Present Position

1. Two and a half years have elapsed since the United States proposed on July 11, 1947 the convening of a conference of the eleven states members of the Far Eastern Commission to draft a peace treaty for Japan, with decisions to be adopted by a two-thirds majority vote. Only China and the U.S.S.R. did not accept the proposal. The Chinese wanted to retain the FEC Big-Four veto procedure at the conference; the Russians wanted to have the Council of Foreign Ministers draft the treaty. There has been deadlock since then. Meanwhile, the United States, desiring to lighten the $500 million annual financial burden and to restore Japan to a state of peaceful intercourse with the rest of the world, has taken unilateral and piecemeal action to achieve these ends. Friendly countries have not been consulted and it is not to be wondered that a good deal of dissatisfaction has developed. Accordingly, during his visit to Washington in September, Mr. Bevin urged Mr. Acheson to have another good look at the possibility of concluding a Japanese peace treaty. Mr. Acheson agreed to push ahead with a re-examination of this whole question.

2. The State and Defence Departments in Washington have been discussing during the past three months the basic provisions they wish to see incorporated in a settlement with Japan. It is understood that the United States views on the substance of the settlement are to be in the form of proposals for discussion with interested friendly powers rather than hard and fast requirements, even though the views are to be approved by the National Security Council and the President.

3. It had been hoped that the United States views would have been available for discussion at the Colombo Conference. The latest information from Washington (December 22) indicates that differences of view between the State Department and the Defence Department over security requirements have not yet been sufficiently reconciled to enable the State Department to let us know before departure for Colombo the position reached in their thinking.

4. In these circumstances, it seems likely that the Conference will use the views expressed at the Canberra Conference in September 1947 as a point of departure for discussion of a settlement with Japan. It will, of course, be necessary to bring up to date those views in the light of international developments and developments in Japan during the past two years. It is understood that the Foreign Office has in preparation a brief for the United Kingdom delegation, and for possible circulation to the Conference should the occasion arise, which will deal with the Japanese peace treaty under the following headings:

          (a) An estimate of the position of Japan in the light of the overall strategic situation,

          (b) An attempt to reconstruct present United States views on a Japanese treaty so far as these are known, and

          (c) A draft outline of the principles for a peace treaty on which a measure of agreement might be reached.

It will be as important for the Colombo conferees to avoid establishing fixed positions which it might be difficult to maintain later as it is for the United States to avoid setting out hard and fast requirements which leave no room for discussion.

Security Requirements

5. With the development of post war tension between the Soviet Union and the Western powers it has become a primary United States objective to deny the industrial potential and large body of trained manpower of Japan to the Soviet Union. It has been the prevailing United States view heretofore that Japan could be most easily defended against Soviet domination by maintaining the United States occupation. Soviet forces are stationed in the Kurile Islands and South Sakhalin only a few miles away from Japan. They also have a powerful base at Vladivostok and their military influence extends into North Korea and China. There is an argument that if a peace treaty were signed now and Japan cast adrift, the Soviet Union and Communist China could be expected to exercise a good deal of military pressure against a demilitarized Japan. It is felt that the present arrangement with United States troops serving as garrison forces from the Okinawas to Hokkaido has a stabilizing effect within Japan and also is a guarantee against any possible high-handed measures from Russian or Chinese Communist quarters. It is understood that some influential officers in the United States Department of Defence continue to believe that a continuation of the occupation during the present period of international tension will serve United States strategic interests best. They argue that if a peace treaty and defence agreement were concluded with Japan, the United States would still have to pay for maintaining security forces in or near the Japanese Islands and would have less control and less flexibility than they have under present arrangements.

6. In August 1949, Mr. Kerman asked Mr. Denning of the Foreign Office informally how Commonwealth Governments would be likely to regard bilateral United States-Japanese security arrangements as part of a "non-punitive peace treaty providing for non-excessive post treaty controls". It would appear that the intention of this United States formula is three-fold:

          (a) To restore Japan to a state of peaceful economic and political relations with the world,

          (b) But to continue to deny to the Soviet Union the industrial potential and trained manpower of Japan by the conclusion of a bilateral United States-Japanese defence agreement, and

          (c) To prevent the Soviet Union from being able to meddle in Japanese affairs after the treaty by restricting the regime of post treaty allied control to a minimum.

7. The Canadian Government has favoured, for more than two years now, the conclusion of an early peace treaty with Japan. It would, therefore, have no objection to Japan being returned to a state of peaceful economic and political relations with other nations provided that:

          (a) The threat of revival of Japanese militarism and aggression was taken care of, and

          (b) Japan met the usual clauses of a peace treaty such as are contained in the European peace treaties.

8. As will be discussed below, Canada can have no real expectation of receiving any reparations from Japan but it would be logical to keep Japanese assets in Canada to offset in part against Canadian claims for war loss or damage arising out of the Japanese war.

9. There does not appear to be any reason for the Canadian Government to object to the conclusion of a bilateral defence agreement between the United States and Japan provided that the agreement does not call for or encourage the revival of Japanese militarism or build up to a threatening point the aggressive potential of Japan. It is obviously in the Canadian interest to see Japan's industrial resources and trained manpower continued to be denied to the Soviet Union. The United States is assuming that responsibility now and the formula by which it continues to do so in the future is not of substantive importance to us. It is assumed that any such defence agreement would not call for the deployment of larger United States forces in the Japan area than are now there. If the commitment was to be increased, it might be of some concern to Canada to question (although the political appropriateness of so doing is very doubtful) whether the commitment of an additional portion of the limited United States defence forces in the defence of Japan would be wise in the light of the greater critical importance of Europe and the Middle East in any future war with the Soviet Union.

10. The considerations discussed above are based on a view of Japan as a bulwark against the expansion of Communism in the Far East rather than as a menace to security in the Far East. This is, of course, a dramatic change of view from that prevailing at the end of 1945. It is argued by the Australians and others with some cogency that in United States' preoccupation with the Soviet menace they have lost sight of the long range possibility that Japan may once more re-emerge as an aggressor nation. This concern is dismissed by United States military analysts as unrealistic. General MacArthur has given it as his opinion that even with considerable assistance from the United States, Japan's war potential could not be built up to any threatening strength in less than 25 years. Everyone will agree that in the physical sense Japan has been pretty effectively demilitarized. Even the Japanese Constitution renounces war. Whatever the estimates may be of Japan's future physical capabilities for making wars attention should be given to those who hold tenaciously to the view that it is an important part of the peace settlement with Japan that everything possible should be done to preclude the re-emergence of Japanese militarism which cannot be submerged very far below the surface of thought in even a defeated Japan.

Economic Provisions

11. When the Far Eastern Commission initiated its study of the economic controls to be placed on Japan during the occupation period it was seen that the questions of Japanese industrial war potential and reparations were closely linked; hence the attempt was made to fix for the year 1950 a peaceful level of economic life for Japan based on the 1930-34 mean with suitable increases for population growth, technical advances, adjustments in foreign trade, etc. What was surplus to this peaceful level in the war supporting industries was to be made available as reparations.

12. The Far Eastern Commission has never been able to reach a decision on the levels to be permitted in the various categories of Japanese industry. The closest approach to an agreement is contained in a policy paper, FEC-242/32 which is based on original United States proposals (Pauley Reparations Mission). At present, all members except the United States, the Soviet Union and China are under official instructions to support this paper.

13. In addition, there has been failure to reach agreement on the percentage of reparation shares to be allocated each of the claimants. China and the Soviet Union have posed the greatest difficulties here. Canada put in a nominal claim for 1-59b of Japan's industrial facilities to be made available for reparations claims in order to make it clear to Canadians who suffered war loss or damage in the Pacific area that the Government is keeping their interests in nund. At the same time there has been practically no interest on the part of Canadian industries in obtaining Japanese industrial equipment. It would not be difficult, therefore, for the Canadian Government at a later stage to indicate that Canada is prepared to forego its share of industrial reparations while retaining control over Japanese financial assets in Canada at the outbreak of war.

14. Following the visit of various United States committees to Japan, the United States representative announced in the Far Eastern Commission on May 12, 1949 that his Government had decided to suspend reparations removals from Japan and to rescind United States interim directive of April 4, 1947 which had provided for an advance transfer program of reparations removals. In an Aide-Memoire handed us by the United States Embassy at that time the position of the United States Government with regard to reparations and level of industry in Japan was set out. It pointed out that the United States Government was compelled to drastically reduce its earlier estimates of the reparations which Japan could afford to pay. The loss of Japanese property had reduced Japan's ability to support even on a minimum level the needs of its people. With a constantly increasing population, Japan, it was stated, would require all of its present resources "and more", to maintain itself. The Aide Memoire emphasized that the deficit in Japanese economy had been home by the United States Government which was now determined that the burden should be reduced. It was also stated that once it had been made certain that Japan could not recover its capacity to make war, no limitation should be imposed on its peaceful productive capacity. 15. A review of the position adopted by Australia, New Zealand and the United Kingdom with regard to the United States action may serve to indicate the trend which discussions may take in the Colombo Conference with regard to the reparations and level of industry problem,

16. Upon receiving a United States Note similar to the Aide Memoire which we received, the Australian Government replied that to date inadequate evidence had been presented in support of the contention that no surplus capacity was available for reparations. However, in a statement which was made in the Australian House of Representatives, the Australian Minister for Defence said that a strong case could be made out in support of the argument that Australia should not take war reparations from Japan, that Australia should give Japan an opportunity to build up an economy which would give its constantly increasing population a chance of a decent standard of living and that when the matter came before the Far Eastern Commission, the opinion of the dominant member of the Commission (the United States), would have to be weighed very carefully.

17. The New Zealand delegate to the Far Eastern Commission stated in connection with the reparations question that the Government of New Zealand "...in assessing the respective claims of Allied security and Japanese viability-which in its view is the fundamental issue involved-the New Zealand Government finds itself confronted by a number of conflicting estimates of existing productive capacity in certain of the "war supporting industries: in Japan and it is embarrassed by the absence of any precise and official estimate of the magnitudes upon which the statement of the United States Government is based; therefore he had been requested to obtain the "latest official figures' on the subject".

18. In a statement which Mr. Bevin made in the British House of Commons on October 19, 1949, he said that "...it would be misleading to hold out any hope that Japan will ever be able to pay any further substantial reparations and at the same time pay her own way in the world".

19. The most recent statement with regard to Canada's position on the problem is contained in a personal message which the Prime Minister, Mr. St. Laurent, sent to Mr. Attlee through Sir Alexander Clutterbuck on July 22, 1949. In this letter, the hope was expressed that the United States might be persuaded to agree to accept a reduced but still viable level of industry for Japan, which would not be regarded as menacing to Japan's Pacific neighbours.

Post Treaty Controls

20. As regards the regime of post treaty control in Japan, the Canadian Government has always been anxious to see this kept to a minimum, consistent with the maintenance of security precautions and observation that Japan is fulfilling her treaty obligations. It is in the Canadian interest to see that the Soviet Union is not permitted to take advantage of any regime of post treaty control to meddle in Japanese internal affairs. Since Canada did not assume any direct responsibilities in the immediate post surrender occupation of Japan it seems unlikely that there would be a disposition in this country to assume any extensive responsibilities in regard to a regime of post treaty control in Japan. If Canada is not prepared to accept such responsibilities it would be difficult to expect other countries to continue indefinitely to do so on our behalf if they were not disposed to do so. In these circumstances, it should not be too difficult to work out post treaty control arrangements which would be satisfactory to Canada and the United States.

Procedure for the Settlement with Japan

21. On July 11, 1947, the United States Government proposed that a conference of representatives of the eleven states members of the Far Eastern Commission should be convened to discuss and draft a peace treaty for Japan with decisions to be adopted by a simple ys majority. Nine of the eleven members of the Far Eastern Commission (Australia, Canada, France, India, the Netherlands, New Zealand, the Philippines, the United Kingdom and the United States) favoured this proposal. China took the view that the voting procedure employed in the Far Eastern Commission would be more appropriate. In that body, decisions are taken by a majority vote including the concurring votes of China, the United Kingdom, the United States and the U.S.S.R. The Soviet Union rejected both these procedures and insisted that the Council of Foreign Ministers comprising the representatives of China, the United States, the U.S.S.R. and the United Kingdom should draft the peace treaty. In a note addressed to the United Kingdom Foreign Secretary on July 3, 1948, Mr. Molotov further clarified the Soviet attitude. He said that in the Soviet view adequate provision for the expression of the views of other interested powers in the drafting of the Japanese peace treaty might be made through a procedure similar to that suggested for the German peace treaty. This envisaged a series of committees and subcommittees and a conference for information and consultation.

22. At a meeting of the Council of Foreign Ministers on June 20. 1949, Mr. Vyshinsky proposed that the Council should agree upon a date for a meeting to deal with the peace treaty for Japan. Mr. Acheson said that other countries were interested in this matter and the Council of Foreign Ministers was not the appropriate body for its discussion. Mr. Schuman said that the French Government had accepted the suggestion made by the United States Government two years ago and they maintained their decision. Mr. Bevin also confirmed that the position of the United Kingdom Government had not changed.

23. Mr. Vyshinsky in a lengthy speech claimed that under Potsdam Agreement Council of Foreign Ministers and not Far Eastern Commission was the appropriate body to draw up Treaty for Japan. He hinted that intention of Western Powers was to exclude China and repeated with emphasis that sole and legitimate body to deal with Japanese Treaty was Council of Foreign Ministers. Members of Far Eastern Commission who were interested would come in after the Council of Foreign Ministers had drafted a Treaty in the same way as other nations had been brought in after the Council of Foreign Ministers had drafted Treaties for Italy and the satellites. Mr. Acheson refuted Mr. Vyshinsky's arguments on the following grounds:

         (a) Japanese Treaty was not referred to at all in Potsdam Agreement.

         (b) At time that Postdam Agreement was signed, Soviet Government were not even at war with Japan.

         (c) "Tasks" for which the Council of Foreign Ministers was established were clearly the preparation of Peace Treaties for satellites, Italy and Germany.

         (d) No Government had claimed more loudly than the Soviet Government that those who had bome the brunt of war should bear major share in peace-making. Soviet Government could not claim to have home the brunt in the Pacific war. Other nations represented in the Far Eastern Commission had borne the brunt and they must participate in peace-making not only as consultants but as equals. It was useless to continue present debate. Mr. Vyshinsky agreed that it was pointless to continue the argument. He took exception, however, to Mr. Acheson's statement drat the Council of Foreign Ministers was not competent to consider the Japanese Peace Treaty.

24. If the United States proceeds with its present intention to draft and submit to friendly powers for continent broad proposals for a settlement with Japan, some progress will be made in giving the rest of us a broad view of United States intentions which will clear up the present unsatisfactory piecemeal approach to the problem. It seems likely that the essential provisions of the United States draft will be brief and in a form which would not exclude the later conclusion of a bilateral defence agreement between the United States and Japan. When the United States has the comments of friendly members of the Far Eastern Commission it will be possible for them to tell whether they can expect the support of a 2/s majority at a peace conference for their proposals. If such support is not evident, there would be little purpose in the United States proposing a conference which would include the Soviet Union and Communist China (assuming that by that time the new regime in Peiping is recognized). If there is satisfactory support for the United States draft then consideration might be given to inviting the Soviet Union and China to attend a peace conference with decisions to be taken by a 2/s majority. Should they refuse to attend, consideration might then be given to whether it would be desirable to conclude a separate peace treaty with Japan or simply postpone the peace treaty but agree upon an interim settlement with friendly powers which would have the effect of bringing Japan back to as normal a state of intercourse with the world as possible.

25. The Canadian Government will, of course, wish to give full recognition to the primary responsibility which must rest upon the United States Government in the formulation of policy for Japan while it continues to bear the major responsibility for the occupation and economic support of Japan and since it would have to bear the heaviest burden in the event of any misstep in relations with the Soviet Union and China over the settlement with Japan.