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

No. 728

Sir: With reference to my despatch, No. 714, of July 15, 1935,34 enclosing copies of two notes addressed by myself to Mr. Litvinov under dates of July 11, 1935, and July 13, 1935, respectively, and the originals of notes addressed by Mr. Litvinov to me under dates of July 13, 1935, and July 15, 1935, respectively, I have the honor to report that the more important Moscow daily newspapers published in full on July 14, 1935, the texts of the two notes dated July 13, 1935. My note of July 11 and Mr. Litvinov’s reply thereto of July 15 have not been published in the Soviet Union and no reference has thus far been made in the Soviet press to the fact that Mr. Litvinov had assured me that it was the intention of the Soviet Government to purchase during the next 12 months American goods to the value of 30 million dollars.

A number of Soviet papers have published editorial comment and articles with respect to the significance and scope of the reciprocal trade agreement between the United States and the Soviet Union which had been effected by the exchange of notes. It would appear that the writers of these comments and articles have been endeavoring to give their readers the impression (1) that the present agreement is merely the first step in the direction of solving the problem of Soviet-American trade relations and of placing those relations on a basis mutually advantageous to both countries; (2) that the agreement represents a shift in the attitude of the Government of the United States brought [Page 216] about through the pressure of American industrial circles which have not been satisfied with the attitude displayed by the American Government in the past with respect to Soviet trade; (3) that influential industrial and other groups in the United States are still dissatisfied with the status of American-Soviet commercial relations and are bringing pressure to bear upon the American Government to place extensive credits at the disposal of the Soviet Government; and (4) that until the United States Government is ready to furnish the Soviet Government with extensive credits and to lift certain barriers which at the present time are excluding certain types of Soviet products in the United States, the volume of trade between the two countries will remain limited, and that if barriers against Soviet products are lifted and credits are granted, the amount of Soviet purchases in the United States could be enormously increased.

As of possible interest to the Department, a number of clippings from the Moscow Daily News, the English language newspaper of Moscow, and several translations of articles which have appeared in the Russian language press commenting upon the trade agreement, are attached hereto.35

It will be noted that a number of these articles are devoted to reporting the reactions of the press in the United States to the agreement. The American press articles are so chosen as to make it appear that, with the exception of the Hearst newspapers, the American press not only hails the agreement, but is somewhat critical of the American Government for not having brought about such an agreement earlier and for not having taken still further steps to develop closer economic relations with the Soviet Union. The Journal of Commerce, for instance, is stated to have published articles emphasizing the potential markets in the Soviet Union for American machine building and other industries, and pointing out that experience has proved that extensive exports to the Soviet Union require long-term credits (Enclosure No. 6). The Baltimore Sun and the New York Post are reported to have welcomed the trade agreement and to have criticized the United States Government for not having developed trade relations earlier with the Soviet Union (Enclosure No. 6). The Baltimore Sun is said to have stated that the United States in its slowness to come to an understanding with the Soviet Union with respect to trade had “dragged at the tail of events”.

The Moscow Izvestiya of July 15 (Enclosure No. 3) reports that the American Government took the initiative in bringing about the agreement. “Aware of the profitableness of trade with the Soviet Union”, that newspaper says, “the Government of the U. S. A. proposed to the U. S. S. R. to conclude a trade agreement on the basis of the new American trade regulation legislation.”

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The Moscow Ekonomicheskaya Zhizn of July 18 (Enclosure No. 7) published an analysis made by its correspondents of the trade policy of the United States and the commercial relations between the United States and the Soviet Union. This analysis attributes the desire displayed by the Government of the United States to denounce high protective tariffs and to bring about the practical adoption of most-favored-nation treatment, based on compensation, to the increasing difficulties which the United States is encountering in selling abroad. It points out that the actual volume of foreign trade of the United States has been reduced to almost one-fourth during the years of the crisis.

The writers of the article take the view that the new methods of the trade policy of the United States in the present situation are not likely, in themselves, to result in a considerable increase in American exports to capitalist countries. There are, however, they intimate, considerable possibilities for the development of trade between the United States and the Soviet Union since the latter “is immune from the calamities of the capitalist crisis” and since it is carrying out a gigantic plan of construction which, under favorable conditions, “may present an enormous market for the sale of the products of the various branches of the U. S. A. economy”. “Only extensive banking credits in connection with the Soviet purchases, credits granted on unusual [usual] terms” they say, “are capable of increasing Soviet imports to such a degree as to make them of substantial importance to the national economy of the United States”.

Respectfully yours,

William C. Bullitt
  1. Not printed.
  2. Nine enclosures not printed.