Confidential report from Robert Brennan to Joseph P. Walshe (Dublin)
(108/63/39) (Copy)

Ever since the Japanese invasion of China began,¹ relations between the United States and Japan have been anything but cordial. The sinking of the U.S. Gunboat PANAY in December 1937 by Japanese aeroplanes² had a decidedly bad effect here, and ever since instances of maltreatment of American citizens in China by Japanese soldiers have not tended to improve the atmosphere. Quite recently, Mr. Joseph C. Grew, the United States Ambassador to Japan, gave great offense in Tokyo by denouncing Japan's policy in China, and only this week, Mr. Sumner Welles, Acting Secretary of State, said that the United States was taking serious notice of indignities heaped on U.S. citizens in Tientsin³ by the Japanese Authorities there.

Early this year, the State Department denounced the Trade Treaty of 1911 with Japan and this expires next January. At the same time, the Senate voiced a demand that an export embargo be placed on Japan. As the bulk of her war munitions come from the United States, it is clear that if such a policy were carried out, not merely would the campaign in China be jeopardized, but the whole economic structure of Japan might be endangered unless Japan chose to establish closer relations with Russia. Wall Street would not like the embargo, of course, since quite apart from the heavy American investments in China, the trade between the United States and Japan amounts to nearly five hundred million dollars annually. The State Department does not relish the prospect of Japan and Russia getting closer together and, consequently, they do not want the question of the embargo to be revived. There are intimations this week that the pressure indicated by the statements of Ambassador Grew and Mr. Welles is the forerunner to a bid for a new commercial treaty with Japan which would not only safeguard the present trade but would also involve the protection of United States interests in China. Mr. Fred Essary, the well informed Washington correspondent of the BALTIMORE SUN deals with the matter in the cutting enclosed.⁴

Some observers here are inclined to think that one of the big considerations behind this move is to lessen any tension there may be in the Pacific so as to give the United States a freer hand in the event of intervention in Europe.