Your telegram 903. [1]

In speaking to Secretary of State [2] today about a matter
connected with Australia, I mentioned to him Menzies' [3] anxiety
about the possibility of a Russo-Japanese agreement and his view
that it was important to use every endeavour to bring about a
settlement between China and Japan. To this Secretary of State
replied that he entirely understood the natural anxiety of
Australia about the Far Eastern situation. He thought, however,
that at this moment universal execration of Russia would deter the
Japanese from entering into any agreement except about minor
questions and that the Russo-Japanese dispute and the Far Eastern
question was much too profound a difficulty to be settled by a
right about turn of this kind. He went on to say that the root of
American policy was to try and convince Japan that her present
policy of trying to make China an exclusive economic area while
expecting to be allowed to trade freely with the rest of the world
was foredoomed to failure and would only lead to the exhaustion
both of Japan and China and that the right policy was to return to
the open door in an independent China which would make possible
once more the investment of capital from which everybody would
benefit. The root to the trouble was the policy of the young
militarists and he thought that there was growing dissatisfaction
in Japan with this. It was the policy of the United States to hold
on to its rights inflexibly and to resist the attempt of Japan to
dominate China if necessary for twenty-five years in the
confidence that it would eventually prevail. I reminded him of the
position which Great Britain and Australia would be in if Japan
struck southward as a result of American policy but he said that
he did not think there was any serious likelihood of Japan doing
this so long as the United States pursued its present lines. He
said that he was doubtful of the wisdom of settling all minor
disputes with Japan because if they were all removed it might make
insistence on the larger policy more difficult.