m
f* 1* In your instructions to Mr* Mallet Your
Lordship appears to refer to the protection of
specific interests in China as the principal object
of the counter measures*   As pointed out in recent
telegrams, however, I feel that the main issue is
now far wider and far more important, since what
Is at stake Is not only our commercial investment
in China but the whole political and economic future
of the countries with interests in the Pacific, to
say nothing of the urgency of ensuring the observance
of treaty obligations as a matter of principle. If
what we are striving for is to uphold a principle
and avert a future danger we are Justified in taking
greater risks in terms of the short-run disadvantage
than if our aims were merely to preserve existing
interests intact*
The question at issue seems to me to be
the prevention of the complete establishment of a
totalitarian power in East Asia with aims similar
to those of Germany and Italy, which is already on
the way to becoming a menace to all countries with
interests in East Asia and the Pacific.   By supplying
Japan with all that she has needed in the past the
British Empire and the United States have already
gone far towards building up this menace and if they
continue from now on to allow Japan to obtain what
she wants they will soon have completed the process*
1/

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I therefore submit that we should emphasize
these wider grounds for action because the Japanese
think that though they might make a deal with us on
a question of interest they cannot reach a compromise
with the United States on a question of principle
and would accordingly, if we took a stand on principle
jointly with the United States, see no hope of driving
a wedge between us*
2*   If any change In the British and American
attitude is to be effective It should be made quickly,
and the most effective change would be to begin at
once to reduce purchases of Japanese merchandise and
gold*     I and my advisers regard the present time as
opportune for more resolute action. With the steady
increase in Japan1 s imports from China and Hanchukuo
and the possible temporary easing of tension with
Russia we cannot feel sure that in a few months the
situation will not have become less favourable from
our point of view.   I have good reason to believe
that the recent dampening down here of the fishery
dispute with Soviet Russia is not unconnected with
the firmer attitude of Great Britain ana United States,
In (c)[of paragraph 3 In the Embassy* s
Aide Memoire of January 25thjit is stated with regard
to an embargo on Japan's export trade that no decisive
effect could be expected for a considerable period;
but this neglects the strong probability that
anticipation by Japan of increasing pressure on her
would cause her to moderate her policy long before
pressure reached its maximum effect.   This consideration
applies/
applies to any single form of pressure and a fortiori
to virtually every form of pressure combination. I
have never supposed that any single counter-measure
would, before becoming fully operative, have an
immediate disastrous effect on Japan's economy but I
do consider that the application of a widespread
embargo on Japan's exports would set in motion a
process that would rapidly prove disastrous*
Point (d). The effect on Japanese shipping
would be far greater than the effect of Japanese
retaliation on British and United States shipping.
We submit that while the refusal of facilities to
Japanese shipping in all British and United States
ports would be a serious disaster to Japanese shipping
operations in most parts of the world and commensurate
with Japanese world trade, retaliation in kind by
Japan would affect the operation of British shipping
only in Japanese-controlled waters.
Point (e).   The participation of the countrie
indicated would prevent Japan from acquiring the
necessary amounts of raw materials.
As regards (f) Canada is also concerned
because of her metal exports to Japan. Without
endangering her own economy and her Continental
policy Japan is not now in a position to retaliate
by making any further considerable reduction in her
imports from British sourees   and in any case our
object in stopping Japanese exports would be to prevent
Japan from financing her essential imports.
Paragraph 9.   An element of continuity is
of/
of course inseparable from any action of this kind
but my considered opinion is that risk of war is slight
if the matter is properly handled. Such risk as there
is arises from possible irresponsible action by
younger officers and reactionary elements rather
than from any deliberate acts of the Japanese Govern-
ment and then only if the matter is mishandled (e.g.
by ill-timed publicity).   The present Japanese policy
is based on the assumption, to which they still hold,
that in no circumstances will Great Britain and the
United States be able to take joint or parallel action
in this matter.   If fcuch action should be decided upon
the problem will be to convince the Japanese Government
without making an overt or public threat- Everything
to my mind would depend on whether such conviction
could be carried in time to the Japanese official -
and particularly the military - mind.   With the situatio
such as it is the saving of "face" is an all important
factor.   Subject to the above comments X entirely agree
with Your Lordship's view that a policy of counter
measures should not be embarked on unless we are
prepared in the last resort to pursue it to the end.
BRITISH EMBASSY,
WASHINGTON, D.C.,
February 3rd 1939.