File No. 600.001/87

The Ambassador in France ( Sharp) to the Secretary of State

[Telegram]

2160. Your 2295, May 29. Complying with your instructions to have the Embassy represented at the silk conference, I asked Mr. Bliss and Mr. Veditz, commercial attaché, to attend the sessions of yesterday and today. They will continue for a day or two longer.

It appears that certain varieties of Italian silks whose export is only permitted to Italy [Switzerland?] are sent to Germany and are there used for important military purposes. The necessity for a drastic restriction of the exportation of Italian silk into Germany is further emphasized by the fact that on account of the increasing scarcity of cotton Germany has found it necessary to substitute silk therefor in a number of forms of important military operations; that the Allied Governments, particularly French, British and Italian, contemplate further restrictions concerning exports of these silks to Switzerland. Such restrictions, however, are likely to produce disastrous effects upon this important Italian industry, hence the Italian Government asks some sort of compensation for such further restrictions. The conference, upon the suggestion of Mr. Clémentel, French Minister of Commerce and Mr. Cochin, Undersecretary of State for the Blockade, proposes instituting at Lyon under the direction of the Lyon Chamber of Commerce and the silk associations of Turin and Milan, under supervision of representatives of British, French, Italian and American Governments, a bureau undertaking to purchase certain standard grades of Italian silks at a price of 90 francs per kilogram for so-called standard qualities of Milan and Turin organzine silks and a proportionate scale for other staple grades. It is further proposed that silks thus purchased shall not be sold under 100 francs per kilo for the basic quality before April 30, 1918. It is estimated that the maximum possible purchases under arrangement cannot exceed 1,000,000 or 1,500,000 kilos, a value of 90,000,000 to 135,000,000 [Page 1167]francs; that European banks will loan upon warrants up to three-fourths of this value. The possible maximum losses would therefore be for the three guaranteeing Governments about 30,000,000 francs which it is proposed to divide equally in case of loss between the French, British and American Governments. In case of profits these would be shared by the above Governments as proposed.

Since the Chamber of Commerce at Lyon which will have charge of directing the operations, legally has no funds for this purpose and the initial operations will require a working capital it is estimated that each guaranteeing Government should make available the sum of 10,000,000 francs. Tomorrow’s meeting has arranged to ratify kinds of silk and the quantities thereof whose exportation from Italy to Switzerland will still be permitted. Since it is assumed that the United States annually purchases over 12,000,000 kilos of silks, it has been suggested that possibly the United States could devise means of absorbing a considerable portion of the Italian output which it is proposed to cut off from Switzerland. It is proposed to subject the whole organization and its operation to the control of representatives of the four Governments although actual commercial operations are intrusted to the Lyon Chamber of Commerce and the silk associations of Milan and Turin and the French Chambers of Commerce at Turin and Milan. The cost of the organization for personnel is estimated at a maximum of 30,000 francs per annum, the traveling expenses of each representative to be borne by the organization. The representatives of the Allied Governments are desirous of learning the decision, at as early a date as possible, of the American Government in regard to the proposal already made at the sittings of yesterday and today, especially as the sale of cocoons takes place shortly and it will be necessary to put into effect without delay the agreement about to be reached at this conference.

In principle the proposal outlined above is acceptable to the representatives of the three Governments. I will report to-morrow or the next day the result of the deliberations of the next two meetings which it is contemplated will terminate the conference.

Sharp