Foreign Relations of the United States, Diplomatic Papers, 1941, The Far East, Volume IV

840.51 Frozen Credits/4442

Memorandum by the Assistant Secretary of State (Acheson)⁸⁶

[Washington,] November 22, 1941.

Present Effect of the Freezing Control in the Economic Control as Exercised Upon Japan

1. Effect upon control of imports. Japanese imports into the United States in 1940 were $106,000,000. In the first five months of 1941 they were $52,000,000. Approximately two-thirds of these imports were silk and silk products. The freezing order is our only machinery for controlling imports. If there were no freezing order, but if export controls were continued, there would undoubtedly be a resumption of imports. It seems probable that these would be chiefly silk and silk products. Probably the general level of imports would decrease, since the export controls would diminish the use of the dollars for purchases in this country. However, the Japanese might be anxious to resume silk imports, both because otherwise the market might be permanently lost through the use of substitutes and partly because it might delay the transformation of our textile equipment from silk to synthetic fibres.

2. Effect of Freezing upon export control. Prior to the application of freezing to Japan, American exports to Japan were approximately $10,000,000 per month. The largest items were scrap rubber, raw cotton, and petroleum products. Since the end of July export control has been extended over a considerable range of products. At the present time raw cotton, textile manufactures, and lumber and wood products other than pulp and paper are the chief items not under export control. However, animal and vegetable food products, other than oils and fats, while under export control, may be exported by reason of the existence of general licenses to all destinations, except from the Philippines. It is the imposition of freezing control which prevents these exports to Japan and Japanese-occupied China. Of course, it would be possible to revoke the general licenses and exercise the control through export control rather than through freezing.

3. Export control in its effect on Japanese trade with other areas. The Japanese oil trade with the Netherlands East Indies was financed largely through the use of dollars. The freezing control has been a factor in stopping this trade. The freezing control also has been a factor in stopping, or greatly limiting, Japanese trade with the other American Republics, since here again payments were made through dollars.

4. Effect of freezing control upon Japanese assets in the United States. The control has immobilized Japanese deposits in the United States. If it did not exist, presumably a large part of the deposits would be withdrawn. In Japan American deposits are immobilized not merely through freezing control, but through pre-existing exchange control.

5. Effect upon Chinese stabilization. At the present time the American freezing control is one of the chief instruments—if not the chief instrument—in the attempt to stabilize the Chinese currency and to control imports and exports through Shanghai. If the freezing control did not exist in respect to Japanese assets, these efforts would be made immeasurably more difficult.

Dean Acheson

86. Noted by the Secretary of State.