File No. 600.119/620
[Enclosure]
The Secretary of the British Embassy
(
Percy) to the Chairman of the War Trade Board (
McCormick)
Dear Mr. McCormick: We are instructed by the Foreign
Office to put before you the following very important problem of
general policy with regard to neutrals.
In the present abnormal conditions of trade neutral countries are
taking steps to exact an artificial price from belligerents for
commodities which they are in a favourable position to supply.
Sometimes the neutrals do this by fixing export prices,
sometimes by the imposition of export duties.
Germany has dealt with this tendency with considerable success
for some time past in her negotiations with Holland and the
Scandinavian countries. Her procedure has been to fix a high
price for the goods which she offers to export to those
countries in return for concessions and then to treat the
reduction of this price as a concession in return for which the
neutral country has to concede further advantages, especially in
the form of loans.
You may remember that last autumn I brought Mr.
Blackett and Mr.
Keynes of the British Treasury to a
meeting of the Board, and Mr. Keynes then
raised this question pointing out the success which Germany had
met with.
The commodities in respect of which we are at the present moment
under pressure from neutral countries are Dutch flax seed and
Danish butter. Other cases will probably shortly arise. In order
to meet this situation we feel that some scheme should be
devised, if, and when, the various agreements with neutral
countries are concluded, whereby the Associated Governments will
be in a position to raise the price of some commodities,
particularly commodities of which we control the supply and
which the neutral countries in question urgently require. We
shall then be in a strong position to bargain against any action
on the part of neutrals, such as is described above.
Owing to our present state of supplies in England, coal is
probably the only article to which we could, at present,
effectively apply the proposed principle, and, as Germany can
still supply coal to Holland, Denmark and Sweden, the value of
this lever is somewhat problematical. In the case of other
articles, we shall be able to do very little without your
co-operation. If you would be prepared to support us we feel
that in practise it would very likely be unnecessary actually to
put into effect any scheme of artificial price-fixing of certain
commodities exported to neutrals as the neutral Governments
[Page 974]
would probably lower
their price when once they saw that our two Governments were in
agreement over the principle involved and intended to apply
it.
You will probably be in a position to control export prices in
the case of all articles falling under the control of the Food
Administration and this in itself would be a very powerful
lever. I do not know how you stand with regard to other
articles.
If you would let me know whether you approve of these proposals
in principle our Government would then put forward suggestions
as to machinery.
Yours very truly,
