File No. 661.119/304i

The Acting Secretary of State to the American Commission to Negotiate Peace, at Paris


118. For the Secretary of State from McCormick [War Trade Board]:

I wish to bring to your attention the following with regard to the Russian situation:

Since the conclusion of the armistice, the general condition of world trade has altered very materially, and this alteration has greatly increased the accessibility of Russia to foreign traders. The cessation of hostilities has made it necessary for the War Trade Board to relax, to a large extent, their restrictions upon exports and imports with respect to almost every country of the world, because the necessity of conserving our own domestic resources through export restrictions and conserving tonnage through import restrictions has practically disappeared. The War Trade Board feel that they can not effectively prevent trade with Russia through China and Japan and it is now possible to trade freely with Russia through China and Japan without any reference whatsoever to the control of the War Trade Board. The only means of controlling such transit traffic is by requiring in the case of exports through China or Japan -a guarantee against reexport, but this control is at best an ineffective one and not susceptible of complete enforcement, and accordingly we do not regard it as practicable. It appears that there is available for Russian trade an amount of shipping which is more than sufficient to carry all the commodities which the Russians are able to absorb under the present chaotic conditions.

It has therefore become apparent to us that our present system of control is becoming less and less effective and that any attempt to control Russian trade through the medium of an export and import control in the United States and in the associated countries will prove abortive; and that if it is desirable to continue the supervision and direction of Russian foreign trade, this can be effected only through the adoption of some comprehensive scheme for a control by the Associated Governments of all merchandise entering or coming from Russia and Siberia; and it further appears that any such scheme must involve the establishment of an inter-Allied control upon Russian ground and the establishment of control organizations at all the gateways of Russia.

For these reasons I am hoping upon my arrival in Paris to be able to present to you the views of the War Trade Board upon the recent developments in the Russian situation.

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The foregoing concerns vitally the future of corporation known as the “War Trade Board of the United States Russian Bureau, Inc.,” which was organized with a capital of $5,000,000 allotted by Executive order from the appropriation for national security and defense. This corporation commenced to accomplish, under war conditions permitting of an effective control, many useful functions in connection with the plan to render economic aid to Russia by stimulating and cooperating with private enterprise, and at the same time controlling and directing exports to Russia. At the time of its incorporation, the need for such an organization was apparent, as the world-wide shortage of many commodities and the scarcity of ocean transportation, together with conflicting interests of various governmental departments, created such a situation that economic assistance could be effected only through the medium of a company which was authorized to engage in trade, and which at the same time operated under government auspices. The relaxation of the export and import control, particularly with respect to the countries adjoining Russia, and the general improvement of the tonnage situation and the consequent probability that uncontrolled private trade with Russia will soon revive on a considerable scale, have all placed this corporation in an anomalous position, because the company has become, or will soon become, a competitor of American and foreign private capital without at the same time being able to effect a proper control of Russian trade which was one of the primary reasons for its existence. It is quite likely that such competition unaccompanied by the accomplishment of the original purpose of controlling Russian trade for the benefit of the Russian people will be resented both by the public and by the commercial interests and governments of friendly countries.

Until further developments, the Russian Bureau, Inc., will continue to perform such useful functions as will assist the Russian situation, at the same time incurring no obligations which can not be fully discharged upon the dissolution of the War Trade Board, or be properly accomplished through the permanent governmental departments. The corporation will continue its organizations here and in Russia so that they may be prepared to be the nucleus of an organization to carry out a more comprehensive inter-Allied program, should it be desirable to utilize the company for this purpose.