893.5151/428: Telegram

The Secretary of State to the Ambassador in Japan (Grew)

113. Your 207, March 26, noon.

1. The Department fully shares your view and that of Craigie that the establishment of a rigid exchange control in north China is imminent [Page 9] and that such control will probably be so administered as to favor Japanese trade and close the door to equality of opportunity.

The Department is continuing to study this whole matter. Meanwhile, the Department offers comment on the suggestions made in numbered paragraph 3 of the telegram under reference as follows:

The Department feels that some form of parallel representations should be made to the Japanese Foreign Office by way, first, of keeping the record and, second, toward safeguarding, if possible, rights and interests. However, there is warrant for doubt whether any assurances that might be given in reply, affirming the principle of equality of treatment, would be made in practice effective. Moreover, we doubt whether an international supervision of exchange control would have substantially beneficial effects unless there were at the same time an international supervision, directed toward assuring equality of opportunity, over movement of trade and economic activity in general. An attempt to achieve assent to these two types of supervision would probably be rejected. If set up, such supervision would probably produce friction and prove futile.

It would seem, therefore, that with regard to this matter, little or nothing would be gained by suggesting and contending for an international supervision. Must we not, in the circumstances which now prevail, choose among courses as follows: (a) concentrate on effort to persuade the Japanese not to proceed, in the development of their economic program with regard to China, with this and other items the effect of which would be discriminatory; or (b) when and as, in consequence of their proceeding with that program, our rights and interests are impaired, continue, as hitherto, to make and to rest upon appropriate protests and reservations; or (c) add to the making of representations an application of some form or forms of positive or negative pressure; or (d) restrict the making of representations to those cases only in which it is absolutely imperative that some action be taken.

2. Department would appreciate being informed of the British Foreign Office reply to Craigie’s telegram under reference. Please discuss with Craigie the Department’s comments made above. Please inform Department of any conclusions at which you and Craigie may arrive as to possible “form of action” in line with the thought expressed in your paragraph 4.

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