793.94/128551/5
The British Permanent Under Secretary of State
for Foreign Affairs (Cadogan) to
the Adviser on Political Relations (Hornbeck)38
[London,] 14 February, 1938.
My Dear Hornbeck: In Brussels, you and
Norman Davis suggested that we should try to work out an outline of
a decent settlement of the Far Eastern situation. At the time, I was
inclined to think that this was a work of supererogation. But we
have been thinking it over, and have now produced an essay on the
subject, which I should like you to see. I therefore enclose it, for
your personal information, and in the hope that, on the same purely
personal basis, you may give us your perfectly frank opinion and any
suggestions that you can think of.
I should explain that this memorandum sets out the kind of settlement
which we in the Foreign Office would consider reasonable, and which
we should like to bring about if we had a perfectly free hand to lay
down the lines of a settlement. Which we have not—as yet! It has not
been considered by the Government and must not be taken as
committing them. The Japanese will of course want far more, and
unless a great and unforeseen change of mood occurs in Japan, we
cannot expect to see a settlement on the lines sketched, unless our
two Governments were able to exercise effective pressure to secure
it. On the other hand, if the Japanese were once brought to accept
it, the advantages it would offer them might be sufficient to
produce a stable situation not requiring to be maintained by
sustained pressure of a kind beyond our ordinary capacity.
Yours sincerely,
[Enclosure]
Memorandum on Possible Peace Terms for
Communication to the United States Government
His Majesty’s Government in the United Kingdom have given
consideration to the question of the possible terms of
settlement that might be brought about through the influence of
the United States Government and of His Majesty’s Government
acting on parallel lines. Action for the restoration of peace
through the established peace machinery of the League of Nations
or through any ad hoc machinery that may
be set up for the purpose under the Pact of Paris39 or the Nine Power
Treaty must, under present world conditions, prove ineffective.
The only way, therefore, in which the influence of His
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Majesty’s Government
could effectively be brought to bear in the direction of
restoring peace would be by action taken in defence of purely
British interests. So far such action has been limited to
representations to the Japanese Government and to various
Japanese military and civil officials in China. These
representations have not been entirely ineffective but action on
these lines seems unlikely to cause Japan to abandon her present
intention of destroying the Chinese Government and setting up in
place thereof one or more puppet Governments or Administrations
that would be completely subservient to the will of Japan. Under
such a settlement it seems clear that all foreign interests
would suffer serious injury and might indeed in the course of
time find themselves excluded from China, as they have already
to a large extent been excluded from Korea and Manchuria. If,
however, representations were backed by naval forces adequate to
defend any vital British interest that might be threatened it
seems probable that the attitude of the Japanese Government
towards China would be considerably modified. The question of
possible peace terms has therefore been considered from this
angle: on the assumption that His Majesty’s Government are in a
position to enforce respect for vital British interests and thus
dictate terms of peace, what should these terms be?
- 2.
- Vital British interests in the Far East are: (1) peace
and stable political conditions, (2) the open door and
equality of opportunity, (3) the security of Hong Kong.
No. (3) might conceivably be obtained independently of
Nos. (1) and (2), but it is clear that if Nos. (1) and
(2) were obtained it would not be necessary for His
Majesty’s Government to take any special measures to
ensure the security of Hong Kong. Consequently, if His
Majesty’s Government were able to secure a peace of a
stable nature and based upon the principles of the open
door and equality of opportunity every vital British
interest would thereby be fully safeguarded and they
might hope to secure the co-operation of other Powers
having substantial interests in the Far East in the
attempt to secure such a settlement. In particular they
hope that the United States Government will also find
that all that is necessary for the protection of
American interests in the Orient is the due observance
by all parties of the Nine Power Treaty, and would
therefore be disposed to take action parallel to that of
His Majesty’s Government. Such action might consist in
representing to Japan that American (British) interests
are suffering damage through the failure of Japan to
observe the terms of Article 1 of the Nine Power Treaty
and in taking such measures as will make it evident that
the United States (United Kingdom) Government does not
intend to acquiesce in any further or continuing breach
of the terms of the Treaty. At the same time, each
Government might make
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it clear that in their view the
terms of peace, besides being fair to China, should be
fair and even generous to Japan.
- 3.
- The arrangements for the future administration of
Shanghai would seem to be the crux of the whole problem.
The obvious solution would be to restore as far as
possible the administration as it existed prior to July
1937 with possibly some improvements on the lines
suggested in the Feetham Report.40
Japan, however, has 20,000 nationals residing in
Shanghai and a considerable share in the vested
interests and foreign trade. As it is essential to avoid
arrangements that would be either unfair or humiliating
to Japan it would be necessary to allow Japan to take
measures for the protection of her nationals and her
interests, and to accord her a share in the control of
the foreign administered area corresponding to the
numbers of the Japanese population and the importance of
Japanese trade and vested interests. The administration,
and more particularly the police force, would thus
become to a large and increasing extent, Japanese in
character. This would lead to friction with the Chinese,
and eventually almost certainly armed clashes and a
recurrence of the disastrous events of 1932 and
1937.
- 4.
- It is moreover difficult to reconcile the foreign
administration of Shanghai with the provisions of the
Nine Power Treaty. Shanghai is the sixth largest city in
the world. In finance, commerce, shipping and industry
it is the heart of China and it may be argued with some
force that China can hardly develop the effective and
suitable Government contemplated in the Nine Power
Treaty so long as Chinese authority is in any degree
excluded from Shanghai. Company legislation, insurance
laws, control of education and relations between
employers and employees, protection of labour, housing,
protection and development of manufactures, control of
key industries, economic planning generally—all these
are essential elements in the social and economic
structure of a modern state. But in the case of China
that structure is distorted because nearly one half the
population of Shanghai resides in areas from which
Chinese authority is excluded. The traditional aim of
American and British policy, enshrined in the Nine Power
Treaty, has been to encourage China to develop into a
modern state. But this aim has been to a large extent
frustrated by inability to break away from the older
tradition of imposing tutelage and protecting foreign
interests by armed force. Important as the foreign
interests concentrated in Shanghai may be, it is
doubtful whether security can in fact be obtained for
them in future by the old methods of foreign
administered areas and foreign garrisons. It is
improbable that the Chinese will accept a situation in
which one half the population of their greatest city is
withdrawn from Chinese control
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and the Governments of, at any
rate, the United States of America and the United
Kingdom will be reluctant in future to use force for the
protection of vested interests, or for the maintenance
of foreign municipal institutions either against Chinese
nationalism on the one hand or Japanese aggression on
the other.
- 5.
- For two reasons therefore, viz. the uneasy situation
which will persist if Japanese control is not eliminated
from Shanghai and the impediment to the normal
development of China which foreign control generally in
Shanghai will constitute, there would seem to be much to
be said for a radical change in the existing conditions
in Shanghai. A solution that would be both in harmony
with the Nine Power Treaty and not humiliating to Japan
can only be found by means of a self-denying ordinance
under which whatever Japan is asked to surrender other
Powers would also surrender, even though this might
involve abandoning safeguards which have hitherto been
regarded as indispensable for the protection of foreign
interests at Shanghai. The only alternative to
maintaining the International Settlement by force is to
surrender all foreign control and restore complete
Chinese control. The rendition of the International
Settlement need not mean the end of foreign
participation in local municipal government. It is
suggested that on the withdrawal of the Japanese troops
from Shanghai the Governments of the United States of
America and the United Kingdom should each use their
influence to secure that one municipal authority should
be set up by the Chinese Government for the whole of
Greater Shanghai, including Pootung, the International
Settlement, the external Roads area, and, if possible,
the French Concession. The existing municipal
administration of the Settlement would be merged in the
larger body which, while remaining a Chinese authority,
would contain a foreign element with full representation
of Japanese, British and other foreign interests. There
would be one police force—also containing a foreign
element—and Chinese laws would be applied and the
Chinese writ would run throughout Shanghai. No troops,
Chinese or foreign, would be stationed within a radius
of, say, 30 miles round Shanghai, thus giving effect to
one of the desiderata to which the Japanese have always
attached great importance.
- 6.
- A solution of the Shanghai problem on these lines
would facilitate a settlement on the other points at
issue on the basis of the open door and equality of
opportunity, and in the spirit of the Nine Power Treaty
which should obviously connote the withdrawal of
Japanese armed forces from China and probably the
withdrawal of all foreign garrisons. The Chinese would
doubtless be willing to give assurances that the
Maritime Customs Administration would be maintained on a
basis of international co-operation fair to all powers
trading
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in the
Far East. She might also be pressed to give satisfaction
to Japan on a number of points to which the Japanese
Government legitimately attach great importance, such as
anti-Japanese teaching in school text books, the
suppression of anti-Japanese propaganda, the tariff
rates to be applied to Japanese trade, etc. Japan
attaches very great importance to her special position
in North China. The terms of peace might therefore also
include the recognition of Manchukuo by China—a measure
which would remove one of the irritants that tend to
disturb international relations generally—and the grant
of special facilities for economic co-operation and the
investment of Japanese capital in North China. This
might include mining and industrial concessions for
Japanese corporations, and some measure of Japanese
participation in the management of the Northern
Railways. Finally if, in the course of the general
settlement, an opportunity should occur for dealing with
the question of extraterritoriality, His Majesty’s
Government would favour a solution on the lines of the
draft agreement of 193141 which of course
would be considerably modified—in the direction desired
by China—by the rendition of the International
Settlement as proposed above.
