Created: 11/14/1947

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The basic problem delaying conclusioneace treaty with Japan at the present time lies in the question of whether Japan Is to be permitted toemocratic stale or is to be eventually drawn Into the Soviet orbit.

The Soviets for the present will negotiate only on their own terms. These termseto power, the use of which could lead to an Impasse in which only two practicable alternatives would be left: to delay formationreaty indefinitely or drawreaty without Soviet participation.

The first of these would allow continued US occupation of Japan. This, in effect, would give theilitary counterbalance to the Soviet position In the Far East and would permit continued democratization of Japan. Op the other hand. Indefinite delay might lead to the negotiationcries of individual treaties whose possibly conflicting provisions would lead to confusion and an unstable International situation. However, the superior bargaining position which the US would enjoyesult of its occupation of Japan might eventually cause the USSR to enter into treaty negotiations on US terms. This would be done by the Sovietsiew to eliminating US troops,US influence, and providing the USSR with greater economic and political access to Japan.

The second alternative, thatreaty not embracing the USSR, Involves the question of whether or not all other interested powers would participate. The Chinese have Implied that in view of Article II of the Suio-Soviet Treaty5 which prohibits both countries from independently entering into negotiations with Japan, they probably wilt not be partyreaty concluded without Sovietrincipal Chinese motive behind this stand isesire to obtain USeasonable assurance of assistance and support would probably overcome Chinese reluctance to participate. Should the Chinese not participate, the UK has indicated that it also may stay out. reaty unsigned by these three nations would have little meaning.

reaty without Soviet participation, general agreement on allpoints could doubtless be obtained. It would have to be recoenircd, however, that ifreaty were to be formulated, the USSR might be disinclined to supply Japan with ncded raw materials from Soviet-controlled areas, and that the USSR would beosition to receive most of the benefits of the treaty without accepting any of Its obligations and thus would remain free to violate its provisions with impunity. The USSR, moreover, would have ample time to study the treaty's disadvantages and weak points, while the Japanese would beetter position to manipulate US-Soviet mutual fear and suspicion to their own advantage.

Further discussion of problems arising from the Japanese peace treaty is contained in Enclosureummary of the position of each power in Enclosure II

Noun This paper has been cooidmaled with lhe Intelligence orcanUnUons or lhe Department* of Statu. Army. Navy, and Ale Fanes.



Were It not for thc intransigence of the USSR, formationeace treaty for Japan shouldomparatively simple matter. All powers with Asiatic Interests have proclaimed their desire: (a) to be secure from any future threat of Japanese aggression; (b) toapan oriented toward "democratic" Ideas; and (c) to restore Japan so that It can contribute to the economic stability of the world without becoming an economic threat

Most of the Interested powers, with the notable exception of the USSR, are In general satisfied with the democratic Institutions now being developed in Japan under the new constitution. (The United Kingdom and Its Dominions, however, areskeptical as to the degree of democratization that has been obtained, and raise what may Indeedegitimate question as to whether these present democraticwill continue to develop without continued firm guidance and supervision from the Allied powers.)

It would appear then, that there should be no Insurmountable difficulties In Lhe formulation of an early peace. However, the real Issue and the one that Is of vitalIs whether or not Japan Is going to be (a) permitted to continue to develop along democratic lines which will eventually enable it toarge contribution to the economy of the Far East and Pacific area, or (b) be eventually absorbed, politically and economically, In the Soviet orbit.

The conditions outlined in (a) above could be brought about by theof the US proposals which callreaty to be drafted by the powers actively engaged in the war with Japan, andimple two-thirds majority vote to govern the drafting The US proposals, however, are unacceptable to the USSR. I. Factors Bearing on the Treaty. a. Soviet Reaction to US Proposals.

Thc Soviet Union Is concerned primarily with preventing Japaneseunder the domination of the US and Is dissatisfied, if not alarmed, by thcof US influence in Japan. Interpreting US intentions as designed to build Japanpringboard against the Soviet Union, the USSR will not at present attend the prospective Japanese peace treaty conference unless It can be sure that no proposal to which it has serious objections will be accepted.

In view of these aims, the USSR has been adamant In Its position that the Japanese peace treaty shall in the first instance be undertaken by the Council of Foreign Ministers under thc same conditions as were applied to the European treaties. Should Soviet protests be Ignoredeace conference called without the USSR, the Kremlin might eventually join In thc negotiations with the aim of bringingeace treaty with Japan which would (a) further reduce US control in Japan, thusreer development of Communism, and (b) Increase the possibility ot Soviet exploitation of Japanese trade. While both these results arc desirable from the Soviet standpoint, other considerations indicate that the Kremlin will, for the present,

consider it more advantageous to abstain from participation unless assured of the right to veto.

By abstaining from participation In the peace conference the Kremlin would beosition to take Independent action at some future date. The peace treaty drawn up by the other powers could be adhered to or not, depending on the relative advantages to the USSR. The Soviets could receive most of the benefits ofreaty without accepting any obligations and thus remain free to violate itswith impunity. Above all, the Soviet Union would be free to negotiate apeace with theapan aware of the proximity of Soviet military strength and desirous of concluding peace with all its former enemies, might beto grant political and economic concessions which the Soviets would use to facilitate Communist penetration in Japan. The Japanese, on their part, would be in'a better position to manipulate US-Soviet mutual fear and suspicion to their own advantage Any treaty drawn uproup of powers including the US but excluding the USSR would be designed to obviate this possibility. The USSR, however, as pointed out above, will not be bound byreaty and will have ample time to study ils advantages, disadvantages and weak points, b. Chinese Reaction to US Proposals.

The problem of convening the initial conference Is further complicated by the attitude of China, which now finds itself caught squarely between the conflicting vital Interests of the US and the USSR. China still desperately needs US aid, and for as long as the probability of obtaining such aid exists, China will be loath to oppose the US proposalseace conference either with or without USSR participation. Also. China's traditional policy of alignment with Western democratic powers may further tend to prevent collaboration with the Soviets.

On the other hand, the Soviet position in Siberia and Korea is an ever-present threat which cannot be opposed by China Furthermore, the USSR is at presentstrong military forces in the Dairen-Port Arthur area and, by USSRof the Sino-Soviet agreement oft may legally maintain these forces until peace with Japan has been formally established. The Chinese, painfully aware of this fact, will exrrt every effort to bring about Soviet participation in thepeace conference.

Finding itself thusilemma, China has endeavored to free itself by playing off the US against the USSR. Chinese key offiicals have made statements in public and In the press lo the effect that China's interestseace treaty with Japan are parallel to those of the Soviets and thatapprochement with the USSR Is desirable. In this connection emphasis has been laid by Chinese officials on Article II of the Sino-Soviet Treaty5 whereby both countries "undertake not to enter into separate negotiations with Japan and not to conclude, without mutualany armistice or peace treaty either with the present Japanese government or with any other government or authority set up In Japan which does not renounce all aggressivet the same tune, tbc US has been assured by no less athan the Generalissimo that China's fundamental foreign policy remainsand that the bonds of traditional Sino-US friendship are strong enough to weather the storm of clashing national interestseace with Japan.

Whether or not China remains aloofonference not attended by the Soviets appears to be contingent upon the prospects for US aid to China. It appears that the Chinese would feel they could afford to interpret Article II of the Sino-Soviet Treaty so as to permit their attendanceeace conference without Sovietonly if sufficient guarantees are made by the US. Thereeal danger that without hope of further US aid China may, in an attempt to postpone an inevitable Central Government collapse, align Itself with the USSR. However, it Is believed that any legitimate hope of US aid. plus the knowledgeapprochement with the USSR could lead only to eventual Communist control of all of China, would cause the Nationalist Government, in the final analysis, to support thc US proposals, c. UK Reaction to US Proposals.

Thc UK has expressed general agreement with US proposals; however, It has indicatedonference from which both the USSR and China were absent would be futile and the successonference held without their participation would be jeopardized. Under these circumstances the UK would reserve Its right not toThc UK believes, however, that Chinese participation ran be assured by adequate US guarantees of assistance and support to China.

2. Probable Developments.

A consideration of the factors outlined inbove Indicates that events relative to the future peace of Japan will probably develop along one of the following lines: (a) the formulation of the treaty could be postponed and Japan permitted to continue Its development along present lines under SCAP or similar authority;reaty could be formulated without thc participation of the USSR; orreaty could be formulated, participated in by the USSR but only under conditions dictated by the Soviets.

Postponement of the peace conference would present the US with certainIt would: partially offset the Soviet position in the Far East by permitting the continued maintenance of US armed forces in Japan; greatly retard thc infiltration of Communism into Japan; allow the continued development of Western democratic Ideas and institutions and make possible further orientation of Japan toward the US On the other hand, indefinite delay might eventually be terminatederies ofpeace treaties whose conflicting provisions might give riseelicate and unstable international political and economic situation

A treaty without the participation of thc USSR could probably be formulated and all outstanding differences between thc interested powers resolved without too great difficulty.ourse of action wouldettlement of the question ofand removalsecision would be aimed at as to thc future leveU of Japanese industrial capacity. Thereupon. Japan would be able to rehabilitate her economy and accordingly contribute to thc economic stability of Asia and the Pacific In such case, liowever. thc raw materials from Manchuria and the Soviet-controlled portion of Korea, as well as those from Communist controlled North China might not be available to Japanese industry. Thc needed materials would then have to be supplied from Southeast Asia and Southwest Pacific areas and from thc US.

Moreover,reaty would leave the USSR with complete freedom of action. To avoid this, stringent provisions would have to be written Into the treaty which might evenontinued occupation of Japan by strong military forces.

It appears that, at present, the only way to insure Soviet participation would be the acceptance of Soviet. that the treaty be initiated by the Council of Foreign Ministers with each possessing the right of veto. The effectiveness of this method, as Illustrated by the attempt toeace with Germany, isatter of history. Furthermore, the Interested powers, other than those represented by the Council of Foreign Ministers, would resistourse of action with every means at their disposal.

It Is possible, however, thatater date the USSR might be willing to participate. Factors which would strongly influence Soviet participation would be (a) conviction on the part of the USSR that the "inevitable" economic depression in the US might not materialize and consequently US troops might remain in Japan indefinitely and/orarge measure of Japanese political stability and economic recovery appears Imminent. It Is believed that under the circumtances mentioned above. Soviet self-interest may eventually impel them to relinquish the veto and assent to negotiations to be conducted according to US proposed procedure.

3. General Alignment or Powers.

Whether or not the USSR participates, seven countries may be expected to give general support, often strong support, to the US: Australia. Philippines. Canada the Netherlands, UK, New Zealand, and France The Philippines. France, and thewill follow the US lead very closely except on some minor Issues. The UK, Canada, Australia, and New Zealand may on occasion find themselves torn between Commonwealth Interests on the one hand and American interests on the other. In most instances, however, these interests will not diverge widely. The results of the Canberra Conference indicate that there will be no linlng-up of the whole Britishto defeat the American position, rather the majority of these powers will support the US stand as the one which will insure their future security.

The most sensitive powers, aside from the USSR, will probably be China and India. China's immediate post-war opportunities for domination ofcommerce arc rapidly being diminished under the twin hammerings of internal strife and grave economic difficulties. Its altitude on any given issue will beby these factors combined with the pressure of internal public opinion,of Soviet proximity, desire for prestige abroad, and hope of acquiring Japan's prewar dominance of Asiatic trade In the final analysis, however, particularly if US aid appears to be forthcoming, China will probably support the US stand on most Issues. India will desire to speak not onlyewly independent power bul also, as far as possible, as spokesman for Southeast Asia. India's position will be colored by Pan-Asiatic sentiments which will result In opposition by India to any increase of Western Influence or prestige in Asia.

Conflict between lhe US and powers other than the USSR appears to be most probable on the questions of reparations and economic recovery. The issue of Japanese economic recovery raises before the various powers the specter of Japanese economic and


miUtary agression as weU as thc more, Immediate threat ot commercial rivalry As it0 COnlr01lnduStria' ^opment through the umltaUou

I more Hi" Ud ta

a more rapid Japanese economic recovery, particularly as regards Ught Indusb^



It is expected that lor trie present the USSR will not agree to attend the prospective Japanese peace conference under the conditions proposed by the American invitation. It will continue to demand veto or equivalent powersrerequisite for Soviet attendance. If at some future dale the USSR should feci that lis conditions for participation were being met. or that self-interest demands that it take partonference, it would probably pursue the following objectives:

establishmentost-treaty control structure establishing theof veto;

withdrawal of all occupation forces;

men Ls to keep Japan's industryevel which would make Itfor Japan to riseilitary or strong economic power in thefuture;

elimination of Zaibatsu control over Japan'sedistributionthe nationalization of major Industries, and the granting lo labor ofIn the control over Japan's industry;

reorganization of Japan's political structure bi order to: limit if notthe Emperor; eradicate or radically restrict the Influence ofgroups; andaximum voiceopular assembly inand other groups (intoarge degree of Communistwould become possible) would dominate.

The cardinal principle behindrogram would be the establishment of conditions whereby American Influence in Japan would be progressively weakened and Soviet Influence correspondingly strengthened with the passage of time

Present Soviet planning relies heavily on the eventual withdrawal of the US. forced by the "inevitable" depression in the US. In the meantime, the initial stages of Soviet penetration can be accomplished through the careful use ot theCommunists This process has the advantage of being gradual; with properno one step Is likely to be sufficiently drastic to produce an effectivein other countries presumably occupied with internal difficulties. The threat of military forces located in nearby Soviet-controlled territories will provide effective psychological support for the Japanese Communists if and when the US forces are withdrawn. Should the depression and the withdrawal of US troops appear to the USSR to be indefinitelyie possibility ol its eventual parUcipalionface treaty on US terms should not be overlooked.

The Soviet Union ultimately desires both agricultural and industrial production to be subordinate to and dependent upon Lhe USSR. US policy in Japan now makes this objective immediately unattainable. As long as this occupation of Japan continues.

Cp V


the USSR willow level of Japanese Industry, particularly heavy industry. Should Soviet domination ot Japan materialize, the USSR would probably build up only light Industry and consumer goods production. Heavy Industry would be confined to the Soviet Union and Sovlct-dominalcd territory. Agriculturally, the USSR willland redistribution, largelyolitical measure to gain support for the Japanese Communists.

The USSR also desires domination of Japanese international trade. To further this objective, the Soviets will oppose any US attempt to revive Japanese trade along prewar lines. They will urge Soviet reparations from current production, and will strenuously attempt, through barter agreements, totrong foothold intrade for exploitation at some future date when Japanese trade is freed from allied control. The potential wealth and proximity of Siberia, combined with state-controlled trading, give the Soviets an advantage over private traders from the West In this respect. Should Soviet political domination of Japan materialize, the Soviets would beosition to confine Japanese commercial relations to the Soviet Union, increasing Japanese dependence on the USSR.


Chin* will notteadfast and consistent position with respect to the Japanese peace treaty. Most probably, the Chinese approach will develop In three distinct phases.

First of all, In view of the Sino-Soviet Treatyhina wUl make every effort to secure the participation of the USSR, Falling this, China probably will, though reluctantly, agree to participate ln the conference without the USSR, If China believes US aid will be forthcoming.

Should the USSR attend the conference, the Chinese representatives willtand on the procedural phase of the conference, seeking tooting system that will giveajor voice along with the US, the USSR, and the UK. thereby minimizing the role of the British dominions, France, and the Netherlands.

When discussions of the treaty's substance begin, China willighly vocal advocateocumentaximum of punitive provisions. This willecessary position for home consumption and will be maintained throughout most ot the conference.

In the final stages, the Chinese negotiators are likely to accept the major items in the US position on the treaty, particularly if concessionsrcsUge-making character can be secured on other issues. That Is to say. the Chinese willreaty that can be presented at home without danger of an overly violent adverse public reaction; to minimize this danger, the negotiators must have some victories, even minor ones, to carry back with them.

Japan's recovery would, Uie Chinese fear, restore the prewar pattern of Japanese economic predominance In the Far East. If Japan's export capabilities were to be limited by the peace treaty, China feels she might eventually become the major supplier of consumers' goods to the Far Eastern markets.

China's present economic situation Is desperate. Inflation is running unchecked at home, and In International trade China's net position is very unfavorable. Within limits, trade relationseviving Japan would hold forth some promise ofthis situation. For commodities such as salt, coal, and iron ore. Japan is China's chief market. At the same time. Japan mightource from which China would obtain, at prices below those prevailing in world markets, some of the manufactured and semi-processed goods needed to sustain the economy of Nationalist China in the civil war. The possibilities of Sino-Japanesc trade may be over-estimated, bul in China's predicament the hope of even minor gains may be sufficient to warrant supportapanese recovery program.

However, it Is believed that in its desire to replace Japan as the leadingnation of the Far East. China is more likely to advocate measures whereby Japanese economic revival might be prevented. China considers that the Far Eastern Commission decision to restrict Japanese industry toevel establishes tootandard and would prefer touch lower level adopted. The reduction of Japan's level of Industry would also keep Japan militarily weak and decrease the possibility of political penetration of China and other Asiatic areas. The resumpuon of trade relations with Japan is not being received with enthusiasm, and in this regard

the State Council of the Chinese Government has passed regulations restrictingfrom Japan to certain non-competitive items. An; eflort of the US to "crank up" the Japanese economy will be attacked by China for security and commercial reasons. China should acquiesce on this point, however, as her prospects fora sizable exporter in the near future are negligibleevived Japan might help relieve the economic situation in Chinalight degree.

China's over-all position regarding Japan's future geographical limitations is that Japan should be reduced to the four main islands as advocated by the Cairo Declaration. Without special Interest in the Kurils, China, for the sake of consistency, will probably oppose the return of the Southern Kurils to Japan. China should vigorously object to Japanese retention of the Ryukyus and presumably will lay claim to this archipelago herself, although economically not equipped to undertake such governingThe occupation of Formosaatter that the Chinese will wish lo have legalized by thc treaty. Chinese negotiators may ask to have reefs and Islands In thc South China Sea explicitly assigned to China by the treaty. China's representatives will askpecific renunciation of Japan's extraterritorial rights, privileges and concessions in China.



iii. lx)min10ns of india and pakistan the dominion of india will seek in thc peace conference on opportunity as an independent power to bolster its international prestige.eading oriental power india is concerned that japan not be impoverished or denied means of legitimateon grounds that smack of racial prejudice or the intention of western nations to keep the orient under permanent subjection.

a pan-asiatic exponent. india will likely object to the large majority of non-oriental powers at the peace conference and seek to place the responsibility for the futureof japan and its demilitarization under thc united nations.

india will not wish to align itself with the soviet viewpoint exclusively nor with an anglo-american bloc. it is anticipated that india may echo soviet sentiments on such issues as us unilateral action. favoring an early peace, the dominion does not agree with the kremlin's demands for decisions by the big four. instead, sheultilateral conferenceoting procedurewo-thirds majority.

it appears that india is tornesire to resume her profitable prewar trade with japan while fearing thc repercussions of japanese competition on certain of her infant industries. indiaefinite fear of ulterior motives in the us pump-priming of japanese economy.

the dominion of pakistan hasesire to be represented at the japanese peace conference and it is anticipated that this request will be granted by the other allied powers. sufficient evidence is lacking to permit an accurate forecast ofposition at the peace council. it is presently believed, however, that while her policies will follow more closely those of the us and the uk than will the policies of the dominion of india, she shows the usual oriental apprehension of continued western attempts lo dominate asia


IV. BltrriSH COMMONWEALTH The results of the Canberra Conference Indicate that thc Commonwealth policy Is based upon the maintenance of US strategic interests in the Pacific. With thcof India on some issues. Commonwealth interests will not oppose Americanon the Japanese peace settlement. Departure from this policy may occur on the questions of Japan's economic recovery or on the extent of democraticIn Japan.

Britain apparently feels that prefabricated democratic reforms cannot be exported to Japan without fundamental institutional changes, particularly In the labor sphere Thc Commonwealth would regard Japanese economic recovery without such changesotential menace to her own living standards. This Is particularly true of thc UK

The Australian attitude may on occasion be motivated by Australia's desire for recognition as one of the "principal powers" In Pacific affairs.


Officially lhe Philippine Government has gone on record as favoring an early and moderate peace treaty with Japan. The strength of Philippine-American economic and political relations indicates that the Philippines will follow American leadership on most peace treaty Issues. The Philippines probably will argueargershareore ambitious removals program than that proposed by the US Fearing Japanese competition, the Plulippines will also resist proposals to revivelight industries. On none of these questions, however, Is the Philippine position likely to bentransigent as to result In an outright vote against the AmericanThe Philippine attitude on the US positionls the USSR Is colored by Irritation at the Soviet refusal to recognize Philippine independence.



The Interests of both France and the Netherlands In the peace treaty have thus far not appeared to be great. It is likely that both countries will support the US on any Issue which does not appear harmful to their own Interests. As colonial powers that have suffered great loss of prestige in the War, France and thc Netherlands will attempt to use the Conferenceounding board for regaining prestige. Should the Japanese Peace Treaty be formulated priorreaty for Germany, France will be motivatedesire to avoidrecedent for tooeace. The Netherlands Is motivated by (a) the economic requirements of thc Dutch position in Indonesia and (b) the desire torecedent for the participation of thc small interested nations In thc discussionseace treaty for Oermany,

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