Foreign Relations of the United States, 1947, The Far East, Volume VI

740.00119 PW/10–1947

The Department of State to the Chinese Minister for Foreign Affairs (Wang)⁴¹

Aide-Mémoire

The Department of State has studied the aide-mémoire on the Restitution of Japanese Looted Property presented by the Foreign Minister of the Chinese Republic on October 9, 1947.

The Department is pleased to be informed that the Chinese Government wishes to accept, in a spirit of compromise, the provision in the pending revision of Far Eastern Commission policy on restitution which calls for establishment of a “secured fund.”

The Department wishes to observe that China’s hope to base a loan, so large as $150 million, upon China’s ultimate share in the contemplated “secured fund” seems to reflect some misunderstanding of the nature and probable size of that fund. To assist in clarifying the position, the following observations are offered.

The Supreme Commander for the Allied Powers is now acting upon a directive regarding restitution of looted property which was issued to him in July 1946. That directive embodied a policy decision which had been approved unanimously in the Far Eastern Commission.⁴² The United States Government was and continues to be satisfied with that policy. When it became apparent, however that a majority of the other FEC countries desired to enlarge the scope of existing restitution policy, the United States Government stated that in the interests of accomplishing a just, comprehensive and prompt agreement on what seemed to be the principal restitution problems, it could agree to the following: Property eligible for restitution from Japan as loot should include not only that property found in Japan which could be identified as having existed in Allied countries prior to their occupation by the Japanese (as the Far Eastern Commission policy now provides), but also property which could be identified as having been produced in Allied territories occupied by the Japanese during periods of such occupation. For example, if identified as to origin or ownership, such commodities as tin or rubber could be restored to an Allied country as loot even if that tin and rubber had been produced during the period of Japanese occupation. Further, the Supreme Commander for the Allied Powers should apply relaxed standards of identification in determining whether or not property should be considered to be loot. In cases of doubt, his presumption should be in favor of the claimant country whenever permitted by the broadest application of law, equity and common sense. Finally, the Supreme Commander for the Allied Powers should set up, inform and seek the assistance of an inter-Allied technical advisory agency when there arose any conflict between claimant countries for property known to have been looted but not clearly identifiable as to particular origin or ownership. However, the United States Government stated that it could approve these modifications in the existing Far Eastern Commission policy only if the Far Eastern Commission would accept a formula providing for establishment of a “secured fund” made up from the liquidation of that property which could be defined as having been looted but could not be identified as to any particular ownership or origin. The “secured fund” would be distributed in dollars or some other acceptable currency to the seven Japanese-occupied Allied countries prior to a specified date but, in the meanwhile, would be available for use by the Supreme Commander for the Allied Powers as collateral or as payment for imports required for self-liquidating production programs in Japan.

The United States Government believes that the effects of this pattern of proposals would be to expand greatly the quantity and value of property moving to claimant countries on restitution account, to establish a simple and fair procedure for administrative handling of property known to have been looted but ineligible for restitution because unidentifiable as to a particular origin or ownership, and to require a small Allied contribution, over a short period of time, to the accomplishment of the economic objectives of the occupation.

By the terms of the directive upon which the Supreme Commander for the Allied Powers is currently acting, he is not authorized to define as loot property to which clear title cannot be established, to effect restitution, or to dispose of it except as Japanese property. If the proposed changes in the restitution policy are approved and a “secured fund” established, the Supreme Commander for the Allied Powers would have to apply, over some period of time, the relaxed standards for identifying property as having been looted before the amount of “unidentified loot” could be determined.

The United States Government cannot foresee at this time what the value of the “secured fund” will be. Nor can it estimate China’s share in the fund, whatever its size, since that share depends upon the award which China will receive in the Far Eastern Commission’s pending decision on authorized reparations percentages of industrial reparations from Japan.

Accordingly, it follows that it would be premature to discuss, except in principle, the question of a Chinese loan for which China’s equity in the “secured fund” could serve as security. However, in principle it would be the Department’s desire that full consideration be given at the appropriate time to the suggested loan referred to in the Chinese aide-mémoire.

Washington, October 19, 1947.

41. Handed under instructions of the Secretary of State to the Chinese Minister for Foreign Affairs at New York on October 19 by the Director of the Office of Far Eastern Affairs (Butterworth).
42. For policy decision FEC–011/12, July 18, 1946, see Activities of the Far Eastern Commission, p. 80; for amended text, FEC–011/18, October 10, 1946, see ibid., p. 83.