611.5131/563: Telegram

The Acting Secretary of State to the Chargé in France ( Whitehouse )

282. Your 352, September 15, 4 P.M. At the direction of the President please present the following aide-mémoire:

“The Government of the United States has received the aide-mémoire of the French Government on the subject of possible tariff arrangements to be made between the two Governments pending the negotiation of a definitive treaty. This aide-mémoire touches also on the French conception of certain principles which might be included in such treaty. The Government of the United States is both surprised and disappointed at the attitude of the French Government as therein expressed. It had supposed that the French Government fully understood that the American law which fixes the tariff on imports does not envisage the conclusion of a treaty of reciprocity in regard to rates of duty.

Passing, indeed, beyond the mere limitations of the law into the broader field of international trade relations, it is the profound belief [Page 679] of the American Government that the only satisfactory basis of such relations is to be found in the domain of equal treatment of the trade of all nations. Any other policy can lead only to confusion and misunderstanding, and, in the opinion of the American Government, is opposed to the soundest principles of world economics and essentially of world good will. Unless the principle of equality of treatment to all is admitted there can be no confidence in the stability of trade relations and the beginning of such discriminatory action can only lead to its extension throughout the world, thus creating trade groups, combinations against weaker nations, reprisals, and a long train of political and economic dangers. The principle of general most-favored-nation treatment in its broadest form, as the basis of commercial treaties, was unanimously recommended by the members of the Economic Conference recently held in Geneva as a principle to be followed. This principle there had the endorsement of the French members.

It is the understanding of the American Government that the principles on which the French Government fixes its tariff are those expressed in 1891 by Monsieur Meline in his report on March 3 to the Chamber of Deputies. Monsieur Meline said at that time:

‘The producer demands, as is his right, that account he taken of the heavy costs which burden his labor and of the disadvantages to which he should not be subjected. In the formation of a customs tariff, he asks that the legislature measure exactly [the differential which separates him from]71 his foreign competitor, and that the tariff rate inscribed in the Act be the representation of this differential.

‘Your commission believed this demand proper, and it is upon this basis that it has tried to perform the difficult work which you have entrusted to it. It has searched for the exact rate which seemed indispensable for each branch of industry and agriculture to assure its existence and free development. It has considered that to give to the tariff a real value and to give courage and confidence to French production, it is important, above all, to fix the minimum rate which will be assured to them and below which in future there will be no concessions. It is upon this fundamental principle that our minimum tariff policy is based; it is this that determines its real character.’

This theory was restated in 1906 by Monsieur Morel, who said:

‘We have been entirely guided by the fundamental rules laid down by the founders of the customs régime of 1892 …72

‘Your commission …72 has tried to measure exactly the differences which exist between the French producer and his foreign competitor by reason of the costs which burden his work and the disadvantages which exist through no fault of his, and it has placed in the minimum tariff the figure representing this difference.’

It is precisely on this theory of protection that the rates of duty of the American Tariff Law rest, and it is believed that a tariff designed for the protection of producers and the raising of revenue is not open to objection by other governments when it is applied equally to all. The Government of the United States would therefore not criticise non-discriminatory tariff rates imposed by France since it considers that rates are a matter solely of internal policy. It feels, however, that a protest is justified when these rates do not apply equally to all nations. The American Government is not now making any criticism [Page 680] of the non-discriminatory rates France has adopted but objects only to the fact that France is discriminating against the trade of the United States by applying to many categories of American goods rates in some cases four times as high as upon similar articles imported from Germany and other countries competing with the United States in the French market.

While the rates of duty of the American tariff rest upon the same theory of protection as do the ‘minimum’ rates of the French tariff, it may be pointed out that the so-called ‘general’ or ‘maximum’ rates of the French tariff, in the words of the report of French Commission on Tariffs and Commercial Conventions submitted to the Chamber of Deputies on March 25, 1927 (document No. 4220), are devised ‘in order to leave to the negotiators of commercial agreements the margin between the duties in the two columns as the essential counterpart which they [may give in exchange for the advantages which they]73 wish to procure.’ The existing rates of the American tariff, it should be noted, embody no such margin for bargaining.

The French Government appears to entertain the view that France is justified in discriminating against American trade because it considers that the average rate of duty imposed by the United States on imports from France is higher than the average rate imposed by France on imports from the United States. But this is not discrimination. Our rates are uniform on these imports, they are the same for others as for France. This argument, moreover, is not admitted by the Government of the United States, which, as stated above, considers tariff rates a domestic matter and at the same time considers all discrimination to be unjustified. If the rates of duty on articles imported into the United States from France are proportionally higher than on those exported from the United States to France the reason is merely that a large part of American imports consist of manufactured articles and luxuries, whereas an equally large proportion of French imports from America are raw materials. Furthermore, the higher duties in the present tariff law charged in the United States on the imports from France have not decreased the flow of French goods as is evidenced by the fact that in 1921 imports from France amounted to $141,885,000, whereas in 1926 they amounted to $152,030,000 [$152,020,000 74]. Moreover in any consideration of trade relations between France and the United States it is necessary to bear in mind the very large invisible exports [of France by reason]75 of expenditures of American tourists amounting to well over $200,000,000 annually.

The American Government points out that it is entirely impracticable for countries to apply to each other’s trade exactly or even approximately the same average rates of duty, which appears to be the logical conclusion of the French contention, in view of the varying commodities entering into international trade as well as the differences in price levels, purchasing power and other conditions of the respective [Page 681] countries. In the trade between the United States and Brazil the position of the United States is the reverse of that existing with France. About ninety-five per cent of the imports into the United States from Brazil are entirely free of duty, while a large proportion of all American exports to Brazil are dutiable. Yet the American Government does not, for this reason, contend that ninety-five per cent of the goods from the United States which are imported into Brazil should be admitted free of duty. On the contrary the Government of the United States can not object to whatever duty may be levied by France or Brazil, or any other nation, when there is no discrimination as between the United States and other countries. Absence of discrimination is a cardinal principle of clean-cut and friendly trade relations.

The policy of the American Tariff Law makes no discrimination whatsoever between articles imported from different countries. Furthermore discrimination in world trade against the United States has practically ceased. It is France alone, at the present time, which seriously discriminates against American products. Article 317 of the present American Tariff law gives the Executive the right to impose additional duties on goods coming from a country which discriminates in its tariff against the trade of the United States. The American Government is very loathe to increase its tariff on articles imported from France which is clearly at the present time practicing serious discrimination as contrasted with its treatment of similar goods imported from other nations which are competitors of the United States. It has so far refrained from doing so since it believes that upon reconsideration the French Government will realize the essential justice of the American principle already, as noted above, endorsed by representatives of the other nations of the world assembled in conference at Geneva, that it will hesitate to discriminate against a nation which has always maintained an intimate friendship with France, and will therefore see its way clear both to the negotiation of a treaty guaranteeing general most-favored-nation treatment and to suspending in the interim its manifest discrimination against American products.”

The above memorandum has been read to the Secretary by telephone and has his full endorsement. In presenting it to the Foreign Office you should make clear that the Department expects a very prompt answer.

Carr
  1. Bracketed correction transmitted to the Chargé in France in telegram No. 292, Sept. 26, 1 p.m.
  2. Omission indicated in the original telegram.
  3. Omission indicated in the original telegram.
  4. Bracketed correction transmitted to the Chargé in France in telegram No. 292, Sept. 26, 1 p.m.
  5. This is the figure given in Foreign Commerce and Navigation of the United States for the Calendar Year 1927. See tables, vol. i, p. x, and vol. ii, p. 52.
  6. Bracketed correction transmitted to the Chargé in France in telegram No. 283, Sept. 20, 10 a.m.