The Secretary of State to the Secretary of Commerce (Hoover)

My Dear Mr. Secretary: I send you herewith a memorandum which has been presented to me concerning the attitude which this Government should take toward cooperation with Germany and German business interests in developing future trade with Russia.

I am disposed to agree with the arguments put forth and the action suggested, but would, of course, like to know your views before proceeding with the matter. If you agree, copies of the memorandum will be furnished to the American Chargé d’Affaires and the American Consul General at Berlin for their confidential information and guidance. You might also care to furnish a copy, for the same purpose, to Mr. Cole.

I am [etc.]

Charles E. Hughes

Memorandum by the Division of Russian Affairs, Department of State

It transpires, through reports reaching the Department of State, that there is a general desire in German commercial and business circles to obtain the cooperation of the United States and American [Page 786] business enterprise in preparing for future trade with Russia, but at the same time an apprehension that cooperation will not be readily granted. This misgiving is in part a natural result of the war, but it is also due to uncertainty in the German mind concerning the attitude of the United States toward the interposition of Germany as a middleman in Russian-American trade.

Indirect trade by way of Germany was one of the outstanding facts in Russian-American trade relations before the war. A classical example is that of cotton. In addition to $22,604,000 worth of cotton exported directly to Russia by the United States in 1913, Germany re-exported $14,964,000 worth, which was almost entirely of American origin. A similar situation existed with respect to other important commodities, including copper, rubber, and agricultural machinery.

This indirect trade will inevitably develop once more, when conditions permit, owing to Germany’s geographical propinquity to Russia, her complementary economic situation, and her vast experience of Russian trade. If this be accepted as inevitable, much can be gained by friendly cooperation with Germany. It is self-evident that the United States will benefit by everything (not directly inimical to its own interests) which will hasten the economic reestablishment both of Russia and of Germany and increase their purchasing power. If the attitude of the United States were understood to be friendly, the appropriate bureaus of the German Government might be led to disclose to the representatives of the United States their views on the development of the Russian situation and to confer with them concerning commercial and industrial projects. Such an interchange of views and information would be of distinct advantage to the United States, which has not so intimate a knowledge of Russia as has Germany. If the German Government felt that German re-exports of American goods to Russia were made with the knowledge and approval of this Government so far as they did not compete with direct American trade, this trade might be conducted on a basis of maximum advantage to the United States. For example, the re-export goods might be offered in Russia, to some extent, not as German, but as American products.

It is considered, in view of the foregoing, that a basis of cooperation with German officials and business men should be laid at once by removing from the German mind misapprehensions as to our friendly disposition, now that peace is signed, and our readiness to encourage indirect trade, whenever and wherever direct trade seems impossible. To this end it is recommended—

That the representatives of the United States in Germany be advised that this Government is not hostile to cooperation between [Page 787] American and German business interests looking to future trade with Russia, nor to the conduct through German middlemen of so much of this trade as cannot be done directly with Russia, provided that the German middlemen play fair; and
That the American representatives be directed to avail themselves of suitable occasions for conveying this impression informally to German officials and prominent business men.