The Acting Political Adviser in Japan (Sebald) to the Secretary of State

No. 863

I have the honor to refer to this Mission’s despatch no. 727 of October 20, 1949,4 entitled “Transmission of Memorandum Summarizing Japan’s trade with Communist [North] China,” and to enclose a copy of a memorandum dated December 5, 1949,4 on the subject “Summary of Trade with Communist China from 1 May to 30 November 1949”. As in the case of previous memoranda submitted to the Department on this subject, the present memorandum was prepared by Colonel Ralph J. Mitchell, recently appointed Chief of the Trade Controls Section, Foreign Trade and Commerce Division, Economic and Scientific Section (ESS), General headquarters, SCAP. Colonel Mitchell is directly concerned with supervision of Occupied Japan’s trade with Communist China and with the USSR.

According to this statement, during the period under review contracts have been closed, with settlement to be made by dollar letter of credit, for shipment from Japan of commodities valued at $1,599,863.02. Of interest are the contracts providing for shipment of certain chemicals to Communist China, these being new contracts signed during November. The dollar total of all contracts represents an increase of $996,648.08, equal to 165 per cent, over the amount reported by ESS as of October 1, 1949.

Contracts for acquisition of Chinese products on an exchange of goods basis had an aggregate value of $13,634,060 as of November 30, 1949, this total showing an increase of $4,728,110, equal to 54 per cent, from the amount reported as of October 1, 1949. In addition to new contracts for soya beans, new contracts were signed during the period from October 1 to November 30 for greasy raw wool, rapeseed, green or white ramie fiber, and steamed bone meal. During November, it will be noted, that Japan received from North China a shipment of nearly 5,000 metric tons soya beans at a value of approximately $500, 000; the freighter on its return trip carried to North China $389,230 worth of such Japanese products as mild metal products, including galvanized sheets and mild sheet and plate.

In addition to the contracts listed in the enclosed memorandum, ESS has received a large number of proposals made by local traders and involving mainly durable goods of considerable variety, including [Page 1001] railway supplies and equipment, copper products, heavy machinery especially for public utilities, boiler tubes, merchant and fishing vessels, et cetera. A number of these proposals have been submitted by ESS to the Department of the Army for consideration by the concerned United States Government agencies.

Special attention is invited to paragraph 4 of the comments contained in the memorandum. Colonel Mitchell points out that:

“From the information available to us to date we may safely assume that there will be a rather direct relationship between a more liberal application of the restrictions of the 1–B list controls and the ability of trading firms to supply the raw products of Communist China to Japan under the contracts already signed as well as under contracts that may be signed later. In the case of many consumer goods not subject to restrictions or quantitative control import licenses for Communist China cannot be obtained. Durable goods for reconstruction and rehabilitation are the primary interest there and import licenses for them, it appears, will be more freely granted. By the same token it may be anticipated that the release of Communist China products will be more freely made against such purchases.”

General Headquarters is now awaiting a reply from the Department of the Army to its telegram sent to Washington on December 6, a copy of which was forwarded (as enclosure no. 2) with this Mission’s despatch no. 821 of November 26, 1949,5 entitled “Control by General Headquarters, SCAP, of Exports from Japan to Communist China, Manchuria and North Korea.” This telegram stated in part that “until now strict adherence to U.S. policy and procedures for processing requests for 1–B items have constituted effective obstacles to Japan’s entry on a competitive basis into Communist China trade. In the absence of simplified procedures as contemplated …6 considered here to be imperative that SCAP exercise broader discretionary authority on offers originating in that area, being guided, of course, by broad U.S. policy.”7

Respectfully yours,

For the Acting Political Adviser
Carl H. Boehringer

Economic Counselor
  1. Not printed.
  2. Not printed.
  3. Neither printed.
  4. Omission indicated in the source text.
  5. On December 13, in a telephone conversation with Colonel Love of the Office of the Under Secretary of Defense and with Stephen C. Brown of the Division of Chinese Affairs, Robert W. Barnett of the latter Division indicated the Department’s position was, “while continuing to prohibit 1A exports, MacArthur should, in due course, be given pretty wide discretion in handling all other trade with China, and that in general Japan should not be required to impose any greater restrictions on the export of 1B items than were imposed by her competitors (e.g., the UK).” He also expressed his feeling that the “Department would be very glad to see and give consideration to a draft telegram more or less accepting” SCAP’s proposals (693.9431/12–1349).