600.119/1897: Telegram
The Acting Secretary of State to the Ambassador in Great Britain (Davis)
3774. For Sheldon [from War Trade Board]: No. 1952. Urgent and important. Embassy’s 4781, December 20, 5 p.m. your 2143. Department’s 3470, December 17, 6 p.m. our 1859, was prepared on December 14 and was delivered the same day to Department to be despatched. Owing, no doubt, to the congestion of cable lines, it was not despatched until December 17. Had it been promptly despatched, ABC would have had 5 full days to consider the proposed publication, or 8 full days before the same would have become effective. On December 20, we prepared and delivered to Department to be despatched, Department’s 3596, December 21, 4 p.m., our 1904. On the afternoon of December 21, Department delivered to us Embassy’s 4772, December 20, your 2140. Embassy’s 4789, December 20, your 2146, and Embassy’s 4781, December 20, 5 p.m. your 2143, were received by us at noon on December 23. You will see from the foregoing that we had decided not to publish, as being included in a so-called non-rationed list, the commodities set forth in Department’s 3470, December 17, 6 p.m., our 1859, before receipt of any protest from British, French and Italian representatives on A B C. Although we did not expressly so state in our 1859, we did not propose to make the publication on December 20 without having heard from you.
Although we did not approve, in principle, of the so-called Free List because of its abolition of the Confidential List, and although we believe that we should have been given notice earlier of the proposed publication thereof, it was not our plan to publish the so-called non-rationed list without giving ABC an opportunity to state their views. We regret that in stating that we proposed to publish it on December 20, we gave the impression that we intended to act without [Page 786] reference to the views of the other Governments. The list has never been published. Please explain the situation to the British, French and Italian Representatives.
And now, to clear up any ambiguities which may have resulted from the unavoidable, because necessarily hurried, correspondence that we have recently exchanged with you, and in order to make this cablegram complete in itself, we submit to you for consideration by A B C the following summary of our position with reference to exports to the Northern Neutral countries of Europe.
I. Rations. We adhere to the belief that the rations for the Northern Neutrals should be immediately increased to the needs of those Neutrals, except possibly in the case of certain raw materials. See paragraph captioned “Raw Materials”. Such increase would not result in a considerable weakening of the economic pressure on Germany, inasmuch as we recommend such increase only to the extent of satisfying the actual needs of the Neutrals. Besides, an absolute physical blockade is now being maintained in the Baltic. Also, the agreements between the Associated Governments and all the Northern Neutrals should, at this time, more even than heretofore, operate as effective guarantees against re-exportation to Germany because of the prospect of the early re-establishment of Free Trade relations and consequent desire of the Northern Neutral countries to observe these agreements with the greatest good faith at a time when they will be seeking to obtain a fair balance of the world’s trade with the Associated Governments.
II. Free List. In view of Embassy’s 4831, December 23, your 2157, in which you state that the ABC have modified the conditions of the Free List and will no longer permit shipments of commodities to firms on the Confidential List, it appears that the so-called free list has now been practically assimilated to the non-rationed list set forth in Department’s 3470, December 17, 6 p.m., our 1859, except for the fact that the commodities in the respective lists are not identical. In view of Embassy’s 4831, your 2157, we have ceased issuing licenses for commodities on the Free List when consigned to firms on the Confidential List. We note from Embassy’s 4855, December 24, 4 p.m., your 2165, that pork and pork products, iron and steel and manufactures thereof, except high speed steel, have been added to the Free List. Those commodities were included in the proposed Non-rationed List set forth in Department’s 3470, our 1859. We therefore approve. We also approve the proposed addition to the Free List of the commodities set forth in Embassy’s 4860, December 24, your 2169.57
We now recommend, further, an immediate addition to the Free List of all the other commodities included in the proposed Nonrationed List as set forth in Department’s 3470, our 1859, and also tobacco. We also strongly recommend that, with the exception of certain articles, particularly raw materials, all commodities, and especially all foodstuffs, be placed on the Free List. In making this [Page 787] last recommendation we are moved by the following considerations: As stated in our 1968, January 2, Department’s 3750,57a and for the reasons therein set forth, we are not in accord with the views of the ABC as set forth in Embassy’s 4838, December 23, your 2163, and in Embassy’s 4855, December 24, 4 p.m., to the effect that the reexportation from the Border Neutrals to the Central Empires of commodities on the Free List should not be viewed as seriously objectionable.
We believe, however, that sufficient safeguards exist to permit the Associated Governments and the Northern Neutrals to derive benefit from the Free List without concurrent benefit to the enemy. And it is because of that belief that we recommend the immediate and ultimate additions referred to above. The commodities now included in the Free List and the additions that we have either approved or proposed consist chiefly of foodstuffs or manufactured articles and do not include all raw materials. As for foodstuffs, the blockade and the agreements referred to above would seem to constitute sufficient guarantees against re-exportation. The only danger would seem to be a possible accumulation of stocks of foodstuffs by Germany in the Border Neutral countries for importation into Germany after a declaration of peace. That possibility is negligible in view of the current high market prices of foodstuffs, which, if ultimately importable into Germany, could, at the time of such future importation, be purchased by her at materially lower prices. As to manufactured articles, the blockade in the Baltic and the existence of the agreements again appear to offer sufficient guarantees. Besides, in the matter of these manufactured articles, Germany is not a buyer, but, on the contrary, in time will be a competitor with the Associated Governments, and, unless we flood Northern Neutral markets with Allied manufactured commodities, Germany, immediately following a declaration of peace, will find those countries rich fields for exploitation. As to foodstuffs, and as to such manufactured articles as American industries produce, this country will have a sufficient supply to satisfy all of the needs of the Associated Governments, in addition to the supply which might be shipped to the Border Neutrals. In fact, we are seeking new markets for our present large surplus stocks of those commodities.
And so we approve of the Free List, but not for the purpose of revictualing or rationing the enemy country at this time, and we are also of the opinion that under any plan which the Associated Governments might formulate for rationing or revictualing the Central Powers, shipments should be made directly to the Central Powers and not through the Neutrals. In this connection, refer again to our 1968, January 2.
III. Controlled List. Inasmuch as additions are being made so rapidly to the Free List, and, in view of our recommendation that, with the exception of certain commodities, all articles should be placed on the Free List, we believe that much quicker progress will be made by eliminating the Free List and substituting therefor, as soon as possible, a Controlled List. We suggest that the only commodities [Page 788] which, from our point of view, should be included in this proposed Controlled List are the following:
- 1.
- Arms, ammunition and explosives.
- 2.
- Fodder, including oil cake.
- 3.
- Seeds.
- 4.
- Cotton, raw, waste, thread, yarns.
- 5.
- Flax, hemp, jute, tow.
- 6.
- Wool, including yarn, noils and tops.
- 7.
- Raw rubber.
- 8.
- Hides and leather, unmanufactured, and leather belting.
- 9.
- Tanning materials.
- 10.
- Rosin.
- 11.
- Turpentine.
- 12.
- Asbestos and asbestos waste.
- 13.
- Graphite and graphite crucibles.
- 14.
- Copper, plates, bars, pipes, wire and cables (except insulated copper cables), copper alloys.
- 15.
- Lead, pig, plates, bars and pipes.
- 16.
- Tin, not including tin and terne plates.
- 17.
- Nickel.
- 18.
- Textile machinery.
- 19.
- High speed steel.
- 20.
- Mineral oils.
This list, from our standpoint, has been compiled with due consideration to the first and second sections of the paragraph hereinbelow captioned “Raw Materials”, but without regard to the third section of that paragraph. In fixing the minimum of these commodities, due regard, of course, must be given to the provisions of the various Agreements with the Northern Neutrals. We believe that the establishment of such a Controlled List will greatly assist shippers in Allied countries. The suggestion that such a Controlled List should be established does not, in any way, affect the principles under which we are now operating and does no more than to increase the commodities on the Free List.
IV. Raw Materials. In suggesting that certain raw materials be omitted from the increase of the rations and be excluded from the Free List, we have in mind the following:
First. All raw materials which Germany herself produces should be permitted to go freely to the contiguous countries, even to the extent of over-supply, so that Germany may not profit in Northern Neutral markets at the expense of the Allies. But exports of even those raw materials which Germany herself produces should be controlled to the extent required by the considerations set forth in the third paragraph below.
Second. Those raw materials which Germany does not produce should be limited by the ration schedules to the actual needs of the Neutrals to prevent accumulation by Germany for future importation.
Third. We have also had under consideration for some time the question as to whether we should exercise a control over the exportation to the Northern Neutrals of certain raw materials with a view to preventing the Neutral countries from competing [Page 789] with Allied industries until such time as those Allied industries, which have been crippled or destroyed by the war, shall have had an opportunity to rehabilitate themselves and until the Allies have recovered from war industries and demobilization to such an extent that they are able to re-engage in industrial competition with Neutral manufacturers. No definite decision has been reached on this point, and McCormick proposes to discuss this problem with you in Paris. The argument against such control is that the revival of trade throughout the world depends to a large extent on an early return to normal trade conditions, and that such a control would eventually operate unfavorably in the case of the Allies and would not achieve the desired result.
You should emphasize the above considerations to the ABC, and advise us of their views with particular reference to the following:
- (a)
- The immediate increase of all rations to the extent of the needs of the Border Neutrals.
- (b)
- The immediate addition to the Free List of the commodities referred to above.
- (c)
- The ultimate addition to the Free List of all commodities, particularly foodstuffs, but omitting certain raw materials.
- (d)
- The ultimate elimination of a Free List and adoption of a Controlled List.
- (e)
- The use of the Free List as a device for a premature revictualing and rationing of enemy countries.
- (f)
- The control of raw materials for the purpose of protecting Allied industries.
Repeat to Paris for Hoover and Taylor from the words beginning “and now to clear up any ambiguities” to the end.
You should not submit to A B C our recommendations for placing all foodstuffs on the Free List, until you have consulted with Hoover. If he cables you his approval of our recommendation, then submit it to A B C. If he disapproves, cable us to that effect and state his objections.
This cablegram and our 1968, January 2, constitute a basic memorandum of our views with reference to exports to the Northern Neutrals. For purposes of future discussion or correspondence, it will be referred to as “W. T. B. Northern Neutral Memorandum.”