711.94/254020/36

Memorandum by the Chief of the Division of Far Eastern Affairs ( Hamilton ) to the Secretary of State

Mr. Secretary: There is attached a revision of the proposal which was sent to you by Mr. Morgenthau.50 (The proposal still of course needs further revision and elaboration.)

I think that the proposal is the most constructive one which I have yet seen. I have shown the proposal to all of the senior officers of FE, and all of them concur in that view.

[Page 623]

I urge that most careful consideration be given promptly to the proposal. To that end I suggest that copies of the proposal be made available to Admiral Stark and to General Marshall and that you arrange to confer with them in regard to the matter as soon as they have had an opportunity to examine the proposal.

M[axwell] M. H[amilton]
[Annex]

Draft Document Prepared in the Division of Far Eastern Affairs

Outline of Proposed Basis for Agreement Between the United States and Japan

A

On its part the Government of the United States proposes to take the following steps:

1. To reduce to a normal footing American naval forces now in Pacific waters, without of course limiting in any way the freedom of action and of decision of the Government of the United States with regard to the disposition of naval forces of the United States.

2. To negotiate a multilateral non-aggression pact with Japan, China, the British Empire, the Netherlands, Thailand and Soviet Russia.

3. To suggest to the Chinese Government and to the Japanese Government that those Governments enter into peaceful negotiations with regard to the future status of Manchuria.

4. To enter into negotiations with the British, Chinese, Dutch, Thai and Japanese Governments for the conclusion of an agreement whereunder each of the Governments would pledge itself to respect the territorial integrity of French Indochina and, in the event that there should develop a threat to the territorial integrity of Indochina, to enter into immediate consultation with a view to taking such measures as may be deemed necessary and advisable to meet the threat in question. Such agreement would provide also that each of the Governments party to the agreement would not seek or accept preferential treatment in its trade relations with Indochina and would use its influence to obtain for each of the signatories most-favored-nation treatment in trade and commerce with French Indochina.

5. To give up all extraterritorial rights in China, including rights and interests in and with regard to the International Settlements at Shanghai and Amoy, and rights under the Boxer Protocol of 1901.

To endeavor to obtain the agreement of the British Government to give up British extraterritorial rights in China, including rights in [Page 624] international settlements and in concessions and under the Boxer Protocol of 1901.

To use its influence toward causing the British Government to cede Hong Kong to China. (This provision might take the form of an undertaking to use our influence with the British Government to cause the British Government to sell Hong Kong to China, the purchase price to be loaned China by the United States.)

6. To recommend to Congress enactment of legislation to amend the Immigration Act of 1924 so as to place all peoples of all races on a quota basis.

7. To negotiate a trade agreement with Japan, giving Japan (a) most-favored-nation treatment and (b) such concessions on Japanese imports into the United States as can be mutually satifactorily arranged, including an agreement to bind raw silk on the free list.

To enter into a joint declaration between the United States and Japan with regard to commercial policy along the lines of the draft handed the Japanese Ambassador on November 15.

8. To extend to Japan a $2,000,000,000 20-year credit at 2 percent interest, to be drawn upon at the rate not to exceed $200,000,000 a year except with approval of the President of the United States.

(Note: The United States should be prepared to extend a similar credit to China.)

(Note: This provision presumably would require Congressional approval.)

9. To set up a $500,000,000 stabilization fund half supplied by Japan and half by the United States, to be used for the stabilization of the dollar-yen rate.

(Note: The United States should be prepared to act similarly in regard to China.)

(Note: This provision may require Congressional approval.)

10. To remove the freezing restrictions on Japanese funds in the United States.

B

On its part the Government of Japan proposes to take the following steps:

1.
To withdraw all military, naval, air and police forces from China (excluding Manchuria—see separate provisions) and from Indochina.
2.
To withdraw all support—military, political, economic—from any government or regime in China other than the Government of the National Republic of China with capital temporarily at Chungking.
3.
To replace with yen currency at a rate to be agreed upon among the Treasuries of China, Japan, Great Britain and the United States all Japanese military scrip, yen and local regime notes circulating in China.
4.
To give up all extraterritorial rights in China, including rights in international settlements and concessions and rights under the Boxer Protocol.
5.
To withdraw all Japanese troops from Manchuria except for a few divisions necessary as a police force, provided U. S. S. R. withdraws all her troops from the Far Eastern front except for an equivalent remainder.
6.
To sell to the United States . . . . . tons of Japanese merchant shipping, to be delivered to the United States within three months of the signing of the present agreement; also, to sell to the United States up to 50 percent of Japan’s current output of shipping, including naval and commercial ships, on a cost-plus-20-percent basis as the United States may select, it being understood that the United States will sell Japan such raw materials as it may be necessary for Japan to import for these purposes.
7.
To negotiate a multilateral non-aggression pact with the United States, China, the British Empire, the Netherlands, Thailand and Soviet Russia.
8.
To remove the freezing restrictions on American funds in Japan.

  1. Ante, p. 606.