The Minister in Estonia (Skinner) to the Secretary of State
[Received May 4.]
Sir: I wish to report that this morning I had an extended interview with Mr. Tönisson, Minister for Foreign Affairs, in regard to the economic situation and especially in regard to restrictions upon imports and the purchase of exchange, which now weigh unequally upon imports from the United States. I had in mind, especially, during the interview, the Department’s instruction No. 660i.006/20, March 8, 1932, to this Legation, suggesting that a fair method of imposing import restrictions would be to average separately the imports from each country for a series of years, and then give to each country such percentage of the average as might be practicable, and I placed the Department’s point of view before Mr. Tönisson with whom I left an aide-mémoire a copy of which I enclose herewith.
Mr. Tönisson, as I expected, manifested considerable friendliness towards the United States, disclaimed any wish to apply unfair restrictions to imports from America but became manifestly nervous when he explained the situation in which Estonia found itself. The plain facts were that the markets for Estonian products had become very circumscribed and the prices paid for these products were going lower and lower. The principal item of export was butter, of which roughly 15,000,000 pounds were purchased abroad, 1/3 of the whole amount going to Great Britain. The United States, unfortunately, while a valued customer in a limited way, absorbed no Estonian butter. The British Government, he said quite frankly, had made it definitely known to the Estonian Government that, with so heavy a balance of trade in favor of Estonia, Great Britain expected and, indeed, insisted that so long as it continued necessary to restrict imports the British market should be favored. Thus it came about that exchange was available for the purchase of goods in the British market when this was not the case as respects other markets like that of the United States.
I made the American case as strong as I could, and I am told that in practice we are receiving assistance from the Estonian Government, but it must be obvious that in the long run, until general business improves, the preponderance of Estonian import trade will be artificially directed to Great Britain and to Germany, by far away the best consumers this country now possesses.
Mr. Tönisson, I am convinced, would like to do something for us, and could not deny that the restrictive rules in operation necessarily [Page 182] did violence to our most favored nation privileges. Probably from now on special efforts will be made to reduce the damage to our interests and in the meantime I shall watch the situation closely, as will Mr. Carlson, with a view to making stronger representations if they should seem to be at all desirable.
As to the gold standard I am inclined to think that it is safe, as far as Estonia is concerned, for the present at least. Some of the politicians, in order to curry favor with the farmers, many of whom are in debt to the banks, are recommending that the gold standard be abandoned hoping by such means to increase the nominal prices of farm products and to that extent to facilitate the liquidation of farmers’ debts. The perils which lurk in these proposals have been remarked, and it is hoped that those who have been loudest in urging a departure from the gold standard have now been silenced—at least for the time being.