Neutrality Act

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The Neutrality Act was an Act of Congress in 1935 providing for the prohibition of the export of arms, ammunition, and implements of war to belligerent countries; the prohibition of the transportation of arms, ammunition, and implements of war by vessels of the United States for the use of belligerent states; for the registration and licensing of persons engaged in the business of manufacturing, exporting, or importing arms, ammunition, or implements of war; and restricting travel by American citizens on belligerent ships during war.[1]


At the White House on March 20, 1935, President Franklin Roosevelt told members of the Nye Committee that an Act should be prepared which would guarantee, in the event of a European war, the absolute neutrality of the American people.[2] The Neutrality Act was introduced in the Senate and House and passed by very large majorities. It had a time limit of two years and at the expiration of the time limit it was passed again by enormous majorities in both houses.

President Roosevelt promptly applied the law when Italian Premier Benito Mussolini invaded Ethiopia in October 1935. When the Spanish Civil War broke out in July 1936 Roosevelt discovered the Neutrality Act did not apply to civil wars, but only to wars between countries. Roosevelt requested of Congress to have the law amended immediately to apply to civil war, which Congress did and Roosevelt promptly declared the Neutrality Act in force as to Spain.

During the Presidential Election of 1936 Roosevelt said "We shun political commitments which might entangle us in future wars; we avoid connection with the political activities of the League of Nations...­ the effective maintenance of American neutrality depends today as in the past on the wisdom and determination of whoever at the moment occupies the office of President of the United States and Secretary of State."[3] And he warned that in the event of war abroad the United States would have to be on guard against arms manufacturers seeking "fool's gold," or war profits from arms trafficking, those who would find it hard to look beyond, "to realize the inevitable penalties, the inevitable day of reckoning that comes from a false prosperity." America could keep out of war, "if those who watch and desire have a sufficiently detailed understanding of international affairs to make certain that the small decisions of today do not lead toward war and if at the same time they possess the courage to say no to those who selfishly or unwisely would lead us into war." This is what was called isolationism.

Cash and Carry law

The public debt in 1932 when FDR took office was $22 billion and largely was a heritage of World War I.[4] Widespread public disillusionment felt that a handful of arms producers had benefited from the war while the nation had been left with a public debt in the form of credits which had been extended to foreign purchasers of arms. Bernard Baruch described how the law functioned: "We will sell to any belligerent anything except lethal weapons, but the terms are 'cash on the barrel-head and come and get it."

The original Neutrality Act was extended to expire on May 1, 1936. It was renewed with a "cash and carry" provision for two years. The basic feature, a prohibition on loans to belligerent governments remained intact. The new act required that, if the president proclaimed the existence of a state of war between others nations, or a civil war that endangered the peace of the United States, the shipment of arms, ammunition, and implements of war, excluding raw materials, would be embargoed.

On July 7, 1937 Japanese troops stationed in North China, under terms of the Boxer Protocol of 1900, clashed with elements of the Kuomintang army near the Marco Polo Bridge, ten miles west of Beijing. An all-out Japanese invasion of China followed. By the end of the month, Beijing was occupied and the following month Shanghai was attacked. The Neutrality Act required the president to implement its provisions when a state of war existed, but Roosevelt did not invoke the act. Twenty-five members of the House signed a statement demanding the immediate application of the arms embargo in order to "stop the feeding of the war which means destruction of thousands of lives in the Orient and of war to all the world". FDR permitted American munitions to reach China via British ships destined for Hong Kong. Time magazine speculated, "though in the long run Japan might need U. S. supplies more than China, the immediate effect of an embargo would be to the advantage of Japan, whose ships could still presumably conduct a "cash and carry" trade with the U. S."[5]

In 1939 the U. S. supplied Japan with 59% of all war materials. The havoc wrought upon China by Japan using American made bombs dropped from American made airplanes was publicized as Japanese atrocities. (cf Porter Sargent, Bulletin #1 War Propaganda, May 30, 1939).[6]

Time magazine referred to Thomas Lamont in its November 25, 1940 issue as a specialist on Japan. Years earlier Lamont visited Japan with Walter Lippmann. At the Academy of Political Science, Lamont responded to the question, "Should the U.S. tighten trade embargoes against Japan?" Time said "he pointed out inconsistencies and omissions in U.S. embargoes that still permitted Japan to get war supplies." The outcry against supplying Japan with the essentials for her aggressive war against China was met by an announcement from the Roosevelt Administration of 'embargoes' on the export of scrap and oil. Porter Sargent observed, "Subtle influences through the organizations of fund raising, public relations and communication by radio or print, make it possible to soft pedal the profit from arming Japan while promoting the use of armed force against her."[7] "Watertight as a fish-net" is how Comintern operative and editor of the Institute of Pacific Relations (IPR) publication Pacific Affairs, Owen Lattimore characterized the embargo on November 9, 1940. "The Royal Dutch-Shell group and a subsidiary of the Standard-Vacuum Oil Company will supply 7,000,000 barrels of oil to Japan over six months," a New York Times dispatch of October 17 reported. "Arrangements have been virtually concluded for Japan to get 40 per cent of her oil requirements for the next six months in the Dutch Indies." KGB source I. F. Stone wrote on the State Department's handling of the embargo in the October 5, 1940 issue of The Nation,

"Within the department, over the objections of a more farsighted minority, the experts made a joke of the discourses by protecting the profits accruing to American business from the aggressions we were so nobly denouncing." The trade "treaty expired in January of [1940], but it was not until July that an 'embargo' on oil and scrap was announced . . . The details were left to the State Department experts. When the regulations were promulgated it was found that the only scrap 'embargoed'" was one little used of the 75 varieties of iron and steel scrap, and "the only petroleum 'embargoed' was aviation gas". Stone continued, "the 'embargo' itself was only a system of licensing. It is now revealed that few if any licenses were denied under these regulations . . . . The Japanese, with about a year's supply on hand, do not need our scrap as much as they did, and the scrap industry, with a defense boom in the offing, does not need Japanese orders . The big steel companies cannot oppose an embargo on scrap by claiming that we have an over-supply of steel and at the same time ask for a higher price for steel on the ground of a shortage . . . . Both big steel and the scrap industry have accepted the embargo with a curious equanimity. This may be the result of a new sense of patriotism or it may be something else."[8]

On July 26, 1941, Roosevelt accepted a plan for economic sanctions presented by KGB Agent and Treasury Assistant Harry Dexter White. Japan found itself in a position where its oil reserves would be exhausted in two years, its aluminum reserves in seven months. Because Japan was poor in natural resources, its government viewed these steps, especially the embargo on oil, as a threat to the nation's survival. Japan's leaders responded by resolving to seize the resource-rich territories of Southeast Asia, even though that move would certainly result in war with the United States. White submitted an appeal to the President:

Oil - rivers of oil - will soon be flowing to the Japanese … To sell China to her enemies for the thirty blood-stained coins of gold will not only weaken our national policy in Europe as well as in the Far East, but will dim the bright lustre of America's world leadership… On this day, Mr. President, the whole country looks to you to save America's power as well as her sacred honor….[9]

The Soviet Union stood to gain vitally from U.S.- Japanese war. On the 25th of November, U.S. Secretary of War Henry Stimson had stated the problem as one of "how we should maneuver them into the position of firing the first shot."[10] It is significant that in the ten-point ultimatum sent to Japan on November 26, 1941, eight of the drastic demands were written by Harry Dexter White. The harsh, demanding language only strengthened the position of the war party in Tokyo. Ambassador Nomura found it impossible to reach an agreement because White's demands were extreme.[11] In other words, Harry Dexter White, an agent of the Soviet Union, helped in a decisive way to draft the ultimatum that provoked war between Japan and the United States. This was the primary aim of Soviet foreign policy to advance the interests of the Comintern and the Soviet Union in the Far East[12]

KGB agent Frederick V . Field[13] in the IPR's Far Eastern Survey: America's Stake in the Far East, Porter Sargent observed "gives the cost of our foreign service in Eastern Asia as $905,754 and adds to this detailed figures totaling approximately $300,000 for State and Commerce Departments, and a proportion of the cost of our Army and Navy running to hundreds of millions annually . To this might be added subsidies for our Pacific merchant marine. This great relief to the British Treasury could not have been continued had it not been skillfully concealed from the American people."[14] Roosevelt biographer Robert Sherwood quoted the Daily Worker about Commerce Secretary Harry Hopkins, "The secret diplomacy involved in the Hopkins appointment can put the American people on the alert-in insisting that no further aid be given British imperialism, since such aid brings the shadow of war closer and closer to our homes."[15]

Far Eastern trade

Of American trade with the Far East, Japan's share had been double, and at times nearly triple, that of China for the previous forty years to World War II.[16] From 1931 to 1935, an annual average of 19% of the total foreign trade of the U.S. was with the Far East. Of this sum, in 1935, 43% represented American trade with Japan, 24% with the Dutch Empire, India, British Malaya and French Indo-China, 18% with the Philippines, and 14% with China and Hong Kong (3% of total U.S. foreign trade). Thus, approximately 8.17% of U.S. total foreign trade, or about $312,000,000, was with Japan and 3.42%, or $130,410,000, constituted American trade with China and Hong Kong.[17]

Second Sino-Japanese War

In 1937, when Japan invaded the Chinese mainland in the Second Sino-Japanese War, the United States economy had relapsed into a depression and Roosevelt refused to apply the Neutrality Act but rather permitted arms shipments to China and Japan from United States arms manufacturers. The Neutrality Act did not require a declaration of war by an aggressor; it merely required the fact of war. The United States was the Nationalist Chinese government's only source of defense materials, while at the same time the United States was shipping six times as much to Japan as to China. The New Deal social programs needed the arms trafficking with Japan to keep people from becoming unemployed. As one commentator observed, President Roosevelt defied the mandatory provisions of the Neutrality Act because his administration required that at this moment America needed some of that "fool's gold" from Japan.

In December 1937 an American gunboat, the Panay, was bombed in the Yangtze River in China in the heart of the Sino­-Japanese war area. Japan immediately apologized and agreed to pay full damages and to punish the guilty officers. Critics have observed, had the President taken care that the laws be faithfully executed under the Neutrality Act, ­ the Panay would not have been protecting American oil tankers delivering oil in the midst of two warring armies in China. The purpose of the Neutrality Act was to avoid precisely an incident of this nature.

Molotov-Ribbentrop pact

After the signing of Molotov-Ribbentrop pact in what was called the Communazi alliance, American Communists denounced President Roosevelt for proposing that the Neutrality Act's embargo provisions be repealed to aid the countries that were fighting Hitler.[18]

Two weeks after World War II started, Roosevelt called Congress into extraordinary session to repeal the arms embargo provisions of the Neutrality Law and thus permit the sale of war material to England and France on a "cash and carry" basis, that is to say, the United States Treasury would not finance the purchase of U.S. produced arms to foreign powers.

A Roper poll taken in September, 1939 showed a total of 2.5% public support for entering the war on the side of England, France and Poland, 8.9% support for remaining neutral but supplying England, France and Poland with materials and food and refuse to ship anything to Germany, and the by the largest margin of any choice 37.5% support for remaining neutral but allowing arms sales to anyone on a cash and carry basis.[19]


  1. "Neutrality Act" of August 31, 1935, 49 stat. 1081; 22 U.S.C. 441 note, U.S. Department of State, Publication 1983, Peace and War: United States Foreign Policy, 1931-1941 (Washington, D.C.: U.S., Government Printing Office, 1943, pp. 265-271).
  2. The Roosevelt Myth, John T. Flynn, Fox and Wilkes, 1948, Book 2, Ch. 6.
  3. Public Papers and Addresses of Franklin D. Roosevelt, Volume 5, pps. 285-292. (Random House).
  4. The Roosevelt Myth, John T. Flynn, Fox and Wilkes, 1948, pg. 129 pdf.
  5. Manslaughter in Shanghai, Time magazine, Aug. 30, 1937.
  6. Prodding Japan Into War, Porter Sargent, Bulletin #95, December 30, 1940, pgs. 525 - 544 pdf, pdf
  7. Prodding Japan Into War, Porter Sargent, Bulletin #95, December 30, 1940, quoted in Getting Us into War, Porter Sargent Publisher: P. Sargent, Boston, 1941, pg. 530.
  8. I.F. Stone, The Nation, October 5, 1940.
  9. Communism at Pearl Harbor, How the Communists Helped to Bring on Pearl Harbor and Open up Asia to Communinization, Dr. Anthony Kubek, Dallas Texas, Teaching Publishing Company, 1959. pg. 12. Dr. Anthony Kubek was the Editor of the U.S. Senate Committee on the Judiciary, Senate Internal Security Subcommittee, Report on the Morgenthau Diaries. In 1965, the SISS issued a two volume committee print entitled Morgenthau Diary (China), Edited by Dr. Anthony Kubek, containing entries from the records at the Franklin D. Roosevelt Library selected to illustrate the implementation of Roosevelt administration policy in China. According to Dr. Kubek, the subcommittee wanted to produce a documentary history on the subject and "also indicate the serious problem of unauthorized, uncontrolled and often dangerous power exercised by non-elected officials," specifically Harry Dexter White.
  10. As Stimson explained: "In spite of the risk involved... in letting the Japanese fire the first shot, we realized that in order to have the full support of the American people, it was desirable to make sure that the Japanese be the ones to do this so that there should remain no doubt in anyone's mind as to who were the aggressors." Stimson's Testimony quoted in Basil Rauch, Roosevelt from Munich to Pearl Harbor (New York: Creative Age, 1950), p. 473. In his testimony before the Congressional Committee investigating the attack on Pearl Harbor, General George C. Marshall said that if the 90-day truce which was the substance of the Kanoe-Roosevelt proposal had been effected, the United States might never have become involved in the World War II at all; that a delay by the Japanese from December, 1941 into January, 1942 might have resulted in a change of Japanese opinion as to the wisdom of the attack because of the collapse of the German front before Moscow in December, 1941. Pearl Harbor Attack. Part 39, p. 502; Part 2, p. 5177; Part 3, p. 1149.
  11. Tragedy and Hope: A History of the World in Our Time, Carroll Quigley, Collier-Macmillan, 1966, pg. 741. ISBN 0-945001-10-X
  12. Communism at Pearl Harbor, Dr. Anthony Kubek, pg. 19. Kubek writing in 1959 during the interwar period between the Korean War and the Vietnam War, two "hot wars" in the "Cold War," concluded: "The United States destroyed the one power that was able to check the flow of that Red tide in the Far East. ...The present Soviet military might, which threatens our national security, is the direct product of billions of lend-lease aid, coddling of Communists in high places in the American Government and failure to understand the basic drives of world Communism. ...Never before in our history was Presidential leadership so devoid of vision and never before had the mistakes of our Chief Executive been so fraught with peril to our nation."
  13. In the final report the SISS stated: "The IPR itself was like a specialized political flypaper in its attractive power for Communists. . . . British Communists like Michael Greenberg...Chinese Communists like Chi Chao-ting, Chen Han-seng, Chu Tong, Y.Y. Hsu;...Japanese Communists (and espionage agents) like Saionji and Ozaki (Hozumi); United States Communists like James S. Allen, Frederick V. Field, William M. Mandel, Harriet Moore, Lawrence Rosinger, and Alger Hiss....The IPR has been considered by the American Communist Party and by Soviet officials as an instrument of Communist policy, propaganda and military intelligence. The IPR disseminated and sought to popularize false information including information originating from Soviet and Communist sources. . . . The IPR was a vehicle used by the Communists to orientate American far eastern policies toward Communist objectives. . ." U.S. Senate Committee on the Judiciary, Report on the Institute of Pacific Relations, Washington 1952.
  14. Prodding Japan Into War, Porter Sargent, Bulletin #95, December 30, 1940, pg. 527, quoted in the North American Review, Winter, 1938-39.
  15. Roosevelt and Hopkins : An Intimate History, Robert E. Sherwood, New York Harper and Brothers, 1948, pg. 233 pdf.
  16. Whitney Griswold in Our Policy in the Far East, Harper's, August, 1940, quote in Porter Sargent, Prodding Japan into War, Bulletin #95, December 30, 1940, pg. 535 - 535, fn. 1.
  17. Griswold, The Far Eastern Policy of the U.S., p 468.
  18. The Soviet World of American Communism, Harvey Klehr, John Earl Haynes & Kyrill M. Anderson, New Haven: Yale University Press, 1995, pg. 75.
  19. Robert E. Sherwood, Roosevelt and Hopkins: An Intimate History, 1948, pg. 143, 146 pdf.