693.002/1125: Telegram

The Consul General at Shanghai (Lockhart) to the Secretary of State

1380. My 1142, August 23, 9 a.m.

In the course of a conversation with my Japanese colleague a few days ago I inquired whether funds for administrative purposes were still being withheld from the Inspectorate General and was informed that they were. A further discussion revealed that a compromise of the pending issue may be arranged by which a Japanese will serve as Acting Commissioner after the retirement of the present Commissioner; that in principle the Japanese have no objection to a British Commissioner, but that they wish a Deputy Commissioner who will function as Acting Commissioner in the absence of the Commissioner. (The effect of this might well be the postponement of the appointment of a Commissioner for an indefinite period.)
A subsequent discussion which I had with Sir Frederick Maze led me to believe that he is disposed to accept this solution as he believes it the best that can be had rather than risk the complete impairment of the Inspectorate General because of the continued withholding of operating funds and to avoid endless controversies in the Shanghai customhouse to the detriment and inconvenience of the public. Confidentially, I gained a clear impression that Sir Frederick is much more interested in what the attitude of the Chungking authorities could be to a compromise such as proposed than he is in appointing a Briton or other non-Japanese as Commissioner. He fears an unfavorable reaction in Chungking but personally feels that a compromise settlement can scarcely be avoided. He repeatedly emphasized that to appoint a Japanese even as Commissioner would violate no administrative procedure in the customs as there have been Japanese Commissioners appointed elsewhere in occupied areas. There is at present an acting Japanese Commissioner at Tsingtau. As proof of this Japanese pressure, which Sir Frederick pointed out he could not carry on indefinitely, he stated that up to this time he has appointed only two Japanese Commissioners out of 16 posts in occupied areas. He emphasized that the British and American Governments [Page 816] should assist in preserving the integrity of the customs by seeking to have the Inspectorate quota funds restored rather than to oppose the appointment of a Japanese Commissioner (his written views on the controversy have not made this distinction) and that in case he is by force of circumstances compelled to make a concession to the Japanese he would like sympathetic understanding in Chungking to which it has been asserted he believes the American Government could contribute something through Ambassador Gauss. I gave Sir Frederick particulars along this line. I believe that he will settle the controversy on the basis described in paragraph 1 and accept the consequences whatever they may be.

Sent to the Department, repeated to Chungking, Peiping. Code text by air to Tokyo.