694.0031/11–1048: Telegram
The Acting Secretary of State to the Acting Political Adviser in Japan (Sebald)
389. Subj summary FEC meeting, Nov 4, 1948. Conduct Trade with Japan (FEC–273/19): Long discussion para lb (2) finally resulted Chi and USSR acceptance fol wording: “in order that Japan may participate in providing goods for international trade.” USSR introduced fol amendment para 1c which had been defeated in Steering Committee: “Insure competitive conditions in trade free of contracts and arrangements which limit access to markets or foster monopolistic control; to oppose excessive concentration of economic power; to oppose encouragement and revival of Japanese monopolies in foreign trade whether with the participation of Japanese or foreign capital.” USSR pointed out first three words his proposal covered phrase “restrict competition” which he proposed delete. US member accepted deletion phrase but could not accept changes rest para. Compromise accepted by USSR. Chi inquired if cartels, price fixing, other unfair practices which were covered by phrase “restrict competition” covered in Sov proposal. US stated was his understanding concept “restricting competition” covered by opening phrase “to insure competitive conditions”. View Chi objection para 9, vote on paper postponed.
Soviet Proposal Re Level Economic Life in Japan (FEC–320): USSR referred queries as to terminology his statement and stated Sov Del proposes [proposals] proceed from FEC policy decision Reduction of Jap Industrial War Potential. Added:
“Thus, war industry ought to include that group of facilities which was defined in that paper as ‘primary war facilities’ as well as that defined as ‘secondary war facilities’. The industries enumerated in the category of ‘war supporting industries’ should be permitted to the extent necessary for the satisfaction of peaceful non-military needs of Japan. The remaining facilities and industries may be included in the category of ‘peaceful industry’.”
NZ stated his Govt bound by Potsdam, Basic Surrender Policy and FEC–084/21. Noted (a) unless and until FEC fixes specific levels referred to FEC–084/21, task carrying out industrial disarmament Japan has not been completed, and (b) no suggestion any of these policies any limitation be imposed on development Japan’s peaceful industries. Therefore, para 1 USSR proposal unnecessary. Re first part para 2 Sov proposal, NZ questioned what was meant by “war industry”. Thought rest of para may or may not be within provisions FEC. Re Jap war industry, NZ Govt believes large proportion Jap industry was never used for peaceful production and has consistently supported policy this excess productive capacity in Jap industry should be removed from Japan as security measure and distributed as reparations. Re controls to be provided for in peace treaty, no restriction should be imposed industries which neither primary war nor secondary war facilities nor key war-supporting industries. Controls should bear only on certain key war-supporting industries. Production certain goods such as light metals, synthetic oil and synthetic rubber, which have strategic importance might have to be entirely forbidden. Production and productive capacity other key industries such as iron and steel, possibly oil refining and storage, should be limited defined levels determined after consideration Japan’s legitimate peaceful needs. Special security restrictions may be required Japan’s shipbuilding, civil aviation. NZ added subject his Govt’s view definition “war industry” appears para 2 Sov proposal in principle accords with policy long held by NZ Govt. Urged consideration Sov proposal should not interfere with prompt, urgent disposal FEC–242/32.