Searching for a Balance: Britain's Trade Policy towards Japan, 1950-54 Noriko Yokoi A thesis submitted for the degree of Ph.D. International History Department London School of Economics and Political Science July 1998 UMI Number: U615516 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. Dissertation Publishing UMI U615516 Published by ProQuest LLC 2014. Copyright in the Dissertation held by the Author. Microform Edition © ProQuest LLC. All rights reserved. This work is protected against unauthorized copying under Title 17, United States Code. ProQuest LLC 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 48106-1346 Tneses r 35^3 British Library of Political and Economic Science A bstract The purpose of this thesis is to examine Britain's trade policy towards Japan between 1950 and 1954. This period was chosen as these were the years when the foundations of Britain's post-war trade and diplomatic relations with Japan were established. Moreover, the study was undertaken to redress the imbalance in scholarly research which is dominated by U.S.-Japan relations. Although the study does not refute the dominant political and economic influence of the United States in Japan, it elucidates the role played by other countries during Japan's early post-war period. The study contends that there was a period in the early fifties when Britain played an influential role in its trade relations with Japan. This was primarily because Japan relied on the sterling area for one-third of its imports. As a banker to the sterling area's dollar reserves, Britain had influence over the area's policy as a whole. In order to understand the reasons why Britain's influence over Japan waned, the thesis examines the sterling payments agreement talks between Japan and Britain. By studying the negotiations behind the agreement it is possible to ascertain the gradual independence of the sterling area countries from British control, and the establishment of their respective bilateral relations with Japan as Britain became sidelined. The other issue examined in the study is Britain's opposition to Japan's entry into the General Agreements on Tariffs and Trade and the factors which led to this policy. The study of the two issues highlights the complexity of the decision-making process in foreign policy formulation. In particular, it indicates the various interests that had to be taken into consideration, such as domestically the views of the textiles industry in Lancashire and those of the various ministries in Whitehall, and internationally Britain's relations with the United States, Japan and the Commonwealth. 2 Acknowledgements I should like to thank my supervisor, Dr. Antony Best, for his encouragement, guidance and patience. I am deeply indebted to him for pointing me towards William Borden's book and challenging me to write the British perspective on Japan's economic recovery. Furthermore, I would like to thank Professor Ralph Smith for introducing me to the Bank of England Archives. I wish to also extend my appreciation to Professor Sugihara Kaoru for directing me to invaluable Japanese sources. Moreover, I wish to thank Dr. Janet Hunter, Dr. John Kent and Professor Ian Nish for their comments on earlier drafts of the thesis. I would also like to thank Dr. Aaron Forsberg, Professor Burton Kaufman, Professor Kibata Yoichi and Professor Nakanishi Hiroshi for their advice and encouragement. I would like to express my appreciation to archivists at the Bank of England, the Birmingham University Library, Bodleian Library in Oxford, Durham University Library, Manchester Central Library, the Modem Records Centre at Warwick University, the Public Records Office, and Trinity and Churchill Colleges in Cambridge. In the United States, I wish to thank the archivists at the Eisenhower and Truman Libraries, the National Archives, and Seeley G. Mudd Library. I wish to also extend my appreciation to the archivists at the Ministry of Foreign Affairs Archive in Japan. A special thank you to Peter Busch and Chiara Levrini for reading large sections of my thesis, and for being such great friends. I am also grateful to Nicola Davies, Roger and Julia Kirkpatrick, Nishikawa Sugiko and Bryan Solomon for their support. I would also like to thank the British Council and the Japan Foundation for funding part of my studies. My appreciation also extends to the Royal Historical Society and the Truman Library for making it possible for me to conduct research in the United States in Summer 1996. My parents have supported me in all my endeavours, including this one. Without them, this would never have been written. I thus dedicate this thesis to them. 3 Table of Contents pages List of Tables 6 Usage 7 Abbreviations 8 Introduction 10 Chapter One: British Trade Policy towards Japan in 1950 16 Introduction 16 The Post-War Economic Situation 16 Open Payments Agreement with Japan 23 Japan's Application to Enter the International Wheat Agreement 32 MFN Treatment for Japan 3 5 Conclusion 38 Tables 40 Chapter Two: On the Eve of Independence: Britain's Sterling Policy towards Japan in 1951 48 Introduction 48 Japan's Entry into International Organizations 49 Long-Term Relations between the Sterling Area and Japan 51 The Sterling Financial Conference 60 Anglo-Japanese Differences over the Sterling Payments Agreement 66 The Peace Treaty and the China Issue 71 Conclusion 82 Tables 83 Chapter Three: Britain's Policy Adrift, 1952 90 Introduction 90 Sterling Area-Japan Payments Relations in 1952 91 The MFN Issue 103 Conclusion 110 Tables 112 4 Chapter Four: Britain at the Helm? 119 Introduction 119 Talks in Tokyo 120 Tdjo's Visit to London 125 American Observations 128 Britain's Policy towards the Intersessional Committee 129 The Intersessional Committee Meeting 134 The Report 139 Towards the Temporary Accession of Japan in the GATT 146 The Eighth Session of the GATT 149 Sterling Payments Agreement 15 3 Conclusion 159 Tables 161 Chapter Five: Limits to Britain's Policy towards Japan 175 Introduction 175 Sterling Payments Agreement 176 The Postponement of Yoshida's Visit to the UK 187 Japan's Application to the GATT 191 The Report on a Commercial Treaty with Japan 192 Yoshida's UK Visit 199 Ninth Session of the GATT and the Japanese Response to the British Aide-Memoire 201 Japan's Membership of the ECAFE and the Colombo Plan 203 Conclusion 206 Tables 207 Conclusion 215 Appendices 221 One: The Japanese Proposal 221 Two: Sterling Payments Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of Japan 223 Three: The Yoshida Letter 227 Four: The Text of GATT Articles 19,23,25 and 35 228 Five: Agreed Minute 231 Bibliography 235 5 List of Figures and Tables pages Figure 1: The Sterling Account System, 1952 40 Table 1.1: Japan's Exports of Cotton Textiles to Great Britain, 1947-1955 41 Table 1.2: Japan's Rice Imports by Country, 1949-1954 42 Table 1.3: Percentage of Japan's Rice Imports from Burma, 1949-1954 42 Table 1.4: Estimated Purchases by Source and Savings per Year by Membership inlWA 43 Tables 2.1-2.6: Cotton Imports into the Congo Basin 83 Table 3.1: Japan's Sterling Reserves, January 1950-December 1953 112 Table 3.2: Annual Trade with Japan (Select Sterling Area Countries), 1950-1958 113 Table 3.3: Sterling Area's Gold and Dollar Reserves, 1948-1954 114 Table 3.4: Japanese Imports and Exports based on Letters of Credit, 1951-1952 115 Table 4.1: Japan's Balance of Payments, 1945-1956 161 Table 4.2: Japan's Exports to the Sterling Area, 1951 -1954 162 Table 4.3: Japan's Imports from the Sterling Area, 1951-1954 163 Table 4.4: Commonwealth Exports to Japan, 1950-1952 164 Table 5.1: Cotton Piece Goods into Nigeria, 1937-1954 207 6 Usage The usual conventions concerning Japanese names are observed throughout this thesis, with the family name followed by the given name. The exceptions are for Japanese scholars who publish in English. Japanese words are romanized according to the modified Hepburn system. Long vowels are indicated by circumflexes but they do not appear in well-known place names such as Tokyo. Chinese names are given in Pinyin. The terms 'Far East1 and 'East Asia' have been used intermittently in the thesis due to the popular usage of the term Far East in the 1950s. An attempt has however been made to use East Asia wherever possible. Moreover, the geographical area described by both terms refer to China, Mongolia, Manchuria, Korea and Japan. The term 'Southeast Asia' refers to Burma, Thailand, Indochina, Malaya, Singapore, North Borneo, Indonesia and the Philippines. British interests in Southeast Asia refer to Britain's colonies in the region. 7 Abbreviations cif cost, insurance, freight COCOM Coordinating Committee CHINCOM China Committee CLC Commonwealth Liaison Committee CPCE Commitee on Preparations for Commonwealth Economic Conference ECA Economic Cooperation Administration ECAFE Economic Commission for Asia and the Far East ECOSOC Economic and Social Council EPB Economic Planning Board EPC Economic Policy Committee EPU European Payments Union ERP European Recovery Program ESB Economic Stabilization Board ESC Economic Steering Committee ESS Economic and Scientific Section FEC Far Eastern Commission FECB Foreign Exchange Control Board FE(0)C Far Eastern