83 Mr M. MacDonald, U.K. Secretary of State for Dominion Affairs, to Commonwealth Government

Circular Cablegram B114 LONDON, 19 October 1937, 4.01 a.m.

CONFIDENTIAL

Following is summary referred to in my immediately preceding telegram [2]:-

First objective Brussels Conference must be to reach peace by agreement. It is still uncertain whether Japan will attend; in her absence it is doubtful whether this objective can be attained unless or until some considerable change occurs in Japan's military or economic position. The Conference may thus be faced with the choice of (a) deferring any action in the hope that such a change will supervene.

(b) Expressing moral condemnation of Japan, without taking or promising any positive action.

(c) Embarking on positive action in the form either of active assistance to China or of economic pressure upon Japan.

Both (a) and (b) are open to the obvious objection that they are tantamount to acquiescence in the aggression. Either course could only serve as encouragement to peace breakers. Course (b) has additional disadvantage that it would further exasperate opinion in Japan to no purpose.

In these circumstances it would seem necessary for all the Governments to go to Brussels realising the full implications of course (c).

So far as assistance to China is concerned (even if the United States Neutrality Law were not an insuperable objection to it in the case of that country) it must be remembered that there are material difficulties in the way of rendering assistance. If it is to be effective it must directly or indirectly involve supplying China with war material. The sea route is, or will shortly be, the only practicable one, and if such supplies were to reach China on a scale large enough to affect the issue of hostilities, it is hardly conceivable that Japan would not extend the blockade to neutral ships. The alternative of acquiescing in the extended blockade or of keeping the sea route open by armed force would then have to be faced.

So far as economic measures against Japan are concerned, a preliminary investigation suggests that they might be effective if they were applied by all countries of the British Commonwealth, the United States of America and some six or eight other countries, provided that satisfactory measures could be evolved to prevent evasion through third parties and provided that the measures extended both to imports and to exports. We are pursuing our own study of this matter and will be happy to discuss it in all its aspects. Whether economic measures would become effective in time to affect the issue of war, unless China were simultaneously assisted, is perhaps doubtful. But irrespective of this, it would seem that if sanctions appeared likely to succeed in their object, there would be a very real danger of Japan taking violent action to prevent their success, either by making war on one or more of the sanctionist countries or by seizing the territory of some other Power from which essential raw materials could be derived. In view of this danger it appears that no country could afford to impose effective sanctions unless it first received from the other participating countries an assurance of military support in the event of violent action by Japan. It would also be necessary to guarantee the territorial integrity of the third parties. If such assurance were forthcoming it is possible, although of course not certain, that Japan would be deterred from taking any such action and that the knowledge that sanctions would eventually prove successful might lead her to consider an offer for peace.

These are briefly the considerations which present themselves to His Majesty's Government in the United Kingdom in their preliminary examination of the problem. They are, however, not a statement of policy, but an appreciation of the difficulties which must be faced and discussed if possible before the Brussels Conference meets. For this reason it is hoped that the United States of America delegation win be able to call here on their way to Brussels. [3]

1 Copies were distributed 2o October 1937.

2 Document 82.

3 Copies of cablegrams B113 and B114 were sent to R. G. Menzies (Attorney-General), R. G. Casey (Treasurer), W. M. Hughes (Minister for Health and for Repatriation), Sir Archdale Parkhill (Minister for Defence), and Dr Earle Page (Minister for Commerce) on 20 October 1937 with the following note: 'An interim reply only is being sent by the Prime Minister indicating that the views of the Commonwealth Government cannot be sent until after the elections. He feels the questions are so important that consideration by Cabinet is essential' (AA : A981, China 116). A copy of B114 was sent to Pearce (Minister for External Affairs), then electioneering in Western Australia, with a similar message and also with observations by Hodgson, Secretary of Department of External Affairs (Document 84). See telegram Hodgson to Heydon, 20 October 1937 on AA : A981, China 116.

[AA : A981, CHINA 116]