The Secretary of State to the Chairman of the United States Tariff Commission (Marvin)

Sir: In order that the Tariff Commission may give consideration to the question whether the restrictions of the Government of Czechoslovakia upon the importation of automobiles are imposed in such manner as to constitute a discrimination against the commerce of the United States within the meaning of Section 317 of the Tariff Act of 1922,40 I beg to bring the following facts and considerations to your attention:

The Czechoslovak Government has established a so-called “contingent” system which limits the number of automobiles to be imported from any country. It appears from the information in the Department’s possession that that system as now administered results in the more serious curtailment of American trade in automobiles than that of other exporting countries.

In a telegram dated April 2, 1928, the Legation at Prague reports that according to information received from the Czechoslovak Minister of Commerce, the total number of licenses for the importation of [Page 703] automobiles issued to the several exporting countries for the year 1926–27 (November to November) were as follows:

France 507
Italy 692
Germany 303
Austria 340
United Status 1254

The Legation had previously informed the Department that a contingent of 800 cars is specified in the Czechoslovak commercial treaties, notably those negotiated with France and Italy, and pointed out that as this number satisfies their present requirements, no effort has been made by these States to increase it. It will be noted that those countries did not utilize the entire quota available to their exporters.

The Legation has stated further, however, that the success of American cars in the Czechoslovak market during the preceding two years has been such that far more than the number for which import licenses are available could be sold if the necessary licenses could be obtained. The contingent of 800 cars which had been allotted to the United States for the current year is reported to have been exhausted on February 15, 1928. The Commercial Attaché at Prague reported on February 21 that American dealers will request 1000 additional licenses for the purposes of the immediate future toward a total of at least 2500 licenses estimated as required to the end of the contingent year November 5, 1928. In contrast with these requirements, the Czechoslovak Minister of Commerce has just informed the American Chargé d’Affaires at Prague that there will be in all 1300 licenses issued for American cars for the current contingent year.

Further information on this subject may be obtained from the Legation’s despatches of February 11 and February 21, 1928,41 copies of which were transmitted to you with the Department’s letter of March 15, 1928.42

It appears from the information set forth above that whereas the contingents allotted to France and certain other countries are more than sufficient to satisfy the needs of automobile exporters in those countries, the American contingent, though larger in absolute amount, is inadequate to care for the demand for American cars and thus does not satisfy the needs of American automobile manufacturers. There is apparently some analogy between the allotment of contingents without careful reference to the relative position which the various exporting countries might normally be expected to occupy [Page 704] in supplying a given market, and the levying of discriminatory import duties. The levying of a non-discriminatory customs duty on a given product does not disturb the relationship existing among the various countries supplying the article in question. The country which occupies the leading position in the production and trade in that article may feel assured that, even though the absolute amount of its exports to the country in question may be reduced in consequence of the imposition of the duty, the same factors which have given it a leading position among the foreign countries supplying that market will enable it to retain its relative position even after the import duty has been imposed. A discriminatory duty, however, will disturb the above relationship and, although the country whose product is discriminated against may continue to occupy the leading position among the exporting countries supplying the market, its relative position among the exporting countries will be less favorable than that which it otherwise would occupy.

The effect of the Czechoslovak contingent system upon American trade in automobiles, as above set forth, appears to be similar to that which would result from the application of discriminatory import duties to American automobiles, and the Department of State will appreciate receiving the comment of the Tariff Commission on the matter. Since the spring and early summer months are those in which the automobile trade is most active, your consideration of the matter at your earliest convenience would be greatly appreciated.

I am [etc.]

Frank B. Kellogg
  1. 42 Stat. 858, 944 ff.
  2. Latter not printed.
  3. Not printed.