The Secretary of State to the Chief of the American Delegation ( Wilson )
1. Department’s instruction No. 65, October 6, 1927. As presumably proposal will be made that scope of draft agreement be expanded to include topics mentioned in quotation from Economic Conference report, you are instructed further as follows:
1. In view of the detriment the American public has suffered through foreign export duties and other measures of a monopolistic nature, this Government would in principle favor addition of new article, toward end of Convention preferably, to be based on first [Page 265] paragraph of passage quoted from above report; article might take following form:14
“Each contracting State agrees to refrain from employing export duties, quotas, or other measures applicable to exportation of goods in such manner as to defeat the application of the principles laid down in the present agreement and particularly in article 1 thereof.”
If, as we hope, the Conference adopts modification of article 5 along lines desired by the Department, then reference to “exceptional or imperative circumstances” in first paragraph of quotation from report would obviously not be necessary; refer to your instructions on article 5. Likewise, first sentence article 4 covers matter of health regulations. The words “applicable to exportation of goods” are believed to be necessary in order to rule out measures which are strictly internal.
2. The so-called raw materials question involves question of export duties. Complete information on the general subject will be found in documents left at the consulate by the delegation to the Economic Conference in relation to the limitation and monopolization of trade. Export duties have been and are being imposed in order to restrict exportation so as to bring about monopolistic prices; rubber control is a case in point. Of course, monopolistic measures may take some form besides export control, and then would be, naturally, quite beyond scope of present discussions.
3. The Department does not wish to have the controversial question of raw materials injected into the Conference if it would jeopard, as seems possible, the primary purpose of the Conference instead of resulting in a constructive step forward toward solution of raw materials problem. Department does not desire you to introduce immediately any proposal, but wishes you to observe carefully the tendencies in the Conference and to cable us your advice as promptly as is practicable. You may wish to sound out, discreetly, your French and Italian colleagues, as the French and Italian delegates to the Economic Conference were especially interested in subject of raw materials. Department will be glad to have you cable comment in regard to text of any proposal on this subject which has likelihood of being seriously pressed. You will then receive additional instructions as may be appropriate.
4. Suggestion has been made (for example, the view expressed by the British in correspondence with this Government on rubber restriction)15 that export duties and import duties alike operate as restrictions upon freedom of commerce. As it is possible that suggestion [Page 266] be made that insertion of clause quoted above is not consistent with proposed separate article on import duties discussed in Department’s instruction No. 65, October 6, the Department calls attention to fact that, while export and import duties may have restrictive or even prohibitive effect, duties on exports may cut off supplies of particular commodities, raw materials in particular, which may be of vital necessity to foreign countries and which are not available elsewhere in sufficient quantities for their needs, while on the other hand the restriction of importation into a given market through duties on imports is rarely, if indeed it is ever, a vital matter to the country of origin, which still possesses alternative outlets. The material differences which exist between effects of import and export duties, as well as fact that latter appear to be much less firmly embedded in the economy of countries than import duties are, are thought sufficient to warrant their separate treatment.
5. It seems to Department that questions of free circulation of capital and of artificial control of exchange operations are outside scope of the present Conference. In Department’s view it is preferable that these questions should not be made subject of seriously considered additional provisions, but if proposals of this nature are pressed, you will cable comment and recommendations.
6. Department of Commerce has approved these instructions.