611.6131/383: Telegram
The Chargé in the Soviet Union (Henderson) to the Secretary of State
[Received June 9—1:15 p.m.]
141. Your 80, June 4, 6 p.m. On June 7th I asked Krestinsky, Acting Commissar for Foreign Affairs, for the information requested in your No. 80 of June 4, 6 p.m. He replied that Soviet purchases during the 12 months period would probably reach $36,000,000 and that he would endeavor to obtain a more precise estimate of them as well as an estimate of purchases for the ensuing year. He stated that in his opinion the Soviet Government would be willing to extend the agreement on the basis of Soviet purchases at $30,000,000 provided the United States would cease to discriminate against Soviet coal. He has been advised by his experts, he said, that the United States had extended full most-favored-nation treatment with respect to duties to other countries on the basis of the Trade Agreements Act54 and could grant similar treatment to the Soviet Government if it so desired. I replied that I was not in a position as yet to enter into a discussion regarding the amounts which the Soviet Government should purchase and would not be until I had received instructions from the American Government following the receipt by it of the information which I had just requested. I added that basing myself upon such information as was in my possession I was of the opinion that the duties on Soviet coal could not be lifted except by an act of Congress or by a treaty ratified by the Senate, either of which were out of the question during the present year.
Rosenblum, the Economic Adviser of the Foreign Office, on the same day also referred to the question of coal duties. He said that the Commissariat for Foreign Trade had strongly criticized the Foreign Office and particularly him for having consented to an agreement which did not provide for the removal of duty on Soviet coal and that the Commissariat took the position that no agreement was preferable to one which consented to even an indirect discrimination against Soviet merchandise.
In the course of a conversation which I had yesterday with Kaminsky, Assistant Chief of the Foreign Trade Policy Division of the Commissariat [Page 327] for Foreign Trade, he also mentioned the matter of coal, stating that the legal experts of the Commissariat who had given much study to the question insisted that the American Government could give most-favored-nation treatment to the Soviet Union by virtue of the Trade Agreements Act as it had already done to several countries such as Sweden. He read aloud article I of the Swedish agreement55 and pointed out that it would appear from the proclamation of the President that the treaty was based entirely upon the Tariff Act of 1930 as amended by the Act of June 12, 1934. I replied that I did not have sufficient background regarding the negotiation of the Swedish and similar treaties to discuss the matter with authority but that it was quite possible that the clauses in the series of treaties signed under the Trade Agreements Act providing for most-favored-nation treatment were based on previously existing treaties and might be considered as mere reiterations of existing treaties. In any event I felt positive that the American Government did not feel itself to be in a position in view of existing laws to include in an agreement of this kind a provision which would eliminate duties on coal. He said that the only value which the Soviet Government had received from the agreement was the saving of approximately $200,000 on manganese duties. The Soviet Government on its part, as the result of the good will manifested in the agreement, had transferred several million dollars worth of orders from other countries to the United States. Duties on coal at the present time were costing the Soviet Government approximately $600,000 a year. He said that he hoped that the American legal authorities would not be so conservative in interpreting the Trade Agreements Act insofar as the Soviet Union was concerned. Would appreciate being advised for my own guidance whether it is possible to remove duties on Soviet coal only by congressional act or treaty ratified by the Senate.