures. These considerations give added force to the objection which the American Government has repeatedly advanced to institution of trade or exchange control by Japanese authorities in North China, the basis of such objection being that all trade with North China would thereby become subject to Japanese discretion and that equality of opportunity would no longer be possible.
Repeated to Chungking, Tientsin and Tsingtao.