Repeated to Washington No. 49.

JAPAN. At meeting with Halifax [1] last Wednesday I expressed the
view that fundamental difficulty was that neither the United
Kingdom nor the United States had a definite policy with the
result that consultation that had taken place had never achieved
anything effective. This Halifax challenged and at his request I
next day sent him a memorandum amplifying my views. As this
memorandum has caused considerable discussion desirable, although
long, that it should now be sent to you.

Begins. 'The position is clearly deteriorating and present
indications point to the British Empire being forced into a war
with Japan.

Such a development would not only be extremely serious for the
British Empire but is one which the United States have a vital
interest in preventing.

In view of these facts and the seriousness of the situation not
only should there be the closest consultation between the United
Kingdom and the United States but it is essential that our two
nations should be agreed upon and resolutely follow a common
policy.

The immediate comment on the last paragraph would be that what is
suggested is exactly what we have been striving to do but United
States will not play.

Is this, however, quite the position? To arrive at a common policy
both countries concerned must know with precision what is the
objective they are seeking to attain; must have a definite
individual policy for achieving it; must disclose that policy to
each other and in frank discussion hammer out differences and
smooth away difficulties.

As for objective, although possibly it has riot been defined with
precision, I presume it might be broadly stated that the United
States and the United Kingdom are striving for the establishment
of a durable peace in the Far East, based on a free and
independent China, and which safeguards legitimate rights and
interests of other nations.

Assuming that both Governments have the common objective indicated
above, the following questions arise:-

(a) What is the policy of the United Kingdom?
(b) What is the policy of the United States?
(c) Has there been any mutual disclosure of these policies?
(d) Have they been fully and frankly discussed between the two
Governments?
With regard to (a) frankly I do not know. It has been suggested
that agreement to close the Burma Road for three months was to
afford time for negotiation of a wide settlement. What, however,
is meant by a wide settlement? Craigie put forward five points in
his cable of 22nd June, No. 1068. [2] I have put forward various
suggestions from time to time. Is the idea of a wide settlement
still being pursued? If yes, is it contemplated to use any of
Craigie's points, or of my suggestions, or what alternative ideas
would be embodied in the proposals to be submitted to the
Japanese?
If the idea of a wide settlement has been abandoned what is the
policy it is contemplated to pursue?
With regard to (b)-I have never been able to understand what the
United States' policy is. From time to time they expressed high
moral sentiments of giving no aid to an aggressor and it is clear
that with strong inspiration from Hornbeck [3] the Administration
is hostile to Japan. Presumably, however, the United States desire
a sorting out of the position in the Far East. Do they contemplate
that this should be brought about by such economic and financial
pressure as will force Japan to behave reasonably? If they do is
it not essential that pressure should be greatly intensified as if
continued only on its existing level present indications point to
increasing dominance of military party in Japan with results of
unpredictable seriousness both to the United Kingdom and to the
United States?
With regard to (c) I suggest that this has not been done and could
not have been done owing to neither the United Kingdom nor the
United States Governments having arrived at general definite
decision as to what their respective policies are.

This has led to a most unfortunate situation. The United States
has a suspicion that owing to our existing embarrassments we are
[prepared to] [4] truckle to a[n aggressor] and would be prepared
to extract ourselves from our difficulties by selling China.

We, on the other hand, regard the United States as adopting high
moral attitude, to a great extent from political motives, of
telling us to stand up to Japan while refusing to afford us any
assistance in the resulting conflict into which their advice would
almost inevitably land us.

In view of great issues involved, has not the time arrived when we
must lay down our definite policy, and having done so put the
positions with the utmost frankness to the United States?
The alternatives before us as I can see them are:(1) To pursue the
idea of negotiating a wide settlement.

If this course were adopted the following points are essential.

(a) That settlement contemplated must be of such a character as to
ensure Japan observing it from self-interest, as no other motive
can be relied on under modern conditions.

(b) That it took the form of offer to Japan of advantages,
economic, financial or otherwise, being conditional upon a
generous settlement being arrived at with China which safeguarded
her integrity and independence,
(c) That the position be so handled as to avoid danger of
negotiations-without resulting in a wide settlement-leading to a
termination of Sino-Japanese hostilities, thus extracting Japan
from the bog she has landed herself in and freeing her for
adventures elsewhere to serious worsening of our position. In
particular the situation should be fully explained to Chiang Kai-
shek [5] it being emphasised that our offers to Japan are for the
purpose of obtaining generous treatment to China, that they will
not be implemented unless that generosity is forthcoming, and that
China's position under any settlement would be guaranteed. As
unhappily under existing circumstances a United Kingdom guarantee
would not be regarded as sufficient, a United States guarantee
also would probably be essential to satisfy Chiang Kai-shek.

(2) To abandon the idea of a wide settlement and concentrate on
keeping alive and increasing Chinese resistance, and at the same
time intensifying financial and economic pressure on Japan so as
to deter her from outside adventures and to bring her into a more
reasonable frame of mind.

Any half-hearted and opportunist policy between (1) and (2) will
get us nowhere and almost certainly land us in war under most
disadvantageous circumstances.

When the United Kingdom Government has decided upon the policy it
considers should be pursued I suggest the United States Government
should be approached with the utmost frankness. In the discussions
we should put alternate policies that could be pursued and we
should indicate the one that we consider it would be wisest to
follow.

At the same time we should make it dear that we are not wedded to
any particular course but owing to the importance in view of world
situation of our pursuing a common policy are prepared in
consultation with them to endeavour to hammer out a policy that
will be acceptable to both of us.

Again it will be said that what I am suggesting is exactly what
has been done.

But is this so? Have either we or the Americans in the discussions
that have taken place put forward suggestions for a definite and
civilised common policy? Has not the position rather been somewhat
nebulous suggestions on both sides with on our side an
apprehension lest we might say something that would give United
States the impression that we were relaxing towards Japan?
Has not this relative lack of frankness led to misunderstandings?
For example do the United States realize that when we talked of a
settlement with Japan we had in mind that anything we might offer
to Japan would be conditioned by Japan according to China a just
and equitable peace? Have they not rather formed the view that we
were prepared [to] sell China in order to relieve ourselves from
dangerous trouble with Japan while we are so heavily committed in
Europe?
Finally, I feel that full and frank discussion with the United
States on the basis of definite policies might well lead to
definite results. The United States and the British Empire
together have a potent weapon against Japan in a financial and
economic embargo. The threat of its utilisation might well bring
Japan to her senses.'
Ends.

BRUCE