894.52/46: Telegram

The Secretary of State to the Chargé in Japan (Dickover)

WASHINGTON, November 3, 1936-3 p. m.

138. Your despatch No. 2067 of October 2, 1936.88

1. Assuming that the third principle (C) of the British proposal contemplates during the 99 year period the continued exemption of leaseholders from payment of taxes on leasehold land and buildings, the Department would be prepared to agree to settlement of the leasehold question on the basis of the British proposal if that proposal should be acceptable to the Japanese Government.

34

2. Upon receipt of the Department's instruction No. 1114 of October 5, you may in your discretion furnish the Foreign Office informally with an outline of the proposal which this Government had intended to make in the near future, using paragraph 1 of page 13, instruction No. 1018 of April 30, 1936, as basis for such outline. Please add that, although this Government believes, of course, that such intended proposal would offer a basis of settlement of the leasehold question wholly equitable to all concerned, it desires to contribute toward final and amicable solution of this long standing and vexatious question by being prepared to accept settlement on the basis of the proposal which it is understood was submitted to the Foreign Office by the British Ambassador on September 29, 1936.

3. Please inform the Department of action taken. If you have objection to making approach above suggested, please indicate character thereof.

4. For your confidential information and guidance: Any right of American leaseholders which may be legally enforceable in Japan cannot, of course, be compromised by acceptance by this Government of plan of settlement. However, upon acceptance by the Japanese Government of the British proposal, this Government would urge American leaseholders to accept the terms of settlement.

33 Not printed.

HULL

*Fifth paragraph from end of despatch, beginning: "The Department is, therefore, of the opinion ...," p. 972.

894.52/47: Telegram

The Chargé in Japan (Dickover) to the Secretary of State

TOKYO, November 11, 1936-4 p. m. [Received November 11-7: 33 a. m.]

230. Department's 138, November 3, 3 p. m.

1. Third principle of the British proposal contemplated exemption from all land and house taxes and the national income tax, but not the prefectural and municipal surtaxes on the national income tax.

2. Before submitting the Department's proposal to the Japanese Government I again discussed the leasehold question with the British Embassy and learned that that Embassy has recently received a reply from the Japanese Government to its proposal (Embassy's despatch No. 2067, October 2, 1936 35). The reply states that the perpetual leaseholds constitute an anachronism and cause unequal burdens of taxation upon the Japanese and foreign residents of the municipalities, and that the solution of the problem cannot wait for the expiration of the 99 year period proposed by the British but must be found in the very near future. The Japanese note then makes a counterproposal, as follows: (a) The leases to be canceled and ownership rights substituted therefor in April of next year, (b) as an act of grace the leaseholders to be exempted from payment of the national land tax for a period of 5 years from the date of cancellation of the leases. The note ends with a statement to the effect that if this proposal is not accepted the Japanese Government will take steps to collect arrears taxes from the leaseholders and will take suitable measures to equalize the burden of taxes in the future (it is presumed that this last refers to unilateral cancellation of the leases by the Japanese Government or to the collection by force of all taxes from the leaseholders in the future in disregard of the terms of the leases).

3. The British Embassy has referred the Japanese note to its Foreign Office and to the British leaseholders committees of Yokohama and Kobe, with the request that it be kept confidential for the present. 4. In view of the Japanese reply to the British proposal, I shall not take the action indicated in paragraph 2 of the Department's 138 pending the receipt of further information. It is suggested that action be delayed until the attitude of the British leaseholders is ascertained, when the situation will be more nearly clarified. Expression of opinion from the British leaseholders expected in 1 or 2 weeks. Department will be informed.36

35 Not printed.

36

DICKOVER

'The Department's telegram No. 143, November 12, 7 p. m., gave approval.

JAPANESE AUTOMOBILE LEGISLATION VIOLATIVE OF THE 1911 TREATY OF COMMERCE AND NAVIGATION BETWEEN THE UNITED STATES AND JAPAN "

894.797/16: Telegram

37

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

39

TOKYO, January 9, 1936-11 a. m. [Received January 9-9:25 a. m.]

6. Department's 202, December 24, 1 p. m.38 At my direction the Counsellor of the Embassy " called yesterday on the Vice Minister for Foreign Affairs 40 and in the course of discussion of the proposed legislation to place the automobile manufacturing industry of Japan under a system of control by means of licenses advised him orally and informally of the American Government's attitude as set forth in the final paragraph of instruction 882 of November 18, 1935.4

The Vice Minister said that he had as yet received no draft of the proposed law and was therefore unable to reply but he observed that the treaty of 1911 42 did not provide for rights of manufacture. The Counsellor replied that irrespective of the specific right of manufacture, assembly and manufacture under present day practice are incidental to and necessary for the trade in automobiles and that a limitation of the right to assemble motor cars under the same conditions as Japanese firms would seriously handicap the American automobile trade and would clearly be discriminatory in contravention of the terms of the treaty.

The Vice Minister said that he would examine the matter and would communicate with the Embassy later. I shall be guided by developments in determining whether representations to the Minister for Foreign Affairs by myself are desirable.

Despatch follows.43

GREW

894.797/17: Telegram

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

WASHINGTON, January 31, 1936—11 a. m.

14. Your 6, January 9, 11 a. m., second paragraph, and your des

patch 1631, January 9.4 For your information the Department

37 Continued from Foreign Relations, 1935, vol. III, pp. 1048–1052.

38 Ibid., p. 1051.

39 Edwin L. Neville.

40 Mamoru Shigemitsu.

"Foreign Relations, 1935, vol. III, p. 1048.

42

Signed at Washington, February 21, 1911, ibid., 1911, p. 315. 43 No. 1631, January 9, not printed.

"Latter not printed.

919456-54-68

considers that the use of the word "manufactories" in its context in Articles I and II of the Treaty confers on American citizens the indisputable right to manufacture on terms of complete equality with Japanese subjects.

HULL

894.797/18: Telegram

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

TOKYO, February 1, 1936-noon. [Received February 1-3:03 a. m.]

22. Department's 14, January 31, 11 a. m. In a recent conversation the Vice Minister for Foreign Affairs told the Counsellor of the Embassy that the attitude of the Japanese Government towards the treaty of 1911 is that article 1 applies to individuals; that it is not contemplated that any individuals as such would be permitted to operate automobile factories under the proposed law and in that respect there would be no discrimination between Japanese subjects and foreigners resident in Japan. So far as companies or corporations are concerned their position is regulated in article 7 and it therefore seems clear to the Japanese Government that the proposed automobile law would not be inconsistent with the provisions of the treaty.

He said further that while the Foreign Office considers the project unwise there are forces at work beyond its control and that there is a movement on foot to put the bill before the special session of the Diet, probably in the spring, but he did not know whether that could be done. Despite its dislike of the project the Foreign Office would not be in a position to state to other departments that there is a treaty obligation which would stand in the way of the proposed legislation.

Despatch follows.45

894.797/27: Telegram

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

GREW

TOKYO, July 10, 1936-5 p. m. [Received July 10-6:18 a. m.]

152. Embassy's despatch No. 1891, July [June] 11, 1936,5 automobile manufacturing industry law.

45

No. 1659, February 5, not printed. The Ambassador's telegram No. 112, May 23, 7 p. m., reported that "the automobile industry law passed the Diet today." (894.797/23)

45 Not printed.

1. Imperial ordinance gazetted today fixes date of enforcement of automobile manufacturing industry law as July 11, 1936.

2. At the same time an enforcing ordinance was promulgated defining automobiles to which the law applies as those having engines of more than 750 cubic centimeters capacity and manufacturers to which the law applies as those producing more than 3,000 cars per annum.

3. The Department of Commerce and Industry simultaneously issued an ordinance containing detailed definitions and regulations of little or no interest to American manufacturers. Full text by mail.46 4. Inform Commerce.

GREW

894.797/31

The Secretary of State to the Chargé in Japan (Dickover)

No. 1115

47

WASHINGTON, October 5, 1936. The Secretary of State encloses a copy of despatch No. 241 dated August 25, 1936, from the American Consul at Yokohama "7 in which it is stated that the manager of the Ford assembly plant at Yokohama has reported to the Consul that Japanese officials appear to be applying the recently promulgated Automobile Industry Control Law with even greater discrimination against foreign companies than is provided for in the law itself.

It is desired that the Chargé d'Affaires direct the Consul to keep the Embassy fully informed with regard to developments adversely affecting American automobile interests in the Yokohama Consular District. The Department would appreciate the receipt from the Embassy of comment with regard to statements made in the despatch under reference of the Consul and an expression of the Embassy's opinion with regard to the question whether any action in the premises by this Government is called for at the present juncture.48

48

The Department, in telegram No. 118, July 20, 1937, 5 p. m., informed the Embassy that in the absence of new and changed factors affecting the situation, it did not seem advisable to restate its views (894.797/32).