NEW BRITISH TIES
Franco-British Alliance.—What amounted to a close military and naval defensive alliance between France and the United Kingdom was brought to completion at the meeting between French and British ministers in London at the end of April. Agreements were reached for closer co-ordination of land, sea, and air forces, for unified war-time command of armies under a French general and naval forces under a British admiral, for pooling of munitions purchases and establishment of storage bases on French soil.
Along with the co-ordination of defense measures, French foreign policy was brought into closer accord with the new and apparently successful conciliatory moves of the Chamberlain government toward the Continental dictatorships. France agreed to make every effort to come to an understanding with Italy, including acceptance of restrictions on aid to the Spanish Leftists across the French frontier, and some limitations also on French commitments in Central Europe. Both British and French were to work in concert at Prague, Warsaw, and Berlin to stave off a new crisis over Czechoslovakia.
Anglo-Italian Agreement.—Prime Minister Chamberlain’s policy of temporizing with the Continental dictatorships was carried to at least partial fulfillment when on April 16 the United Kingdom and Italy signed an agreement covering all important points at issue between the two nations and opening the possibility of a better understanding between the European democratic and dictatorial powers. The pact was embodied in a protocol with eight annexes, an appended declaration, and an exchange of letters. The Italian letter gave definite renewal of Italy’s pledge that she had “no territorial or political aims and sought no privileged economic position in either metropolitan Spain, the Balearic Islands, any Spanish possession overseas, or Spanish Morocco, and had no intention of keeping any armed forces in any of the said territories.” It pledged adherence to the British plan for evacuation of foreign troops from Spain, and that if this were not completed before the termination of the war, it would be carried out immediately thereafter. The British reply pledged efforts in the May League Council meeting to secure recognition of Italian sovereignty over Ethiopia, and also indicated that settlement of the Spanish question was requisite before the general convention should go into effect. Other points covered in the agreement were as follows:
- Military.—Italian adherence to the 1936 London naval treaty; Italian agreement to reduce forces in Libya to a peace-time strength of about 30,000; mutual agreement to inform each other regarding any major administrative changes or movement of armed forces in territories bordering on the Mediterranean, Red Sea, Gulf of Aden, or neighboring thereto, and to inform each other also regarding new naval or air bases in the Mediterranean east of longitude 19oE., and in the Red Sea or its approaches; mutual reaffirmation of the convention guaranteeing free use of the Suez Canal for all powers at all times; mutual pledges not to employ injurious propaganda in Palestine or elsewhere; Italian pledge not to use natives of Italian East Africa for overseas military service
- Territorial.—Mutual reaffirmation of the 1937 declaration regarding the status quo in the Mediterranean; mutual pledges to respect and Protect the independence of Saudi Arabia and Yemen; Italian recognition of the British Aden Protectorate, established in 1935, covering the vast coastal area of Arabia from Aden to the Sultanate of Oman; mutual agreement to settle Ethiopian frontier disputes; Italian recognition of British trade and missionary privileges in Ethiopia, and of obligations to the United Kingdom in the matter of Lake Tsana, the source of the Blue Nile.
Anticipating the agreement, England in April requested that the matter of Italian sovereignty in Ethiopia be included in the agenda of the May League Council, with every prospect that a satisfactory solution would be reached, especially since Italy’s Ethiopian empire had already been recognized by nearly half of the League nations.
While the Anglo-Italian pact might be regarded elsewhere as a thrust at the Rome-Berlin axis, Germany took the view that it was a very satisfactory triumph for Italian diplomacy, in no way Weakening Italo-German solidarity. In fact the consolidation of Italian empire in the Mediterranean and Africa and of German empire in Central and Eastern Europe were regarded as not conflicting with each other and not to be stopped now by England or France, or by the two combined.
Anglo-Irish Accord.—After three months of negotiation a far-reaching agreement was signed in London on April 25, ending the 6-year tariff war between England and Ireland and putting Anglo- Irish relations on what is hoped to be a durable basis of friendship and good will. By the new agreement the United Kingdom surrenders all treaty rights over the Irish naval ports of Cobh (Queenstown), Berehaven, and Lough Swilly, together with all public buildings and defenses. The transfer is to be made unconditionally on December 31, but it is assumed that Irish munitions purchases will be made in England, that British authorities will be consulted in the modernization of port defenses and the development of a small Irish coast-defense force, and that the British fleet will have access to the naval bases in time of war.
To settle the land annuities, payment of which was stopped in 1932, Ireland turned over a lump sum of £10,000,000, thus forever ending yearly payments amounting to about £4,700,000. Ireland will, however, pay a small annuity of about £250,000 for damages during the postwar “troubles.” A major part of the new treaty was taken up with a sweeping removal of tariff barriers, the result of which is expected to be a doubling of Anglo-Irish trade, which dropped from £81,000,000 in 1929 to £42,000,000 last year.
No mention was made of the inclusion of Ulster in a united Ireland, but England is expected to raise no obstacles and to urge an early removal of disabilities against the Catholic faith in Ulster. In Ireland, a move for winning favor from the Ulsterites was perhaps to be seen in the nomination of Dr. Douglas Hyde, Protestant and 78-year-old historian, as candidate of both leading political parties for the first President of Eire. On May 4 Dr. Hyde was elected by acclamation.
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FRANCE
Stronger French Ministry.—During the spring months a series of Cabinet changes in France shifted control, in response to a corresponding shift of popular feeling, from the Left Bloc to a more moderate line-up headed by the Radical Socialist leader Edouard Daladier. The resignation of the Chautemps Ministry in early March was apparently a voluntary move for a more effective combination freed from the influence of the extreme Communist left wing. In the subsequent reorganization, former Premier Leon Blum failed to secure the Cabinet of National Union he sought, and the government he actually formed was short-lived. Upon its downfall on April 8, Daladier organized an “anti-red cabinet,” including representatives of the Right and Center and no longer dependent on the Communist vote. To this group by almost unanimous vote both Senate and Chamber gave full fiscal and economic control till the end of July. The aim and task of the Daladier government is to keep labor under control, speed up national production by all possible means, and check inflation while still securing the credits needed for the big program of national defense. An 8 per cent increase in French taxes is expected to raise 4,000,000,000 francs. The advent of a moderate and apparently stable French government was at once seized by England as an opportunity to cement Franco- British ties, and bring Paris into closer harmony with the new aims of London policy.
Franco-Italian Approaches.—Moves for a Franco-Italian understanding were initiated in mid-April immediately after the completion of the Rome-London accord. It was expected that a preliminary understanding would be reached enabling France to work with England in the May League Council for recognition of the Ethiopian conquest, and to agree also on terms for a Spanish settlement, even though it involved some surrender of support for the Leftist cause.
CENTRAL EUROPE
Triumphant Fuehrer.—With a united and enthusiastic nation behind him, Chancellor Hitler set out in early May for his Italian visit, a chief object of which was said to be a clearer understanding with Mussolini over Germany’s new role in Central Europe. One reported aim was to secure free access to the Mediterranean through Adriatic ports, especially Trieste; another, to settle more definitely the Italian and German spheres of interest in the Danube Valley.
The Fuehrer’s success in absorbing Austria had already been approved in the plebiscite of April 12 by a practically unanimous vote. In Austria the 99.73 percentage of “Ja” votes was actually found to be greater than in the total realm, which gave a percentage of 99.08 out of 49,493,000 votes cast. Faith in the diplomatic intuition of the leader prompted the belief that Germany’s next move— for rescue of the 3,500,000 Germans in Czechoslovakia, or reclaiming the Polish Corridor—might also be achieved without war.
Demands Faced by Czechs.—In Central Europe the chief concrete development in April was the series of demands made by the German Sudeten leader Konrad Henlein on April 24 at his party congress in Karlsbad. In his speech Henlein for the first time frankly identified his followers with the Nazi party in Germany, and insisted that the Czechs abandon their French and German alliances and their assumed role as bulwark against Germany’s eastward expansion. More specifically, he set forth a program of “minimum” demands which included full equality of Sudeten Germans and Czechs, autonomy in territory chiefly populated by Germans and legal guarantees for Germans outside that area, removal of Past injustices and reparation for all damage suffered since 1918, and full liberty for Germans to proclaim their Germanism and adhesion to German “ideology”—an ideology in which such freedom is certainly not conspicuous. Later it was understood the Sudetens would call for a plebiscite on the question of union with Germany and in such a plebiscite, despite a considerable difference of feeling among the Sudeten Germans, it appeared certain the more radical pro-Nazi element would swing the rest.
Governmental leaders at Prague were inclined to regard the Henlein demands as beyond reason, and to go ahead with their proposed “nationality” statute granting wide concessions to non-Czech racial elements. At the same time they were ready to accept any advice or aid from Paris and London on means of halting Nazi pressure on their frontiers.
UNITED STATES AND LATIN AMERICA
Mexican Oil Difficulties.—The conflict arising from the seizure of foreign oil plants in Mexico was not lessened by direct correspondence in April between the British and Mexican governments. In response to British protests Mexico took the ground that the British government could take no action since the British companies were under Mexican charter, and that in any case protests should await final adjudication by the Mexican courts. The British view was that, however the companies were incorporated, their ownership was British, that adequate payment was not in prospect, and that the government had a right and duty to protect its citizens’ interests.
Meantime a Mexican commission set a preliminary maximum valuation on the plants of 30,000,000 pesetas, a price which took into consideration only the plants themselves and not the land holdings or oil stocks. It was still hoped that diplomatic negotiations with Mexico might effect a compromise settlement based possibly on a plan of government production and company marketing.
Quarantining Aggressors.—Considerable interest was aroused in April by a resolution introduced in Congress by Representative Byron Scott of California calling on the State Department to supply a list of nations who had recently violated treaties to which the United States was a party. In its reply the State Department went no further than to refer to American protests regarding treaty violations by Italy in Ethiopia in 1935 and by Japan in China in 1937. No mention was made of intervention in Spain or the union of Germany and Austria. Mr. Scott criticized the reply as incomplete and stated that he had in mind a further joint resolution condemning these aggressions and recommending a popular boycott of the offenders. Although such a resolution would inevitably be buried in committee files, it would serve to express so-called liberal sentiment in Congress against the present Neutrality Act, and in favor of some action to support such agreements as the Pact of Paris and the Nine Power Treaty.
Non-recognition Policy.—However reluctantly, the American State Department in early April took note of the Austro- German union in a message to Germany announcing that the United States government found itself “under the necessity as a practical measure of closing its legation at Vienna and establishing a consulate general.” On the same date it gave notice that Germany would be looked to for payment of American reconstruction loans to Austria, and also for service of Austrian federal, provincial, and corporation bonds held in the United States. Similar action must presumably soon be taken regarding the Italian conquest of Ethiopia.
Of the Non-Recognition policy in general and its employment in recent years, an interesting survey is made by Cyrus W. Peake in the March number of Amerasia. Although earlier employed against revolutionary governments in Latin America, Mr. Peake dates its application to the Far East in the year 1915, when, in connection with the “Twenty-one Demands,” the United States declared it could not recognize any agreement “impairing the treaty rights of the United States and its citizens in China, the political or territorial integrity of China, or the international policy relative to China commonly known as the open-door policy.” It was applied again in the Manchurian affair in January, 1932, and adopted as a League measure in the following March. While weak in its application, the writer feels that proof of its value may be seen in the efforts of nations affected to secure its abandonment. One of its most effective results has been to put a practical boycott on loans or credits for the development of areas thus seized. Its chief weakness is the one involved in all measures for collective security—that it is hard to hold any large group of nations to its observance over an extended period. Opportunities for national trade or political advantage are likely to outweigh loyalty to the general cause.
FAR EAST
Financing the China War.—As demonstrated in 1914-18, experts are prone to overestimate the effect of financial and economic difficulties in shortening war, and this miscalculation seems to have been repeated in the struggle between China and Japan. After nearly a year of conflict there is yet no sure indication that the war will be ended by financial collapse. Two recent articles, “War and the Japanese Budget” in the Far Eastern Survey for April 20, and “China’s Financial Progress” in a Foreign Policy Report for April 15, give some idea of the economic and financial status of both nations.
In Japan there have been war appropriations amounting to about 6,500 million yen, a sum which, if it covers costs till March 31, 1939, will mean an average monthly expenditure of 320 million yen. In 1937-38 the regular naval and military appropriations plus the special war budget was over 4 billion yen, or roughly 30 per cent of the total national income, as compared with a war expenditure in the United States in 1918, at the height of the World War, amounting to about 25 per cent of the national income. Taxes in Japan are expected to cover not more than a quarter of the budget for 1938-39 and the rest must be financed by internal loans. With governmental control of banks and capital, this can be managed, but it means a tremendous diversion of national production into the war effort. Japan can carry on, but a long-continued war will “load the government with debt, create a great heavy industrial plant which can be maintained only with difficulty if at all, in time of peace, and drive a final nail in the coffin of ‘liberal’ capitalism.”
In China, pre-war tax and fiscal reforms had brought the national revenue in 1936 up to nearly twice that of 1929, and had nearly balanced the national budget, if allowance were made for retirement of old indebtedness. In July, 1937, the total Chinese debt in American money was about $1,350,000,000, and external borrowing was possible at less than 5 per cent. Up to the close of 1938 it was estimated that China had expended abroad not more than $125,000,000 for war supplies purchased or contracted for, and still had cash reserves abroad amounting to about $300,000,000. With tariff revenues greatly reduced, there is almost certain to be a moratorium on external and internal loan payments, but for the present there is no reason to believe that China’s military resistance will collapse for lack of financial resources.