F.E.C. 45.

Most favoured nation treatment for Japan

Your telegram No. 109 of 18th February. [1]

United States would not accept the contention that a policy
decision of F.E.C. would be necessary before SCAP could be
authorised to negotiate with other countries concerning most
favoured nation treatment to Japan. The interpretation of the
terms of reference which the United States has been forcing on
F.E.C. for some time now is that SCAP can exercise his
Administrative authority except in cases where he is specifically
limited by Far Eastern Commission policies. The United States
would argue that in negotiating most favoured nation treatment
SCAP would not be acting contrary to any existing F.E.C. policy
decisions. The United States could also point to the fact that
SCAP has already negotiated on behalf of Japan several Bilateral
Trade Agreements of one sort or another, e.g., sterling payments
agreement.

We have informally sounded out Barnett [2], State Department, who
was at London talks on M.F.N. He says that the only type of F.E.C.

action on M.F.N. which the State Department could envisage would
be an F.E.C. recommendation that member countries apply M. F. N.

treatment to Japan.

The only type of binding policy decision which F.E.C. can pass is
one which states what S.C.A.P. must require the Japanese to do.

F.E.C. has already laid down certain policies concerning the
principles which Japan must follow in its import and export
policies e.g., 'sources of Japanese imports' and 'destination of
Japanese exports' of 8th May, 1947, any trading principles which
F.E.C. countries should apply to Japan could only be in the form
of a recommendation. While nothing would please the United States
better than if F.E.C. passed a recommendation that member
countries apply M.F.N. to Japan such a recommendation could have
no legal binding force. For the foregoing reasons the United
States has found it necessary to discuss M.F.N. to Japan outside
of F.E.C.

We are continuing to sound out other Delegations informally and
will advise further.