Foreign Relations of the United States, 1947, The Far East, Volume VI

894.60/2–2047

The Assistant Secretary of State (Hilldring) to the State–War–Navy Coordinating Committee

confidential

Washington, March 4, 1947.

Subject: Draft Directive Regarding Assured Production Capacity Levels for Japan.

There is enclosed a draft directive prepared on the basis of a policy decision unanimously approved at the forty-sixth meeting of the Far Eastern Commission on February 20, 1947, under the provisions of paragraph II, A, 1, of its terms of reference. It will be noted that this policy decision is quoted verbatim in the enclosed draft directive.

It is requested that the enclosed directive be forwarded to the Joint Chiefs of Staff for transmission to General MacArthur⁴⁹ for his guidance in accordance with paragraph III, 1, of the terms of reference of the Far Eastern Commission. It is assumed that if the Joint Chiefs of Staff have any question regarding the draft directive they will refer the matter to the State Department for clarification before transmitting a directive on the subject.

It is also requested that the enclosed statement of the Chinese representative to the Far Eastern Commission made before the policy decision relative to Assured Production Capacity Levels for Japan was formally approved by the Commission, and setting forth the position of his Government with regard to paragraph 5, Iron and Steel Industry, of the policy decision, be transmitted to the Supreme Commander for the Allied Powers for his information. The French representative expressed his concurrence in the Chinese statement.

The Secretary General of the Far Eastern Commission has requested that the Joint Chiefs of Staff, in transmitting the enclosed draft directive to the Supreme Commander for the Allied Powers, inform him that in adopting the policy decision relative to Assured Production Capacity Levels for Japan the Commission accepted the recommendation of the Supreme Commander that the decision not be released to the press until specific plants had been designated by the Supreme Commander, pursuant to the terms of the policy decision. The Commission would appreciate it if the Supreme Commander could inform them when in his opinion the release of this policy decision to the press would be appropriate.

It is also requested that the Supreme Commander for the Allied Powers be informed that the Australian representative pointed out that consultation with the Allied Council, as provided by the policy decision, might involve public disclosure of its contents and desired that it be understood that a Power would not be violating the Commission’s decision on publication if it raised any question connected with the policy at a meeting of the Allied Council.

J. H. Hilldring

[Annex 1]

Draft Directive Regarding Assured Production Capacity Levels for Japan

confidential

The following directive, prepared by the State Department to implement the policy adopted by the Far Eastern Commission on February 20, 1947, under the provisions of paragraph II, A, 1, of its terms of reference has been received from the State, War and Navy Departments for transmission to you for your guidance in accordance with paragraph III, 1, of those terms of reference:

“1. Interim assured production capacity levels are hereby established for each of the eight categories of Japanese industry listed below.

The Supreme Commander for the Allied Powers, upon consultation with the Allied Council for Japan in accordance with the Terms of Reference of the Allied Council for Japan, may designate for retention specific plants and establishments, associated with each category, whose aggregate production capacity does not exceed the level established for that category. Such designation should be interpreted to mean that:

a. The Supreme Commander for the Allied Powers, upon consultation with the Allied Council for Japan in accordance with, the Terms of Reference of the Allied Council for Japan, decides that operation of these plants and establishments, individually and collectively, is practical in terms of current needs for their products, and in terms of such conditioning factors as availability of raw materials, power, and labor;

b. Owners and management are assured that the particular facility will not be subject to removal under the Interim Program or subsequent disarmament or reparations programs.

“2. Machine Tool Industry

The assured production capacity level for Japan’s machine tool industry should be placed at a balanced type-size aggregate of 7,500 units annually.

“3. Arsenals, Army and Navy

No assured production capacity level should be assigned to Army and Navy arsenals.

“4. Aircraft Industry (including aircraft engines)

No assured production capacity level should be assigned to the aircraft industry.

“5. Iron and Steel Industry

The assured production capacity level for Japan’s iron and steel industry should be placed at an aggregate of 2.0 million metric tons of steel ingot, and an aggregate of 800,000 metric tons of pig iron annually.

“6. Light Metals Industry

No assured production capacity for Japan’s light metals industry should be given.

“7. Thermal Electric Power Industry

The assured production capacity level for Japan’s thermal electric power industry should be placed at an aggregate installed public utility capacity of 1.0 million kilowatts.

“8. Soda Ash, Chlorine, and Caustic Soda Industry

The assured production capacity level for Japan’s soda ash, chlorine, and caustic soda industry should be placed at 207,000 metric tons of soda ash, of which 72,000 are required to produce caustic soda, 28,000 metric tons of chlorine, and 80,000 metric tons of caustic soda annually.

“9. Sulphuric Acid Industry

The assured production capacity level for the Japanese sulphuric acid industry should be placed at 3,000,000 metric tons annually.”

[Annex 2]

Item 3—Assured Production Capacity Level for Japan

(FEC–083/2, FEC–083/3, FEC–083/4)

(Statement by the Chinese Member)

Dr. Koo presented the following formal statement:

[In his statement, not printed, Dr. Koo declared that the Chinese Government would accept the proposed directive only conditionally.]

Mr. Naggiar (French Representative) said that he desired to record his Government’s approval of the position just expressed by Dr. Koo.

General Hilldring said that he had no objection to the record containing this statement of understanding on the part of the Chinese representative. He desired to point out, however, that the subject of reparations from current production had not previously been considered by the Commission and he wanted to make it clear that the United States Government could not at this time commit itself on any proposal involving reparations from current production. Dr. Koo said that the understanding he had just recorded naturally applied only to the Chinese Government and that he simply wishes to reserve the right of the Chinese Government to raise the question at the appropriate time.

49. This was done in serial 71, March 7; the Par Eastern Commission was informed by General Hilldring on March 19.