611.6131/317: Telegram

The Secretary of State to the Ambassador in the Soviet Union (Bullitt)

111. Your 202, May 16, 5 p.m.

1. While Department would prefer to have statement with regard to the amount of Soviet purchases to be made in the United States in 1935 contained in the identic note to be exchanged with reference to the generalization of tariff concessions to the Soviet Union, it is prepared to agree to the omission of this statement provided Soviet. Government will address you a separate note referring to the undertaking of the Soviet Government to increase substantially purchases in the United States of articles the growth, produce, or manufacture of the United States and informing you that it is contemplated that such purchases during the year 1935 will amount to $30,000,000. Department would like to be in a position to publish this note, together with the identic note. If, however, the Soviet Government will agree to send such a note only on condition that it will be treated as confidential, Department is willing to do so and withhold it from publication, provided the Soviet Government has no objection to the Department making at the time of the publication of the identic note a statement to the effect that the Department has been informed that Soviet purchases in the United States will amount to at least $30,000,000 in 1935.

For your information. For reasons stated in last paragraph of its 79, April 20, 3 p.m., it is important that Department be able to indicate specifically the increase in trade which will take place. It is not fixed on any one method and if you are unable to reach an agreement along the lines mentioned above, Department will be glad to consider counter-proposals. In an informal discussion of this matter at the Department on May 24,26 Ambassador Troyanovsky suggested the possibility that Boiev might be authorized to address a communication to the Department stating that purchases of the Soviet Government in the United States in 1935 will amount to a minimum of $30,000,000.

2. The Department is unable to agree to the text of the Soviet counter-draft providing for general most favored nation treatment. You should point out that, under the language of the Department’s draft, the Soviet Union would be assured of the benefit of all tariff reductions made in agreements with foreign countries (Cuba excepted, of course), since the only reductions which have been, or are likely to be, made in the American tariff under agreements with foreign countries [Page 201] are those which will be made under the authority of the Foreign Trade Agreements Act of 1934. In view of the fact that the occasion for the exchange of notes with the Soviet Union is a question of generalizing tariff reductions made under the Trade Agreements Act, it is desired that the proposed exchange of notes be definitely related thereto.

For your information in the event that the Soviet Government should advance as a reason for proposing general most favored nation treatment the desire to eliminate the tax now imposed on Soviet coal. Section 601 (c) (5) of the Revenue Act of 193227 provides that the lax imposed on imported coal shall not apply to countries whose imports of this product from the United States are greater than its exports to the United States. Under this provision, directly or through operation of the most favored nation clause of treaties, coal from certain countries is exempt from this tax, while coal from the Soviet Union is not. As a matter of municipal law, it is questionable whether an exemption from this tax through the operation of the most favored nation clause could be obtained by the Soviet Union by an executive agreement of the kind under consideration rather than by formal treaty. In the event that the Soviet authorities raise the question of the treatment of Soviet coal, you should inform them of this situation and explain that for legal reasons this Government could not agree to a general most favored nation clause as contained in the Soviet counter-draft, emphasizing that if such a clause were contained in the note, effect very possibly could not be given to it with regard to the tax on Soviet coal.

  1. See last paragraph of memorandum of May 24, 1035, by the Chief of the Division of Eastern European Affairs, p. 189.
  2. Approved June 8, 1932; 47 Stat. 109, 260.