I desire to invite the Department’s attention, however, to the fact that
such examinations continually cause misunderstandings and bad feeling.
The French Government itself would not dare to make a law forcing their
manufacturers to show their books to French agents and it is obvious
that such demands on the part of foreign agents are badly received. I
recommend a change in Section 510 of the Tariff Law which deals with
this subject.
I am enclosing herewith a copy of a memorandum, prepared by a member of
my staff, which presents in detail the arguments against the
advisability of the making of such demands.
[Enclosure]
Statement Prepared by Mr. Chester Lloyd Jones,
Commercial Attaché, Embassy in France
I. French Criticism of Cost of
Production Investigations
I summarize below the French criticisms met in conversation with
French business interests and in the press, without passing on their
solidity:
- (1)
- Our government should confine the effect of its laws to
its own territories. It is indefensible to try to give them
effect within the borders of a friendly neighbor state. If
the propriety of such extraterritorial extension of law is
admitted, it is obvious that international trade might be
subject to intolerable interference even before it crosses
the border of the state where it originates.
- (2)
- The cost of production investigations are an inquisition
into the affairs of French manufacturers contrary to all
precedent. No French Parliament could stand which passed a
law authorising French tax officials to inquire into the
books of French citizens to the degree to which American
agents are authorized to do so not in their own but in a
foreign country.
- (3)
- Is it to be supposed that United States citizens would
submit to similar inquisitorial legislation passed by
France? Investigations of this sort are authorised in
American law in connection with income tax and other
legislation, but such inquiries are within the national
territory, and have not even there been extended to cost of
production. An attempt to enforce a foreign law in France as
a condition for the right to sell in the United States is
indefensible.
- (4)
- It is useless to try to differentiate between the actions
of one set of American officials and another. The
representatives of the [Page 225] Treasury Department demand the opening
of books and the disclosures of production costs because
they say they want to assure honest valuations for goods
imported into the United States. If this were the only use
which would be made of the information, the inquiries might
be less objectionable. But the representatives of the Tariff
Commission are in Europe to get information as to the cost
of production in different countries in order that the
American tariff can be adjusted in such a way that any
advantage reaped by a foreign producer through cheaper
labor, cheaper raw materials, or cheaper methods of
manufacture may be counterbalanced by the tariff rate
adopted in the United States. The information they want they
try to secure through threat that if not given, the tariff
will go up. The information they seek, if given, will be
used to check the import trade which they are
investigating.
- Is it to be supposed that the information given one set of
officers for one purpose will not find its way into the
hands of the other set of officers and be used by them for
another purpose?
- (5)
- The investigations are, in addition, objectionable because
they discriminate between French producers. If all the
information asked were given, an efficient plant
manufacturing at low cost would find itself at a
disadvantage in American trade as compared to a less
efficient plant.
II. French Action
Proposed
The cotton and woolen associations, and perhaps others, have
counselled their members to report any attempt to force the giving
of information to the associations, which will take the matter up
with the French Government. They encourage non-compliance with the
demands made. The “Conseillers du Commerce Extérieur” have at a
number of meetings discussed the character of the investigations
carried on. Protests have reached them from a number of trade
syndicates, some of which have proposed that, at least, the
application of the American law be made less brusk by agreement to
allow the trade syndicates to report on the cost of production,
their conclusions being accepted, and the individual merchant being
freed from interference. (This does not seem to be a satisfactory
way out. CLLJ.)
III. Estimate of the Effect of the
Legislation
Obviously, the American officers sent to enforce the laws to which
the French take exception have no option. It may also be urged that
this is a “good law”, in that it protects the income of the United
States.
[Page 226]
The legislation certainly does not promote friendly international
relations. The opposition aroused seems to be addressed primarily
against the activities of the agents of the Tariff Commission and
incidentally against the representatives of the Treasury. Perhaps
the activities of the latter might have been accepted if there had
been no feeling aroused that the information given was to be used to
the disadvantage of French exports in the fixing of future tariff
rates—but even that is doubtful. French exporters and French
Government officials question the propriety of the action taken by
certain of the representatives of the Tariff Commission, and have
protested against them. The criticism which some of these
representatives have aroused comes not only from individual firms,
but from the trade syndicates.
It is a fair question whether legislation by France attempting to do
the same thing in America which our officials have attempted to do
in France would be accepted without vigorous protest by the American
business public.
Take an example: There is now a fairly large export of aluminium
ingots from the United States to France. There is also an important
French aluminium industry. Suppose a French official attempted to
get from the American Aluminum Company their costs of production,
assuming that he acted under French law. What would his reception
be? This is an extreme example, since the American Aluminum Company
has refused to give any information on this subject even to the
United States Government. But the reaction toward the inquiry would
be the same even in branches of industry where control is not so
completely in the hands of a small group.
The practical effect of the activities under the existing American
legislation is to dry up sources of commercial information formerly
open to the representatives of the United States Government in this
country. Trade syndicates whose members have been affected by the
investigations now refuse cooperation, alleging that the reason for
doing so is that they feel that any information given may be used to
their disadvantage. Cotton, wool and silk manufacturers and the
electrical equipment interests are examples of groups which have
been less communicative through the bad feeling aroused.
But aside from details, it can generally be assumed in human
relations that a certain standard of action is “good” if one would
welcome the application of that standard to himself. I doubt whether
French legislation of this sort would receive a cordial reception in
the United States.
