611.6131/408: Telegram
The Chargé in the Soviet Union ( Henderson ) to the Secretary of State
161. Your 92, June 24, 11 a.m.
1. On June 26, I presented to Neymann and Rosenblum an aide-mémoire incorporating the substance of paragraph 1 of the telegram under reference and stated orally the points set forth in paragraphs 3, 4 and 5. I did not mention the point contained in paragraph 6 since the question regarding the possibility of the conclusion of a treaty was not again raised. They expressed regret that the American Government was unable to include a general most-favored-nation clause as suggested by Krestinski and stated that in the circumstances the Soviet Government could not obligate itself to buy American merchandise valued at more than $30,000,000 during the coming year. They said that they would refer the American Government’s proposal to the appropriate officials and discuss the matter with me later.
[Page 336]2. In the afternoon of the same day during the course of a conversation with Kaminski of the Commissariat for Foreign Trade, I asked if he had received a copy of my letter to Rosenblum of June 16 explaining the position of the American Government with respect to the coal tax. He replied that he had examined this letter with care but that opinions in his possession of lawyers employed by American firms importing Soviet coal still continue to believe that the Executive Branch of the American Government was not using to the full the powers granted it under the Act of June 12, 1934.
3. I am not giving in detail my replies to the remarks of Neymann, Rosenblum and Kaminski since they were along the lines suggested by the Department.
4. I called on Neymann at his request on July 1st and found Rosenblum and Kaminski with him. They asked that I convey to the Department their proposal that the wording of the Embassy’s note this year be somewhat different from that of the note of July 13, 1935. The wording of the second paragraph should be broadened so that Soviet merchandise should be promised not only equal treatment with regard to duties but also equal advantages and facilities in other respects. They stated that they had reason to believe that despite the views of the Executive Branch of the American Government the President had the right by virtue of the Trade Agreements Act to lift taxes on imported goods as well as to modify duties. They said that their belief was based not only on the opinion of American lawyers but also upon the wording of the Act which contained a reference to excise treatment. They felt that an alteration of the wording along the lines suggested would give the American courts an opportunity of deciding whether they or the American governmental lawyers were correct. The lawyers for the coal importers would be in a position to argue that under the Swedish treaty Swedish goods were entitled to receive unconditional most-favored-nation treatment and that Soviet merchandise therefore could not be subjected to any treatment less advantageous than that accorded to Swedish goods.
I gave them a number of reasons why the American Government could not consent to an arrangement of the kind proposed and told them that I felt it would be useless to convey their suggestions to Washington. I added that I was sure that as soon as I had an opportunity to reexamine the text of the Act I could convince them that any passage which might be in it containing reference to excise treatment could not be interpreted as giving the President the power to lift the taxes on coal. They suggested that we consider the matter further and discuss it on the following day.
5. At the meeting on July 2 in order to eliminate useless discussion I handed them a written statement containing my views with regard [Page 337] to their suggestions to which was attached an analysis of the sentence of the Act which referred to excise treatment. The statement read in part as follows:
“In view of the statements already made to me by my Government I feel that it would be useless for me again to make any proposal to it relating to the possibility of the tax on coal being removed as the result of any proclamation issued by the President on the basis of the Act in question.…67 It is not the policy of my Government to sign any agreement of an equivocal nature. In all agreements entered into on the basis of the Act of June 12, 1934, it has taken especial care to see that there is an absolute meeting of the minds on all points.…67 I know that my Government would be unwilling to incorporate in its agreement with the Soviet Government any clause or phrase which may have the slightest appearance of giving privileges or rights which it feels it is not empowered to give or which might be so unclear as to make necessary an interpretation by the courts.”
After some discussion Neymann again suggested that conversations be discontinued until the following day.
6. At today’s meeting they appeared to be finally convinced that they could accomplish nothing towards lifting the coal tax at the present time. They insisted, however, that they could not face the higher Soviet authorities charged with conducting foreign trade with an agreement permitting the present coal tax situation to continue unless they had in their possession something more tangible than the oral statement which I had made on June 26th along the line of paragraph 5 of your telegram under reference. They asked if I could not write them a letter incorporating the substance of my oral statement.
I replied that I was sure that my Government would not authorize me to make either orally or in writing any statement which could be considered as a promise that it would make a recommendation to Congress at its next session. I then read to them the appropriate passage from the telegram, in order that there should be no misunderstanding regarding the nature of my previous statement. Kaminski said that he was of the opinion that the Soviet authorities would be satisfied if they had an informal letter from me to the effect that it was my understanding that the appropriate authorities in Washington were considering at the present time the possibility of seeking removal of at least the discriminatory features of the Act in action at the next session of Congress but that it was, of course, impossible to forecast what action Congress might take. He said that the Soviet Government would undertake not to publish such a letter if written. I agreed to submit his suggestion to the Department for consideration.
7. All three stated that it was out of the question for the Soviet Government to agree to buy more than $30,000,000 worth of American [Page 338] merchandise during the coming year. I again emphasized the difficulty which the American Government would encounter in justifying the agreement in case Soviet purchases in the United States would be curtailed. Mr. Neymann said that in his opinion this difficulty could be partially overcome if the American Government when announcing the continuance of the agreement would issue a press release stating that in 1935–36 the Soviet Government had purchased more than its obligations had called for and that this circumstance gave rise to the hope that during the coming year its purchases would also exceed the amounts for which it has obligated itself.
8. Rosenblum thereupon handed me the drafts of the two notes which his Government proposed sending the Embassy with the request that in order to save time I submit them immediately to my Government for approval. A careful translation of these notes is appended. He suggested that the Foreign Office and Embassy exchange identic notes similar to note A and that the Foreign Office send note B in reply to an inquiry similar to that of the Embassy of June 15th, 1935.68 The inquiry and note B would be dated 2 days later than note A.
9. If the Department can devise some form of letter for me to write regarding the coal tax along lines similar to those proposed, not only would negotiations be facilitated but some of the resentment which undoubtedly exists in influential Soviet foreign trading circles would be considerably allayed.
Note A. “Mr. Chargé d’Affaires: In accordance with conversations which have taken place, I affirm that an agreement has been reached between us relative to the prolongation for another year i. e. until July 13, 1937, of the validity of the agreement regarding mutual trade relations between the Union of Soviet Socialist Republics and the United States of America recorded in the exchange of notes between the People’s Commissar for Foreign Affairs M. M. Litvinov and the Ambassador of the United States of America Mr. W. Bullitt on July 13th, 1935.
Receive the assurances, et cetera.”
Note B. “Mr. Chargé d’Affaires. In reply to your inquiry regarding the intended purchases of the Union of Soviet Socialist Republics in the United States of America in the course of the forthcoming year I have the honor to inform you that according to information received by me from the People’s Commissariat for Foreign Trade the economic organizations of the Union of Soviet Socialist Republics intend in the course of the forthcoming year to buy in the United States of America goods in the amount of $30,000,000.
Accept the assurances, et cetera.”