611.6131/386: Telegram
The Acting Secretary of State to the Chargé in the Soviet Union (Henderson)
Washington, June 24,
1936—11 a.m.
92. Your 148, June 17, 11 p.m.
- 1.
- Please arrange an interview with Neymann and Rosenblum as soon as possible and inform them that you have been instructed by your Government to make the following reply to the proposal outlined in Mr. Krestinsky’s memorandum:
- (1)
- The Government of the United States is prepared to continue during the 12-month period commencing July 13, 1936, to generalize to the Soviet Union all tariff concessions granted in trade agreements concluded with other countries (Cuba excepted64) provided that the Soviet Government will at least maintain during this period the increased volume of purchases of American goods in the United States made in the period from July 13, 1935 to July 13, 1936.
- (2)
- With respect to the proposal of Mr. Krestinsky that the question of the removal of the tax on Soviet coal be settled in the agreement now under discussion, the Government of the United States is obliged to point out that the executive branch of the Government of the United States does not have the power to remove this tax and that, for the legal reasons set forth in your letter to Mr. Rosenblum, the solution of this question does not lie, as Mr. Krestinsky suggests, in the inclusion of a general most-favored-nation clause in the agreement under consideration. In this connection, it is desired to draw Mr. Krestinsky’s attention particularly to the fact that the United States, in order to preclude any misunderstanding with regard to obtaining exemption from the tax on coal through a most-favored-nation clause in an executive agreement, has insisted on the insertion in trade agreements with countries with which it does not have most-favored-nation treaties and from which exports of coal to the United States exceed or may exceed imports therefrom, a clause reserving to the United States the right to impose the tax in question on coal from those countries.
- In view of the foregoing, the Government of the United States hopes that the Soviet Government will agree to the extension of tariff reductions to the Soviet Union on the basis provided in paragraph 1 of the exchange of notes of July 13, 1935.
- 2.
- You are authorized to leave in your discretion an aide-mémoire incorporating the foregoing.
- 3.
- In discussing paragraph (1), it is desired that you emphasize that it would be difficult for this Government to meet the opposition which is manifesting itself to the continuance of the agreement of July 13, 1935 and to justify the continued generalization of tariff concessions to the Soviet Union if Soviet purchases in the United States are to be curtailed.
- 4.
- In discussing paragraph (2), you should point out the pertinent reservations contained in the fifth paragraph of Article I of the trade agreement with Netherlands and the second paragraph of Article II of the trade agreement with France. You should explain that no reservation was included in the trade agreement with Sweden because of the improbability that imports of coal from Sweden would exceed exports of coal to that country and that no reservation was necessary in the case of Belgium in view of the fact that imports of coal from that country were exempt from the tax by virtue of a most-favored-nation clause contained in an already existing treaty.
- 5.
- With regard to the question of the indefinite continuance of the tax on coal raised by Rosenblum (numbered paragraphs 9 and 10 of your telegram), you may state that the Department is fully aware of the fact that a tax of this character is inconsistent with its commercial [Page 335] policy of equality of tariff treatment. The Department is considering at this time the possibility of seeking the removal of at least the discriminatory features of the tax by legislative action at the next session of Congress. It is not possible, of course, to forecast what action Congress might take.
- 6.
- In the event that the question of the conclusion of a treaty is raised again, you should not only point out the impracticability of such action insofar as obtaining the elimination of the tax on Soviet coal during the next 12 months period is concerned, but express the opinion that Mr. Neymann, in particular, should appreciate that it is extremely improbable the Senate of the United States would give its advice and consent to any treaty with the Soviet Government which did not include a settlement of the question of debts and claims as foreseen in the conversations between Mr. Litvinoff and the President.65 It may be stated for your information that this Government would not find it practicable to enter into any treaty with the Soviet Union which did not include such a settlement.
- 7.
- For your information and guidance, Department would very possibly be willing to accept, if the Soviet Government should insist, and if it yields on the coal question, Mr. Krestinsky’s proposal contained in paragraph (2) of his memorandum with regard to the amount of purchases to be made next year.
Phillips