740.00119 PW/4–1249
The Director of the Office of Far Eastern Affairs (Butterworth) to the United States Representative on the Far Eastern Commission (McCoy)
Dear General McCoy: I am writing at once to thank you for your comments1 received April 11 on our proposed Japanese reparations position. I have forwarded your memorandum to the Secretary, accompanied by a copy of this letter.
I fully understand and share your desire that our Japanese reparations position accord with the basic United States policy of settling international problems by international cooperation. As you say, it was thought some months ago when the possibility of utilizing our interim directive power to make possible the delivery of additional reparations was being considered, that opportunity might be afforded other FEC nations to express their views on the quantities of facilities to be made available from particular industries under our proposal, and that we should stand ready to alter our proposal within rather narrowly defined limits to meet their views if we might thereby increase its overall acceptability. It has now been decided, however, on the basis of the most thorough investigation and General MacArthur’s personal appraisal of the situation following receipt of the recent stabilization directive, that the United States cannot support further reparations removals from Japan,—certainly not on a scale which would have any chance of acceptance by the other FEC nations—, and that the wisest course in the circumstances is to let the reparations issue atrophy. In this connection you will be interested in the following excerpt from a memorandum of the Secretary’s conversation of April 2 with Mr. Bevin:
“…2 Since the U.S. is spending about 900 million dollars a year in Japan, MacArthur has been told to take more vigorous steps toward recovery. While reparations in themselves are not much of a drain, they are a confusing factor in the Japanese economy and we shall let them fall into oblivion …”
You will note that the only faits accomplis with which other claimant nations will be presented under our proposed position will be the rescission of the Advance Transfer directive and withdrawal of our shares proposal of November, 1947. As you will recall, these two measures were the result solely of United States initiative, responsibility and action. The rest of our position is restricted to a denial of intention to take unilateral action to make additional reparations available, and to an expression of United States policy views that Japanese resources [Page 708] should be utilized for recovery purposes to the maximum extent permitted by existing FEC decisions and that there should be no limitation on levels of Japanese peaceful productive capacity. The U.S. proposal as a whole is to be explained to representatives of the friendly FEC nations in the context of our overall Japan policies before action of any sort is taken, and full opportunity will of course be afforded for discussion of the U.S. expression of views in the FEC following your announcement of our position to the Commission and submission of this Government’s new policy proposals.
Although possibilities of the FEC nations accepting these proposals are remote, it is important that we make every effort to persuade as many nations as possible of the reasonableness of our position. It is for this purpose that the Secretary or his designee will invite representatives of the friendly FEC nations to the State Department to advise them of our position and to explain the considerations underlying that position. I am sure that I speak for the Secretary in saying that your assistance in further clarifying our position to your colleagues on the Commission after its announcement would be invaluable in minimizing opposition to it, and, possibly, in securing a growing measure of acceptance for our policy proposals.
With reference to your comments on certain details of the proposed U.S. position, you are correct in your assumption that the United States will continue to oppose reparations from current production. The statement in paragraph 5 of our proposed position that “there should be no further industrial reparations removals from Japan” is intended to cover reparations from current production as well as from existing capital equipment. The statement is also so drafted as not to infringe in any way our commitment for the removal of gold, silver and precious stones as reparations, a commitment which is subject, however, to the first charge principle on repayment of occupation costs.
I much appreciate the spirit of helpfulness which prompted you to make the comments which you have sent us, and assure you that those of us responsible for Japanese affairs within the Department of State fully share your desire that our Japan policies be at all times based on the principle of international cooperation.
Sincerely yours,