The Minister in Estonia (Skinner) to the Secretary of State

No. 8 (Diplomatic)

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.

Respectfully yours,

Robert P. Skinner

The American Legation to the Estonian Ministry for Foreign Affairs


The American Minister called upon His Excellency the Minister for Foreign Affairs today for an informal discussion of the general situation respecting imports, exports, and exchange in Estonia. Mr. Skinner said that he realized the complete friendliness of the Estonian Government and of the people of the country, and believed it was their intention to deal fairly with imports from the United States and purchase of the exchange necessary to pay for such imports. He also comprehended that the country was passing through a critical period, as are all other countries at the present time, and that it was probably necessary to apply restrictive measures of a more or less transitory character while the crisis continued. On the other hand it had been brought to his knowledge that measures were now being enforced which might place importers of American goods in Estonia in an unfavorable situation as compared with importers of goods from other countries, and to the extent that this might be true it created a situation which Mr. Skinner trusted would be corrected at an early date.

The American Government took the definite position that restrictions must apply equally and without favor to importations from all countries. A fair method of accomplishing this object would be [Page 183] to accept the average imports from all countries during the last three years for the purpose of establishing an annual average, and thereafter reduce the annual average of permissible imports from every country by such percentage as might be deemed desirable. The present policy of granting import licenses in favor of countries known to be heavy importers of Estonian goods was unfair, did violence to American treaty rights and resulted in general dissatisfaction. Importers who had spent years in building up a demand for American goods found themselves forced out of business and threatened with ruin while competing goods were thus arbitrarily introduced into a market which did not desire them.

Furthermore it was impossible to say that goods received from a country which, perhaps, did not import heavily from Estonia could be dispensed with as unnecessary. Buyers of American goods in Estonia did not purchase them in order to give pleasure to the United States, but because they were needed for the productive purposes of Estonia, and their importation therefore affected the exporting power of the country. Moreover, it was sometimes the case that countries which did not import directly from Estonia nevertheless were important consumers of Estonian goods. The United States, for example, imported little or no flax from the Baltic States, but as there was a very small linen manufacturing industry in the United States that country imported from Great Britain and other countries enormous quantities of manufactured linen and in that way became an important client of Estonia, although it received no credit for this fact in the form of import licenses.

There were perhaps other considerations which Mr. Skinner might advance all of them tending to show that inconvenience and injustice must result from the application of restrictive measures which did not fall upon all alike, but he hoped he had said enough to induce the Estonian Government to introduce changes into its present practices.

While not germane to the foregoing discussion Mr. Skinner could not help expressing his gratification that Estonia remained upon the gold standard, and he hoped that the country would continue to do so even though it might become necessary to resort to extreme measures to maintain the present situation. It was an attractive theory that by debasing the currency speedy advantages to trade might be realized, but it was the experience of the world that these temporary advantages were soon lost, and that the economic chaos resulting from a fluctuating currency soon bore heavily upon all classes of the population since, inevitably, whether a country remained upon a [Page 184] gold standard or not, the gold standard nevertheless continued to be the yardstick by which values were measured everywhere.