the American republics, which has been warmly welcomed, and there is general confidence that further ways can be found to assure the maintenance of peace on this continent. Certainly the economic troubles that have pressed so hard on the world during these past few years are one of the main causes of the disturbance of spirit and upset of relations that have taken place. This Government has taken the lead in trying to bring about changes in the international trade situation which would improve conditions everywhere. The needs of our own domestic situation have coincided completely with this undertaking. By 1933 a serious emergency had arisen in our trade relationships with other countries. We had repeatedly increased the barriers to the entry of foreign products into this country, and the sale of American goods abroad was being subjected to increasingly drastic retaliation and restriction on the part of other governments. In addition, we had most substantial investments in foreign countries which our previous policy had thrown into great jeopardy. Many branches of American agriculture and industry required a revival of our trade with other countries if they were to escape continued depression, idleness of resources, and unemployment. The other countries had no smaller need. Under the authority conferred by the Trade Agreements Act of 1934, we have entered into numerous commercial agreements whereby most carefully selected and limited reductions have been made in our own tariffs. In return, we have secured reductions of the barriers imposed against American goods by other countries and assurance of various kinds against the operation of the trade-control systems that have come into existence elsewhere. The vast decline in our foreign trade has ceased. A substantial and steady increase is being recorded. During 1935 our sales abroad exceeded those of 1932, the lowest year, by 671 millions of dollars. The trade records of 1936 to date indicate that this figure will be surpassed. This has been an extremely wholesome factor in the improvement in our own conditions and in building up the world's purchasing power. Our imports of foreign goods have similarly increased, reflecting chiefly the enlarged American demand for raw materials, arising from the improvement of productive activity in the United States and our increased purchasing .power. In the negotiation of these agreements the principle of equality has been maintained in the belief that trade conducted on this basis brings the greatest economic benefit, has the greatest possibilities of expansion, and involves the least conflict. We are vigorously striving to secure similar equality of treatment on the part of other coun tries with which we have negotiated. In connection with this program we have refused to be drawn into a system of bilateral balancing between pairs of countries because this system is comparatively sterile and requires direct government management of international trade, which soon extends to management of domestic production. At the same time, we have been alert to the problem of protecting our trade interests against the incidental disadvantages that we might suffer from the practice of such a system by other countries. The trade policy this country is pursuing fits well into our domestic economic situation and policies. I am willing to leave this judgment to the arbitration of facts. Certainly by now it should be clear, even to those engaged in industries that have been the most direct beneficiaries of excessive tariffs, that this alone will not bring them prosperity. It should also be apparent that they can thrive only when other branches of production thrive, including those that habitually dispose of a large part of their products in foreign markets. The rebuilding of international trade offers a splendid opportunity for governments to improve the conditions of their people and to assure them the necessary means of acquiring the essentials of wellbeing and the raw materials for production. If this result can be achieved, one of the fertile causes of dissension and possible war would be weakened or removed. The plans and hopes of millions of individuals now appear to have no place except in military formation. An improvement of economic conditions would guarantee another place. Advancement in this direction need not await a solution of all political difficulties. Terms have been found by which advance can be made even in the face of the monetary uncertainty which still exists. A great opportunity awaits great leadership. In trade interchange baleful elements enter particularly the trade in arms, ammunition, and implements of war. This trade is at present mainly incidental to the preparation for war. However, in some times and circumstances, it may itself be an element in stimulating or provoking war. Therefore, we have established a system requiring full disclosure regarding American trade in this field by placing those engaged in it under a license plan. Whether and to what extent it may be wise to regulate or restrict such trade between ourselves and other nations, for reasons other than the protection of military secrets, is a matter on which we are constantly weighing our current experience. Our existing legal authority is limited. But, as in the present Spanish situation, we assert our influence to the utmost to prevent arms shipped from this country from thwarting national or international efforts to maintain peace or end conflict. But ac tion of that character cannot best be governed by inflexible rule, for, to a large extent, it must be determined in the light of the facts and circumstances of each situation. This much is certain-we are always ready to discourage to the utmost the traffic in arms when required in the interest of peace. Up to this point I have dealt with the principles of our policies and relationships with other countries when peace prevails. Lately, after a lapse of almost 20 years, we have been called upon to consider with great seriousness the question of what these relationships should be if war were unhappily to occur again among the other great countries of the world. We must squarely face the fact that to stay clear of a widespread major war will require great vigilance, poise, and careful judgment in dealing with such interferences with our peaceful rights and activities as may take place. Legislation recently passed provides some of the main essentials in a wise anticipatory policy. I have in mind the resolutions of Congress of 1935 and 1936 which, in addition to providing for the licensing of all imports and exports of arms, ammunition, and implements of war, prohibit their shipment to belligerent nations. Those same resolutions prohibit the flotation of loans and the establishment of credits in our market by belligerent countries, and otherwise strengthen our existing neutrality laws. On some of these matters the Congress by law has modified policies formerly pursued by this Government in times of war abroad. There are other vital aspects of this problem which will continue to receive the careful attention and study of the Department of State. The problems arising during a period of neutrality are so great that they constantly renew in one the determination to spare no reasonable effort to play a full part in the encouragement of the maintenance of peace. We have sought to demonstrate that we are interested in peace everywhere. Surely this endeavor must continue to command our full abilities if war elsewhere can create such difficulties for us, if it can change for the worse the world in which we must live, if it can threaten the civilization with which all of us are concerned. I cannot believe that the world has completely changed in mentality and desire since those great decades when the principles of liberty and democracy were extending their reign. I believe that this was a natural evolution of our civilization. I do not believe that with the great and growing facilities for education and for personal development people will permanently abandon their individual liberties and political rights. In my judgment it is not a basic defect of democratic institutions that has led to their decline in so many places but rather the onset of weariness, fear, and indifference, which can and must be dispelled. These are the heritage of the last war. They must not be permitted to bring on another. Let me return to a remark that I made in the beginning-that the direction of our foreign policy must be acceptable to the people. Our task is to formulate out of the wishes and wisdom of a popular democracy a sound foreign policy which will ensure peace and favor progress and prosperity. In the conduct of that task we must be able to distinguish between the sharp voice of excited or prejudiced minorities which may from time to time arise and the fundamental and more lasting welfare of our nation. We must be on guard against the hasty, excited impulse, the quick upsurge of passing emotion. Satisfactory foreign policy must be able to count upon the qualities of patience, of sympathetic understanding, of steady poise, and of assured inner strength among the people. In the past crises of our history Americans have shown that they possess these qualities in full measure. I do not doubt that they are still present as a firm support. Against the walls of our democratic methods and institutions storms from elsewhere beat violently. Let us avoid flabbiness of spirit, weakness of body, grave dissent within our own numbers, and we shall have nothing to fear from these storms. We must keep before us the knowledge that our democracy was builded on the solid qualities of hardihood, individual self-reliance, full willingness to put general welfare above personal interest in any great matter of national interest, forebearance in every direction, and abiding patriotism. They alone can furnish the necessary assurance that our foreign policy and our foreign relations will continue to bring peace with the whole world and will not fail in that leadership appropriate to a country as great as ours. 78 762.94/113 The Ambassador in Japan (Grew) to the Secretary of State [Telegram: Paraphrase] TOKYO, December 4, 1936-1 p.m. 251. Embassy's 238, November 23, 6 p.m. The adverse reaction both abroad and in Japan to the recent agreement with Germany seems to have surprised the Japanese Foreign Office, which is trying in every way to minimize the effect by denying categorically the existence of an understanding in regard to military matters or participation in a Fascist bloc. For the purpose of minimizing the effect of the agreement the Minister for Foreign Affairs held a general press conference on December 3. This is the second conference of this kind which he has called since he took office. Conversations with members of the Diet, Japanese business men and others, as well as views expressed in the press reflect much opposition to the agreement. It appears that there is a feeling that the agreement has engendered an unfortunate suspicion that relations with the United States and Great Britain have thereby been weakened and that Japan should strengthen rather than weaken her relations with those countries. It is difficult to trace the Japanese leadership which resulted in the agreement. Apparently one of the few active backers of the agreement is the Chief of the Bureau of Military Affairs in the Ministry of War (Isogai). It appears that some of the early conversations took place between the German Ambassador and the Japanese Embassy in London. According to the description given by the Minister for Foreign Affairs (Arita), the agreement is a kind of police measure providing for a standing commission in Berlin in which an official from the Japanese Home Office will represent Japan. There will be an exchange of information and the Japanese Government will proceed only against Japanese abroad or at home who may engage in communistic propaganda or activities. Arita expressed the hope that other governments may conclude similar agreements and he said that the agreement is aimed against no country. Foreign diplomatic representatives in Tokyo in general are of the opinion, nevertheless, that the Japanese and German General Staffs have concluded a secret military understanding. Apparently the negotiations were carried on in Berlin by the Japanese Military Attaché there (Major General Oshima) and it is entirely possible that neither the Japanese Ambassador in Berlin nor the Japanese Foreign Office participated directly in the negotiations. Last fall when the German Ambassador to Japan was in Berlin, the German Military Attaché in Tokyo (Colonel Ott) was summoned suddenly to Berlin and returned to Japan a short time before the agreement. was signed. Colonel Ott is studiously avoiding conversations with other Military Attachés in Tokyo now. The British Ambassador feels certain that a secret military agreement exists and he is of the opinion that, as one item of the alleged |