The Minister in Denmark (Coleman) to the Secretary of State

No. 167

Sir: I have the honor to refer to despatch No. 166 of October 21, 1932 under the same subject and to enclose herewith copy of a note verbale received this morning from the Foreign Office in reply to the Legation’s aides-mémoires of August 17 and September 12.

It is submitted to the Department whether this policy as outlined violates our treaty with Denmark? While broadly speaking this policy might seem to be uniform and without special favor, the Department will note from previous correspondence that its application has been prejudicial to American commerce.

It may be pointed out that this note makes no reference to that part of the Tariff Law recently passed which required certain American goods to pay a higher duty than similar British products between October 10, 1932 and January 31, 1933.

Respectfully yours,

F. W. B. Coleman

The Danish Ministry for Foreign Affairs to the American Legation

Ø/P.I. Journal No. 73.K.38/U.S.A.

Note Verbale

In reply to the aide-mémoires of August 17 and September 12, 1932, of the American Legation, the Ministry for Foreign Affairs has the honor to refer to the explanation of the principles governing the distribution of exchange certificates given orally on April 8, 1932, and on earlier occasions, and in a note verbale of June 28, 1932.

On the above mentioned occasions it was pointed out that the export trade of Denmark had been greatly reduced in consequence of the tariff measures and import restrictions, etc., introduced by various countries during recent years. Denmark has for this reason fewer bills of exchange at her disposal for purchases abroad. Consequently Denmark is unable to maintain her usual import trade; when obstacles are placed in the way of the export trade, causing the latter to decrease, imports must necessarily be reduced in the same ratio if the economy of the country is to remain on a sound basis. The Danish Government has therefore reluctantly found themselves obliged to limit the facilities for acquiring foreign bills of exchange. This limitation is provided for in the Danish Act in question, in which [Page 171] it is stipulated that the importation of goods from abroad can only take place after the Exchange Bureau of the National Bank of Denmark has issued a certificate to the effect that exchange considerations present no obstacles to the importation of the goods in question. In other words: no goods can be imported and no foreign currency can be obtained for the purchase of foreign goods, unless the importer has received an exchange certificate from the Exchange Bureau.

It goes without saying that the limited amount of foreign currency must in the first instance be reserved to pay for the importation of such raw materials and other goods as form the basis of Danish export activities (from which the foreign currency is derived), and, in the second instance, for the importation of raw materials for other productive activities. This has redounded greatly to the advantage of the United States, seeing that Denmark purchases a considerable portion of the raw materials for her agriculture and her manufacturing industries from that country.

In order to avoid arbitrary or unfair treatment of individual countries, the Exchange Bureau has, furthermore, largely taken into account the normal ratio between exports to and imports from each separate country, so that the ratio between the import and export figures for the whole year should be the same as that of the preceding normal years, in so far as is compatible with the consideration explained above. The norm chosen is not the figures of the single year of 1931, but the average figures for the period 1929–31, according to which Danish imports from the United States are normally about 15 times as great as the imports of the United States from Denmark.

During the first nine months of the present year the United States imported from Denmark goods to an aggregate value of 31/3 million Kroner. According to the normal ratio between exports and imports there should therefore have been issued exchange certificates for purchases in the United States to a total amount of 3 1/3 X 15 = 50 million Kroner. Actually, however, Danish imports from the United States during the nine months in question amounted to 69 million Kroner. It will thus be seen that the total amount of exchange certificates which have been issued for purchases in the United States have exceeded the standard figure of 50 million Kroner by 19 million Kroner, or nearly 40%.

The individual cases referred to in the aides-mémoires of August 17 and September 12, 1932, of the American Legation, in which exchange certificates have been refused for purchases in the United States, while they have been granted for purchases in other countries, are therefore naturally explained by the fact that imports from the [Page 172] United States had already been exceptionally favored during the first nine months of the present year, and that the other countries in question, in accordance with the principles explained above, had a fair claim to be considered.