Until the summer of 1941 the United States declined to deploy its most powerful economic sanction against Japan, dollar freezing. In the meanwhile, beginning as early as 1935, it sought to regulate its position as the world’s most important supplier of materials for war. The first steps, taken at a time when Japan was not yet an aggressor in China, were aimed at keeping the United States from being drawn into another foreign war. Later steps were taken by so-called voluntary means and by executive orders to ensure that the nation’s exports did not support Japanese aggression in China.
The United States’ initial step was the Neutrality Act of 1935. Hitler was consolidating his power in Germany, Italy was about to attack Ethiopia, and a disarmament conference at Geneva had failed. Congressional isolationists proposed legislation to avoid a war trap by restricting exports of munitions to countries engaged in war. In response to their concern, Senator Key Pittman of Nevada sponsored the Neutrality Act, which was passed by joint resolution of Congress and signed by President Roosevelt on 31 August 1935. The act forbade export of “arms, ammunition or implements of war,” directly or through third countries, to any nation at war. It banned U.S. ships from transporting arms to belligerents, prohibited Americans from sailing as passengers on their ships, and closed U.S. ports to their warships. Munitions-producing firms were obliged to register with the secretary of state and to list their products. A National Munitions Control Board consisting of five cabinet secretaries and chaired by the secretary of state was charged with promulgating regulations and administration. Although all arms exports required licenses from the Department of State, the act did not target Japan because licenses were automatically granted for arms sales to neutrals for their own use, and Japan was not yet at war.
FDR, advised by the Munitions Control Board, defined six categories of exports subject to licensing, with a focus on air power that became a theme of U.S. policy in the next few years. Weapons were self-evident: rifles, machine guns, cannon, and ammunition; bombs, naval mines, and torpedoes; tanks and armored cars; warships of all kinds; poison gas; and aircraft designed to carry guns or bombs along with weapons mounts and racks. Category IV, however, extended the list to all aircraft, engines, propellers, and parts, whether or not adaptable for combat, reflecting a special sensitivity to the bombing of civilians. (Ships and vehicles convertible to combat were not limited.)
Roosevelt wished for flexibility to embargo munitions sales to aggressor states, perhaps in concert with League of Nations sanctions, while allowing sales to victimized countries. But congressional sponsors feared that doing business with one side only, as in 1914–17, was inherently dangerous. They insisted on evenhandedness in order to “take the profits out of war.” FDR was busy with New Deal legislation and did not resist. He settled for an amendment limiting the term of the act to six months. The Neutrality Act also authorized the president to determine whether a conflict was actually a war. In October 1935 he proclaimed that a war existed between Italy and Ethiopia and imposed an evenhanded munitions embargo. Mussolini was the aggressor and little inconvenienced because ordinary commodities such as oil were not restricted, but landlocked Ethiopia could not acquire anything. The 1935 act was irrelevant to Japan, then at peace, but it signaled U.S. leanings toward avoiding dangers by refusing to help powers that went to war.1
After a 1936 amendment (chapter 2), on 1 May 1937 Congress extended the Neutrality Act for two more years and further amended it. A cruel civil war had erupted in Spain, drawing in several European powers. The new act empowered Roosevelt to impose arms and shipping embargoes against those parties in a civil war that might “threaten or endanger the peace of the United States.” Significantly for Japan, Congress instructed the president to identify products that could be used to manufacture armaments abroad, and to forbid sales of them to belligerents if exports would also impair the security or peace of the United States or threaten its citizens. The amendments also strengthened registration and licensing of munitions firms and, oddly, required licenses for import of munitions.
The 1937 act introduced a concept that indirectly allowed the president to favor one warring power over another. One professor of political science called it “qualified neutrality,” but Hull called it a “neutrality disaster.” The law prohibited U.S. ships from carrying munitions, or the materials for making them, to any country at war. Exports of other products to them could continue if embarked on foreign ships and if title and control passed before they cleared from a U.S. port, the famous “cash-and-carry” rule that barred U.S. financing and carriage to war zones. In principle the rules applied to all sides, aggressors and victims alike. In practice it was evident that Britain and France, having large merchant fleets, command of the sea, and reserves of dollars and gold would retain de facto access to U.S. products during a war against Germany or Italy while those Axis powers would not. Japan was not targeted by the May 1937 act—its attack on China lay two months in the future—but in case of war the same advantages of shipping, sea control, and money would ensure it of access to U.S. supplies while China would be denied. What Congress would not do explicitly, tolerate the favoring of one side in a war, it did indirectly. When in July Japan attacked China, American sympathy was entirely with the beleaguered Chinese. Given the perverse logic of an evenhanded munitions embargo and cash-and-carry, Roosevelt declined to label the conflict a war, because a mandatory arms embargo would have harmed China more than Japan. For the next four years Japan continued to import and stockpile war materials (although not armaments) from the United States.2
The first constraint on an export to Japan was extralegal and exceedingly narrow. The Department of State frequently condemned attacks on U.S. interests in China, including the bombing and sinking of the naval gunboat Panay in the Yangtze River on 12 December 1937. (Japan apologized and paid restitution.) Hull lectured Tokyo about air raids that slaughtered Chinese civilians; the world was not yet inured to aerial devastation of entire cities. Public opinion was especially outraged because U.S.-built planes and equipment were thought to be flown by Japanese pilots. Before the invasion of China the United States annually sold to Japan less than a dozen planes of all types, worth in total $1 or $2 million including spare parts. In 1938 exports jumped to sixty-six planes, fifty-six unmounted engines, and accessories, and totaling $11 million, or 5 percent of all U.S. exports to Japan. In May 1938 public indignation rose to a crescendo after gory air raids on Canton. Hull felt inspired to take some action, but State Department counsel opined that the government could not legally embargo airplane exports without either a presidential proclamation that Japan was at war or an act of Congress. Learning of Japan’s large aircraft orders, Hull told the press that the United States would “frown upon” selling any planes suitable for bombing civilians. FDR agreed. On 1 July 1938 Charles W. Yost, chief of the department’s Office of Arms and Munitions Control, notified the 148 U.S. aircraft manufacturers and exporters who had registered with his office that only with “great regret” would he issue export licenses for warplanes and their munitions, without naming Japan specifically. Civil aviation parts were exempted.
Within a month the Aeronautical Chamber of Commerce, an industry trade group, reported that the “moral embargo,” as it came to be called, was 95 percent effective. In 1939 the United States sold only two airplanes to Japan, and none thereafter. Parts and accessories sales declined 90 percent by 1940 and virtually ended in 1941. The aviation industry, awash in orders for U.S. civil transportation, and after late 1939 from France and Britain for war planes, did not object. But the moral embargo scarcely troubled Japan. It had produced more than one thousand planes in 1936 and was expanding toward a goal of five thousand per year.3
By 1939 majorities in both U.S. political parties leaned toward a more tangible expression of irritation toward Japan. The administration reacted by terminating a treaty that governed commercial relations. In 1911 Secretary of State Philander C. Knox and Japan’s representative in Washington, “being desirous to strengthen the relations of amity and good understanding that happily exist between the two nations,” had negotiated the Treaty of Commerce and Navigation. It granted each others’ citizens and companies the rights and privileges of domestic commerce, freedom of ships to come and go (except coastwise trade which was accorded most-favored-nation treatment), equal travelers’ rights, and mutual rights to open consulates. Export duties were to reflect “perfect equality of treatment,” a meaningless provision as the United States Constitution, Article 1, Section 9, prohibited duties on exports. Import duties were not to exceed those imposed on third countries under a most-favored-nation rule. The treaty, as renewed from time to time, could be abrogated by either party on six months’ notice. If terminated, the United States could legally discriminate against Japanese commerce.
On 26 July 1939, at the start of the third year of fighting in China, Secretary of State Cordell Hull served notice on Ambassador Kensuke Horinouchi that the United States would withdraw from the treaty in six months, ostensibly to reconsider the protection of its commercial interests in Asia, a reference to war damage to U.S. business operations in China. State Department lawyers advised Hull that the U.S. Code levied an automatic 10 percent duty and other charges on cargoes arriving in vessels of treatyless states. However, the president could suspend the duty if Japan did not discriminate, and, confusingly, an 1872 proclamation by President Ulysses S. Grant exempting Japan was still in effect. Tokyo was taken by surprise. Aware of U.S. public indignation and worried that the United States might label the China incident a war and invoke Neutrality Act embargoes on strategic commodities, some Japanese officials proposed a new treaty or at least a temporary stopgap agreement, while others sulkily denied any war damage. Hull shunted the proposals to Ambassador Joseph Grew in Tokyo. Tokyo pledged to reopen the Yangtze River to U.S. shipping. At the last minute Grew announced that the United States would not impose penalties when the treaty expired on 26 January 1940. Japan gratefully announced an Imperial ordinance pledging no increase of duties and most-favored-nation treatment. The administration had fired a popgun across Japan’s bow. It did not yet appreciate its powers of international control of money in a world at war.4
In March 1939 Hitler’s troops marched into partitioned Czechoslovakia in violation of the Munich Pact, signed in 1938. As war in Europe appeared imminent, FDR called for revision of the Neutrality Act in order to aid the democracies. On 1 May the cash-and-carry provisions of the act expired. In the summer the House of Representatives voted to restore the rule, but the initiative died by one vote in the Senate Foreign Relations Committee, deferring action until 1940. On 1 September Germany invaded Poland. On 3 September Britain and France declared war. Two days later Roosevelt declared U.S. neutrality.
The three-week German-Soviet conquest of Poland shocked Congress into action. Polls showed a sharp change of public sentiment in favor of the Allies. Roosevelt mused that the United States had always championed freedom of seaborne trade with two disastrous exceptions: Jefferson’s embargo of 1807–9 and the 1935 Neutrality Act. Helping the democracies, he said, would protect U.S. security and speed development of U.S. defense industries. Furthermore, in modern war distinctions between munitions and other goods were artificial—aluminum sheets became airplane wings and brass plumbing tubes became artillery shells. The president favored controlling exports of eleven strategic raw materials and restriction of iron and steel exports, but he had no legal authority to do so. The State Department opposed export controls on any commodities that clearly targeted Japan as the largest buyer.
On 21 September 1939 Roosevelt assembled Congress in special session to unblock munitions exports while retaining the cash-and-carry rule. The Allies controlled the sea and had ample money (or so it seemed at the time), whereas Germany, blockaded and cash poor, could neither buy nor carry U.S. products. Congress reacted favorably. On 4 November 1939, by large majorities, it amended the neutrality acts as requested. The United States returned to the business of selling arms to belligerent states as it had in 1914–18, but only to those who could pay cash and carry them away in their own or other foreign ships.5
The November 1939 neutrality amendment did no harm to Japan, deemed to be still at peace. Japan had dollars and ships for purchase and transport of war-related materials. Administration officials fumed over civilian suffering as the Soviets bombed Finland and Japanese air attacks in China continued unabated. The executive branch and some legislators pondered embargo laws against Japan, but the president, keeping his options open, preferred informal steps to halt materials and services explicitly for Japanese bombers. The moral embargo on aircraft had been of little consequence because Japan was self-sufficient in warplane design and production. It relied, however, in varying degrees, on U.S. metals and know-how. On 15 December 1939 the administration asked U.S. producers of three strategic metals—aluminum, magnesium, and molybdenum—voluntarily to halt exports to Japan. The United States could not imply that is was conserving for national defense as it had ample supplies of those metals.6
Aluminum, a metal one-third the weight of steel, constituted 80 percent of airframe weight. Before 1934 Japan had imported five thousand to ten thousand tons annually. Thereafter Tokyo launched a plan to refine aluminum at home from foreign raw materials. Imported materials, primarily bauxite ore, comprised only 12 percent of the cost of aluminum sheet. Electricity was by far the largest input, but Japan was self-sufficient, 55 percent from hydroelectric dams and the rest from domestic coal. Aluminum smelters consumed electricity voraciously, ultimately taking 25 percent of Japanese power production. As early as 1933 U.S. Army G-2 Intelligence had recommended dropping aluminum metal from lists of materials Japan would lack in a war. By 1936, two years after its first electrolytic smelter came on line, Japan was 40 percent self-sufficient in aluminum. In 1938 subsidized new plants raised output to twenty-one thousand tons. In 1939 the government took over production.
For its pre–Pacific War program of five thousand planes per year before Pearl Harbor, Japan needed about 20,000 to 30,000 tons of aluminum, depending on plane types. As Japan concentrated on bombers, planners anticipated 4.5 tons of aluminum per airplane, but inefficiencies due to wastage in cutting complex shapes from sheets and tubes raised the requirement to 6.5 to 7 tons per plane. The mobilized economy also needed aluminum for machinery, ground transportation, and especially lightweight cables to wheel electricity from mountain dams an average of three hundred miles to metal and chemical plants on the coast. (In-plant scrap was too low in quality for recycling into aircraft.) In 1937–39, therefore, Japan resumed large-scale importation of aluminum ingots and slabs, initially from Europe and Canada until war restricted those sources. In 1939, despite Japanese Empire production of almost 30,000 tons, imports rose to a peak of 36,701 metric tons.
The United States had been a negligible supplier of aluminum to Japan until it provided about 20 percent of the 1939 buying surge. Foreclosure by the moral embargo of December 1939 caused no injury to Japan’s goals, nor its civilian economy, which had never consumed much aluminum and could use aircraft factory scrap for curtailed production of household goods such as pots and pans. Japan’s ultimate aluminum achievements were astonishing. Production rose to 80,000 tons in 1941 and a 1944 peak of 151,000 tons, including 37,000 tons in Korea, Formosa, and Manchukuo. A deliberate U.S. and Allied attempt to slow Japanese aircraft production did not occur until the embargo of aluminum raw materials in 1941. Although the United States itself relied on foreign bauxite, Japan depended on it for two other minerals essential for aluminum smelting: fluorspar and petroleum coke (see chapter 10).7
Duralumin, the hard aluminum alloy preferred for airplanes, contained 1 percent magnesium along with some copper and manganese. Japan had unlimited sources of magnesium oxide from Manchukuoan deposits and from seawater. It began electrolytic refining of magnesium simultaneously with aluminum, building plants in the home islands and Korea. At the time of the moral embargo it was thought to have sufficient magnesium. Output rose to 2,559 tons in 1940. But in Europe the Germans, and soon the British, adopted alloys primarily of magnesium, 35 percent lighter than aluminum, for ailerons, turrets, castings, and landing gear. Japan lacked the magnesium capacity to emulate them, so the moral embargo of magnesium probably retarded aircraft quality. Civilian uses were negligible.8
Nature endowed the United States generously with molybdenum. The Climax Mine in the Colorado Rocky Mountains produced 66 percent of the world’s output, and U.S. copper mines recovered a further 28 percent as a byproduct. Dissolving as little as one-quarter of 1 percent ferromolybdenum or molybdenum oxide in a steel melt, along with other alloying elements, imparted toughness and resistance to abrasion and corrosion. Tool steels for machining hard metals contained 8 to 9.5 percent molybdenum. In the late 1930s molybdenum demand from Europe and Japan flourished for guns, armor, aircraft engines, and the machine tools to manufacture them. The United States exported two-thirds of its molybdenum production. The Japanese Empire mined only tiny amounts in Korea. In 1939 Japan imported from the United States 9.4 million pounds of molybdenum concentrates worth $3.7 million, about 15 percent of U.S. output. An embargo of molybdenum was a pet project of Secretary of the Treasury Morgenthau, a friend of Harold Hochschild, whose family controlled Climax and who had lived in China. The moral embargo of molybdenum, however, was not a serious impediment. Japan had accumulated a stockpile. It could substitute other alloying elements, especially tungsten, which was mined abundantly in China. At British request, the International Nickel Company of Canada, the dominant world supplier, also stopped selling nickel to Japan, an important metal for stainless and alloy steels.9
In a follow-up moral embargo notice of 20 December 1939 the U.S. government requested American firms to make “no future delivery to certain countries,” including Japan, “of plans, plants, manufacturing rights, or technical information” for aviation gasoline. Airplane engines were evolving toward higher compression ratios, that is, squeezing more gasoline and air into tighter volumes so that explosion in the cylinder exerted maximum thrust. But hotter high-compression mixtures ignited prematurely, causing “knocking” vibrations that sapped power and threatened a pilot’s control. Aviation gasolines were rated by octane number, the relative content of iso-octane chemicals that retarded premature ignition. Older airplanes performed well on 72-octane fuel, but modern engines required at least 87 octane. To upgrade, refineries added to the fuel tiny amounts of tetraethyl lead, an antiknock chemical, or blended it with benzol or alcohol. The most promising solution pointed to catalytic cracking, a refinery process that exposed oil feedstock to a platinum-coated catalyst that accelerated reactions and minimized coking (clogging). In 1938 a consortium of major U.S. oil companies developed a moving-bed “platforming” process that solved the problem of mass production of high-octane gasoline.10
The Japan Gasoline Company, a cartel, since 1928 had been purchasing technology rights from Universal Oil Company of Illinois, a firm employing six hundred fuel specialists. Japan was eager to produce iso-octane chemicals and feedstocks to refine high-octane gasoline from California crude oil. On 31 October 1938 Japan Gasoline contracted for the rights to use Universal’s refinery processes through 1946. In 1939 Universal, which designed iso-octane units for Mitsubishi Oil and Nippon Oil, sent over blueprints and American engineers. By the time Universal terminated the contract in deference to the moral embargo, the Japanese had the know-how and a stockpile of catalysts. Japan ultimately built five catalytic cracking plants with a total capacity of fifteen thousand barrels per day of high-octane gasoline. The moral embargo came too late.11
From 1935 to 1939 the United States deployed legal and extralegal export restraints, at first to shield itself from war risks but increasingly in hopes of reining in aggressors. The first actions, aimed primarily at the European Axis, impacted Japan very little. Because Roosevelt refused to label the Sino-Japanese conflict a war lest support of China also be proscribed, the neutrality laws did not much inconvenience Japan, nor did the cash-and-carry policy pose a barrier to its purchases of strategic materials. Moral embargoes did halt sales to Japan of warplanes in July 1938, and of three nonferrous metals and fuel know-how for aviation in December 1939, but they took effect after Japanese stockpiling surges, too late to do much harm to Japan’s preparations for war. Abrogation of the 1911 Commercial Treaty in January 1940 was a meaningless gesture because the United States did not invoke any trade penalties. As to Japan’s civilian economy, the U.S. embargo actions prior to the middle of 1940 scarcely impacted it because they inhibited only items of direct military use.