894.6511/26
Memorandum of Conversation, by the Adviser on Political Relations (Hornbeck)
Messrs. Arensberg, Ruslander and Lang71 were sent to me by Mr. Charles Moser of the Department of Commerce. Mr. Moser had informed me that he had discussed with them the commercial aspects of the project under reference and he was asking them to consult me about political aspects.
Mr. Arensberg stated that he and his associates are manufacturers of steel and machines; that they are one of the largest producers of certain types of machines; and that they have done extensive business in Great Britain, including the setting up of a mill there, and in France. He said that they own at present a mill located at Wooster, Ohio, which, in their business, has been superseded and which they are not using. Japanese interests (he mentioned the Mitsuis and Mitsubishis) have come to them with a proposal that the mill be moved to [Page 504] Japan, that a new company be created there in which the stock will be held 51 percent by the Japanese and 49 percent by the owners of the mill under reference, the Japanese paying the cost of shipment to New York and taking the parts to Japan by Japanese ships. Mr. Arensberg wished to know whether the Government would prohibit or “veto” such a transaction.
I replied that, as I understood it, the sellers were to be given no cash but were to be paid in stock. Mr. Arensberg said that that was correct but that the Japanese would pay the expenses involved in moving the mill. I remarked that this would not apply as payment on the property. Mr. Arensberg assented. I asked whether, then, this would not have to be considered a credit transaction. Mr. Arensberg replied that it would: that the sellers would expect to get their compensation over a period of years from dividends on their stock. I then said that, first of all, there is no law so far as I know prohibiting such a transaction; second, the Government would not, in fact could not, either prohibit or “veto” it; but that, to be utterly frank, the Government is discouraging such transactions on a credit basis. Mr. Arensberg inquired whether the Army or the Navy would be interested and would wish to “prohibit” such a “sale”. I said that it was my understanding that the Army and the Navy were directly interested only where there was involved something in the nature of a machine or an instrument which had some special features possessing some peculiar military character. Mr. Arensberg said that the machinery which the mill under reference manufactures is not in itself of a military character nor does it produce military instruments: it comes in the field of machine tools, lathes, etc. I said that I did not think that the Army or the Navy would be interested but that if he cared to consult them there would be no reason at all why he should not do so.
Mr. Arensberg then asked whether this Department’s expression of opinion would go beyond merely saying that we neither approve nor disapprove. I said that it would go a bit beyond that: I repeated that we cite no law prohibiting, we can ourselves neither prohibit nor veto, but we cannot in good conscience do otherwise than discourager—credit transactions. I said that we had done this in a number of instances. Mr. Arensberg asked whether this applied only in the case of Japan. I replied that in any particular situation the principle would have to be considered in relation to the question of what in the opinion of the Department would be in the best interests of the United States.
Mr. Arensberg said that he thoroughly understood our position: he thanked me for having given him and his associates time and for having been frank.
Mr. Lang remarked that it was a pleasure to do business with a government where business could be done promptly; and that he [Page 505] thought that in some other countries it might have taken a month to do what he and his associates had been enabled to do in Washington this morning.
- Of Pittsburgh.↩