E (PD) (3 7) 11 (extract) LONDON, 2 June 1937

SUGGESTION FOR REGIONAL PACT IN THE PACIFIC

2. MR CHAMBERLAIN reminded the Conference that the suggestion for
a Regional Pact in the Pacific, now made in the Memorandum by the
Australian Delegation (E. (37) 29) [1] before the present Meeting,
had been first put forward by Mr Lyons at the Opening Plenary
Meeting of the Conference. [2] Possibly Mr Lyons might wish to
open the discussion by developing some of the particular points in
his Paper.

MR LYONS thought that it was hardly necessary for him to add
anything to his Memorandum at the present stage.

MR MACKENZIE KING said that he had read the Memorandum with much
interest. There was of course no one Pacific problem. Three of the
continents of the world bordered on the Pacific. Canada as one of
the bordering countries would be greatly relieved at any
guarantees of peace in the Pacific area, and would be very glad to
consider definite proposals.

A great deal remained both for study and for debate. The first
step of all ought probably to be informal and confidential
discussions with the United States and Japan with a view to
ascertaining their attitudes towards the proposal. Before those
attitudes had been ascertained any step taken in public was more
likely to jeopardise than to advance the prospects of the plan.

Now that the United States had withdrawn from the Philippines [3]
it seemed to him that a revival of the Four-Power Treaty of 1922
[4] would not be the right form for the new Pact to take.

MR SAVAGE agreed in general with Mr Mackenzie King. The Conference
ought to go forward with the proposal since it was clearly a step
in the right direction. He only hoped there would be no stepping
on other people's toes. It seemed to him to be a pity that the
proposal had already been so well ventilated in the Press. People
would now be disappointed if nothing came of it.

He did not see that the Dominions bordering on the Pacific could
enter into any Pact of the kind suggested, without almost
automatically involving the United Kingdom. Was it the intention
of the United Kingdom Government to take part? If so, there would
be no means of keeping other European Powers out of it.

GENERAL HERTZOG said that he did not wish to contribute to the
discussion at the present stage.

LORD ZETLAND stated that the Government of India was much
interested in the suggestion. They would look favourably on any
scheme which would lessen the prospect of perpetual danger from
Japan.

It might, however, be difficult to secure Japan's whole-hearted
co-operation. Indeed, from the Japanese point of view it was hard
to see what basis for a commercial economic arrangement could be
found. Japanese trade competition with the United Kingdom and the
United States continued unabated. The low cost of production in
Japan remained a constant menace to the standard of life of the
West. The only new factor was that the internal situation in Japan
appeared to have become difficult and unstable.

The delicate question of Manchukuo would also arise. Would the
Pact mean a recognition of the Japanese conquest? Possibly Mr Eden
might be able to enlighten the Meeting on this point.

MR EDEN said that the United Kingdom Delegation were grateful to
Mr Lyons for bringing the proposal forward; they liked the idea
and would do their best to co-operate. It did indeed seem that the
present was the psychological moment for a detente in the Far
East. A detente there would certainly be a very real service to
peace in general.

It was no use ignoring the difficulties. There were many problems
to be examined. For instance, those set out at the end of the
Australian Memorandum:-

(i) The scope of the scheme.

(ii) The question of adding a general declaration of economic and
cultural collaboration.

(iii) The question of adding a guarantee of non-aggression and
respect for each others' sovereignty, and
(iv) the question of reiterating the principle of the Paris Pact
to the effect that war was renounced between the signatories as an
instrument of national policy.

As regards the scope of the new arrangement, he thought it would
probably have to be wider than Mr Lyons had suggested. For
example, China, Russia and Holland ought to be included. The
position regarding the Four-Power Treaty of 1922, to which
reference had been made, was that it had not actually lapsed. It
remained in force after the expiration of the original period in
1933, subject to the right of the High Contracting Parties to
terminate it at 12 months' notice. The Four-Power Treaty would not
altogether serve as a model on the present occasion. For one
thing, it was only concerned with the islands in the Pacific. The
new agreement would certainly have to be extended to the mainland
if it was to have any attraction for China and Russia.

As Lord Zetland had said, Manchukuo presented a difficulty. There
was not only the technical question of the recognition of the
Japanese conquest, but also the practical questions raised by the
Chinese attitude to the territory.

He had had several messages from Foreign Powers since Mr Lyons'
speech at the Opening Plenary Session. These showed both an
interest and a willingness to co-operate.

In reply to the question raised by Mr Savage, Mr Eden said that
the United Kingdom ought certainly to be a party to the Pacific
Pact as they were to the Nine-Power Treaty. So far as he could see
there would be no objection if France or other European Powers
wished to follow suit. The essential thing, of course, was that
the Pacific Powers should join in.

The first step required seemed to be a technical examination of Mr
Lyons' proposal by the experts of the Delegations interested.

MR CHAMBERLAIN said that as one who for a long time had taken a
personal interest in Far Eastern affairs, he wished to add a few
observations.

He had first been led to study Far Eastern questions by
consideration of defence and strategy. A threatening situation in
Europe was capable of being multiplied in gravity by the
difference between our present relations with Japan and those we
enjoyed in 1914. There was now the perpetual danger that trouble
in Europe might be Japan's opportunity to take some step to our
disadvantage in the Far East. At present we should be quite unable
to counter such a step. It was impossible to say where things
would stop.

All this was in unhappy contrast with the days of the Anglo-
Japanese alliance. [5] In those days Japan had felt real
friendship and gratitude towards us as the one European Power
prepared to associate with them. They had been bitterly
disappointed when the alliance was not renewed. We had many
reasons for not renewing it, and we could not go back on that
decision; but it had meant a great addition to our anxieties.

Could we now obtain, not an alliance, but an understanding with
Japan? If we could, it would be an enormous burden off our
shoulders. It would leave us free to prepare for dangers nearer
home.

[Chamberlain then referred to Britain's position in China, a
country he regarded as 'one of the great potential markets of the
world'. He explained that Sir Frederick Leith-Ross, whose mission
to China ostensibly concerned Chinese finance, 'had been
instructed to enter into relations with the authorities both in
China and Japan on a wide range of questions'. Chamberlain then
proceeded to speak of the attitudes of the Chinese and Japanese
Governments to the United Kingdom.]

Both countries, at any rate, had now greater confidence in us. So
far as we were concerned they knew that they had nothing to fear.

Japan herself had recently become less aggressive. Possibly she
had seen that a policy of aggression did not pay. It had been a
sign of the times that the German-Japanese agreement [6] had been
received with no enthusiasm either in Japan or elsewhere.

The great economic problem of Japanese competition remained. We
felt it everywhere with increasing severity-at Home, in India and
in the Colonies. In some cases no tariff wall had been high enough
to keep out Japanese goods which were on sale at prices less than
we paid for the raw material. The solutions of surrendering our
trade to Japan or reducing our standard of living to a Japanese
level must both be ruled out. The only real solution was to reach
a friendly agreement under which Japan would agree to regulate her
exports in such a way that both countries could continue to make a
living. Such an arrangement, if it were practicable, would be an
enormous contribution to the political and economic appeasement of
the world. He meant, of course, an arrangement in which the other
Pacific countries shared. The parties to the agreement would
certainly have to include this country, the Pacific Dominions,
China, Japan, Russia and Holland. He was not without hope that the
United States also would wish to take part. A conversation with
Sir Ronald Lindsay [7] before the last Presidential election had
encouraged him to hope that the United States would not recoil
from a Pacific Pact in the same way as they recoiled from
'European entanglements.'
Mr Lyons had taken a step in the direction in which he, Mr
Chamberlain, had been anxious to move. The next thing was to put
into effect Mr Eden's suggestion of a technical examination of the
proposal by the experts of the Delegations interested.

LORD ZETLAND remarked that such news as came from Japan seemed to
show that the civilian element was now asserting itself while the
influence of the Army had waned. Had Mr Eden formed any
appreciation of the extent of these changes.

MR EDEN said that it was very difficult for anybody not on the
spot to make such an appreciation. It certainly seemed that
Japanese opinion was more moderate now than for a long time past.

Possibly this was due in part to rearmament in the United Kingdom
and in Russia. Internal difficulties in Japan-political,
financial, and trading-had no doubt contributed to the result. One
important change for the better had been the appointment of Mr
Sato as Foreign Minister. We certainly ought to give Mr Sato every
support in our power.

Mr Eden mentioned a recent conversation between himself and Dr
Kung, the Chinese Finance Minister, who had hailed Mr Sato's
appointment.

One could not, of course, say how long this more hopeful situation
might last. Reaction might always follow.

MR SAVAGE said that he was very glad that Mr Chamberlain had
mentioned the dangers inherent in Japanese commercial competition.

The fact must not be lost sight of for a moment that Japan was
able to produce and export first-class goods at prices which in
our case were impossible.

MR HAVENGA recalled the fact that the South African Delegation at
Ottawa had agreed to impose special duties to keep out Japanese
goods. It was now becoming more and more difficult to maintain
these duties. The Japanese had regarded their imposition as an
unfriendly move.

Mr NASH pointed out that a country with as low a standard of
living as Japan became more dangerous in proportion as it became
conscious of that low standard. There was no effective means of
keeping Japan out of their markets, and it was certainly out of
the question to lower our own standards. The only solution was to
raise Japan gradually to a standard approaching our own.

One point which ought to be noted in connection with the proposed
Pact was that the United States and Japan were not members of the
League of Nations.

SIR SAMUEL HOARE referred to his remarks on the Defence question
at an earlier meeting of the Principal Delegates. Mr Chamberlain
had now greatly reinforced what he (Sir Samuel) had said. The
overwhelming gravity of the present situation was that Germany,
Italy and Japan must all be accounted as potentially hostile. In
these circumstances a regional Pact in the Pacific would be an
enormous assistance. If possible the Pact should cover not only
the islands of the Pacific but the mainland of Asia. Even an
insular pact, however, would be a great achievement.

These were the only methods by which we could relieve ourselves of
the burden of overwhelmingly high Naval estimates. We might
otherwise carry that burden for twenty years to come.

MR LYONS said that he much appreciated the reception given to his
proposal. He was very grateful also for the frank discussion of
the difficulties which it involved.

Mr Chamberlain's contribution had been most illuminating. Provided
that progress was made he would be happy to accept Mr Eden's
suggestion of an examination of the proposal by experts of the
Delegations. As regards measures to restrain Japanese competition,
Australia's experience might be of interest. The Ottawa agreement
[8] had not been effective in keeping Japan out. The Commonwealth
had then decided, in order to assist United Kingdom manufacturers,
to raise their tariffs against Japan. Finally by friendly
negotiations they had obtained an arrangement with Japan. Japan
had undertaken to regulate her exports. Australia and Japan were
now on good terms, and he felt sure that any other difficulties
could be resolved by methods of friendly negotiation.

It was agreed:-

That experts of the Delegations interested should examine Mr
Lyons' proposal for a Pacific Pact in its technical aspects and
report whether any, and if so what, methods could be adopted
usefully to further the idea. [9]