The Ambassador in France (Edge) to the Secretary of State
[Received 9:33 p.m.]
306. My telegram No. 269, of August 28, 10 a.m.26 First official conference on the proposed double taxation treaty took place yesterday with M. Germain Martin, Minister of the Budget, Borduge, Commissioner of Taxes, Campana, Foreign Office, and two other French tax officials deputized to represent the French Government. I was accompanied by Armour, Howell and Carroll.
At the outset M. Germain Martin with many apologies announced that a new situation had arisen through the Minister of Agriculture, [Commerce], M. Flandin, having insisted, because of the existence of many unsettled economic problems between the United States and France, emphasizing particularly the tariff, that no double taxation treaty be signed until other problems could be reviewed. M. Germain Martin clearly indicated his embarrassment, especially in view of the specific assurances which had been given me from time to time that if the conferees could agree upon a treaty it would be signed by the accredited [Page 40] French officials. Notwithstanding the frank admission that an agreement could not be finally signed at this time, M. Germain Martin suggested that the conferees discuss the points at issue in article 10 and article 11 of the French and American proposals submitted to the State Department in the Embassy’s telegram No. 246, August 5, 10 a.m.27 I took the position that it was useless to spend the time discussing the details if no one was authorized to sign an agreement should one be reached and that the new development amounted practically to a breach of faith. M. Germain Martin was however so insistent that we continue the discussions that I felt it probably wise to meet his wishes and if possible keep him under further obligation. We conferred for two hours on the details, the French still insisting upon their draft of article 10. One or two alternative proposals were made which did not meet our approval.
I endeavored to make it clear at the conference that each problem must stand absolutely on its own merits; that we would refuse to consider any extraneous questions as a part of or bearing upon the proposed taxation treaty.
I made the frank statement that the quotité imposable was illogical and contrary to recognized international custom and perhaps international law and that I was not prepared or disposed to suggest any concessions beyond those presented in the American treaty draft.
The conference adjourned with the French conferees expressing the hope that some way out could be found but offering no definite proposals beyond the general statements made.
[Paraphrase.] I expect to see M. Flandin and if necessary have a conference with M. Tardieu.
. . . . . . . . . . . . . .
M. Campana, of the Foreign Office and one of the conferees officially appointed by M. Briand, later told a member of my staff and me personally to some extent his disappointment at the position in which the French had placed themselves and admitted that the delay was simply an attempt by M. Flandin to force other concessions apart from the problem of taxation. He advised Howell confidentially that at a meeting, on September 26, of representatives of the Ministries of Foreign Affairs, Budget and Commerce M. Flandin indicated that he was opposed to any agreement at this time. The Foreign Office representative, I am informed, then took the position that the tax treaty was already practically agreed to in principle and that, with the tax question disposed of, French commercial interests would be much better served. The Department of Commerce, upon the insistence of the representative of the Foreign Office, wrote a letter to the Foreign Office assuming responsibility for these new tactics. Regret has [Page 41] been expressed by representatives of the Foreign Office and the Budget that the matter was not closed last summer when the opportunity presented itself but now, to a great extent, the situation was unfortunately out of their hands. Local politics have, it would seem without doubt, entered into the question. If the agreement were signed at this time the Minister of Commerce fears that the press would hail it as a triumph for American business in competition with French industrialists and the opposition would use it for an attack on all parties for having given up one of the few levers it had to bring to bear upon us. The Foreign Office, which has shown a friendly attitude, and even the Ministry of Budget, I am inclined to believe, might be disposed to reach an agreement with us, even on the text of our article 10, had it not been for the new development of M. Flandin’s opposition, although opposition was still shown yesterday.
It is my suggestion that the present status of the matter be maintained as confidential. [End paraphrase.]