893.51/2256: Telegram
The Ambassador in France (Wallace) to the Acting Secretary of State
[Received 4.20 p.m.]
679. Our 649, June 6, 11 p.m.9 From Marshall. The following at the request of Lamont for the Department and American group. He thinks the views expressed in the note of French Foreign Office are in substantial accord with the ideas which the American group have in mind. He expresses it as his personal opinion that the explanatory phrases offered at the end of the note are not unwise in defining more clearly the nature of the support afforded by the respective Governments and sees no reason why they should not be accepted. The agreement adopted provides that the consortium is to deal particularly with those projects which are to bear in effect the guarantee of the Chinese Government or any Province or Department of the Chinese Government which at the same time are subject to a public issue and does not contemplate “the limitation of the industrial activities of private persons or of financial or industrial corporations” as to initiative on the part of houses which are not members of any one of the financial groups. His understanding is that the respective Governments would neither approve or disapprove.
He points out further that the intent of the whole agreement is to secure a substantial working partnership among all the four groups and a pooling of their interests. To that end each group bound itself to do all it could to see to it that valuable concessions now in the hands of “third parties” might be upon some equitable basis, to be arranged, turned into the consortium. When this phrase was written there was especially in mind the situation with respect to the Japanese group. At that time the Japanese representatives did not know the composition of their group and at the same time it was known that various Japanese banks held important concessions. The Japanese representatives agreed to do all they could to bring these concessions within the scope of the consortium and naturally a similar undertaking was made by the other financial groups, it being embodied in the resolution.
The note alludes to the phrase “substantial progress has been made” taken from paragraph 2. He wishes to point out that it is not quite accurate in stating that such options are necessarily “excluded from the pool” rather the phrase is that such concessions or agreements “may be omitted.” The intention of this is that if [Page 447] “substantial progress” as estimated by the judgment of a majority of the consortium has been made with respect to any one undertaking, then such undertaking shall not necessarily be turned over to the consortium but if in view of the consortium “substantial progress” has not been made, then automatically such agreement shall be turned over to the consortium. He recalls that on this important point the Japanese representative at first desired that each group should be its own judge of what the phrase “substantial progress” meant in any given case, but after discussion the Japanese representative agreed with the other representatives present to leave this to the decision of a majority of the consortium as each instance arose.
Japanese representative has suggested that any banking loan in amount of three million yen or more should be considered as falling within the scope of the consortium whether it involves a public issue or not. To this he agreed personally but has promised to submit it to the other groups.
From Marshall—A reading of the note convinces me that the Minister of Foreign Affairs misunderstands the field in which it is proposed to give the consortium sole support. If it is explained that it is only in the case of Chinese and provincial Government loans or those having their guarantee that such support is given and that the contracts arising out of such loans will be open to all responsible bidders in the respective countries, I think the coast will be clear.