File No. 652.119/1431
The Ambassador in Spain ( Willard) to the Secretary of State
[Received August 18, 12.37 p.m.]
For Leffingwell [from Davis]:
No. 10. Your No. 5.1 Sorry War Trade Board has granted licenses for balance of cotton for Spain for shipper [shipment?] on consignment as this will make my negotiations more difficult. Most of our ammunition was used in making present Spanish agreement and if all concessions made by War Trade Board are given out there to the press it is rather difficult for me to negotiate by offering concessions which have been [previously] granted and published. Am glad War Trade Board decided not to deduct petroleum lost from regular Spanish allotment, but it would have assisted me very much to have been authorized to make this offer in connection with negotiations, instead of its having been made and published there previously.
Chadbourne, with my concurrence recommended by War Trade Board, issued cotton licenses corresponding to June only, our opinion being that it was unnecessary and inadvisable to issue further licenses pending my negotiations here, and the adoption of necessary modifications in plan for the license and future distribution of cotton for Spain.
The Spanish Government is protesting seriously against the present system by which American exporters and some Spanish dealers have shipped cotton to their own agents, who take advantage of [Page 1703] artificial scarcity to exact exhorbitant prices considerably in excess of cost and customary profit.
Licenses for export of cotton appear to be granted to very few firms, many of whom are exacting these exhorbitant prices. Spanish Government does not understand this and it causes speculation, general confusion, dissatisfaction and considerable suspicion on the part of Spaniards who seem to think our Government is assisting American merchants to profiteer. Some spinners have been able to get more than they need, others not enough, and mills must either shut down or pay any price demanded to obtain supplies required.
Chadbourne and his associates confirm above statements and agree to accept that licenses for cotton corresponding to July last and August should be cancelled until a more satisfactory plan has been adopted, and even then, in connection with my negotiations, but if these licenses cannot be cancelled then the American exporters should be required to ship cotton and dispose of same only to the manufacturers and upon conditions as to price and payment agreed upon by War Trade Board and Treasury Department. Chadbourne will cable shortly recommending plan for future licensing and distribution. Spanish Government strongly urging that consignment of cotton to agents, where the cotton has not previously been sold, be discontinued, and the licenses be granted only to or for specific spinners up to a total of 35,000 bales based on [number] of spindles actually in operation. To protect spinners from extortion by cotton merchants, Spanish Government also urges that when Spanish Cotton Committee and War Trade Board representative agree upon allotments to each spinner, licenses will accordingly be issued to the respective spinners or their agents, who may with such [licenses] purchase from any dealer in United States who offers most favorable prices and conditions. Davis.