611.6131/442a: Telegram
The Secretary of State to the Ambassador in the Soviet Union (Davies)
77. Your 137, June 28, 7 p.m.
(1) The following is the full text of the proposed commercial agreement to be embodied in an exchange of notes:
“With reference to recent conversations which have taken place in regard to commerce between the Union of Soviet Socialist Republics and the United States of America, I have the honor to confirm and to make of record by this note the following agreement which has been reached between the Governments of our respective countries:
1. With respect to customs duties or charges of any kind imposed on or in connection with importation, and with respect to the method of levying such duties or charges, and with respect to all rules and formalities in connection with importation, and with respect to all laws or regulations affecting the sale, taxation or use of imported goods within the country, any advantage, favor, privilege or immunity which has been or may hereafter be granted by the United States of America to any article originating in any third country shall be accorded immediately and unconditionally to the like article originating in the Union of Soviet Socialist Republics.
It is understood that so long as and insofar as existing law of the United States of America may otherwise require, the provisions of the foregoing paragraph, insofar as they would otherwise relate to duties, taxes or charges on coal, coke manufactured therefrom, or coal or coke briquettes, shall not apply to such products imported into the United States of America.
It is understood, furthermore, that the advantages now accorded or which may hereafter be accorded by the United States of America, its territories or possessions, the Philippine Islands, or the Panama [Page 410] Canal Zone to one another or to the Republic of Cuba shall be excepted from the operation of this Agreement.
Nothing in this Agreement shall be construed as a limitation of the right of the United States of America to impose on such terms as it may see fit prohibitions or restrictions (1) imposed on moral or humanitarian grounds, (2) designed to protect human, animal or plant life, (3) relating to prison-made goods, or (4) relating to the enforcement of police or revenue laws.
2. On its part, the Government of the Union of Soviet Socialist Republics will take steps to increase substantially the amount of purchases in the United States of America for export to the Union of Soviet Socialist Republics of articles the growth, produce, or manufacture of the United States of America.
3. This Agreement shall come into force on the day of proclamation thereof by the President of the United States of America. It shall continue in effect for 12 months. Both parties agree that not less than 30 days prior to the expiration of the aforesaid period of 12 months they shall start negotiations regarding the extension of the period during which the present Agreement shall continue in force.”
(2) It will be noted that the points raised in paragraphs 3a and 3b of your telegram under reference are covered in the above text.
(3) The following comment with regard to the several numbered sections will be of value to you in your negotiations with the Foreign Office:
- Section 1. The Soviet Government may be assured that if the wording of this section is included in the agreement the Treasury authorities will hold that Soviet coal will be exempt from the excise tax. No such assurance can be given if any modification is made in the language of this section. As was pointed out in the second paragraph of Department’s 70, June 23, 6 p.m., the inclusion of section 1 granting most-favored-nation treatment to the Soviet Union depends upon assurances in writing from the Soviet Government that exports of Soviet coal to the United States during the 12 months of the proposed agreement will not exceed 400,000 tons.
- Section 3. The Department desires that the agreement be proclaimed by the President with a view to giving it, from the standpoint of municipal law, as nearly as possible the same status as the Netherlands’ Agreement which is the precedent for exempting Soviet coal from the tax.
- Section 2. The undertaking of the Soviet Government in regard to the amount of its intended purchases under the proposed agreement should be contained in an exchange of communications similar to that of last year.
(4) With regard to the amount of such purchases, the Department desires that you make every effort to obtain an undertaking from the Soviet Government to purchase not less than $40,000,000 worth of American goods during the 12 months of the proposed agreement. [Page 411] In this connection you should point out that the proposed agreement will accord to the Soviet Union full most-favored-nation treatment, and that the removal of the excise tax on Soviet coal will result in appreciable financial benefit to the Soviet Government. You will recall that last year at the time of the renewal of the original agreement the unwillingness of the Soviet officials to agree to any increase of Soviet purchases in the United States was largely influenced by the failure to include a most-favored-nation clause in respect to Soviet products. You should point out that there exists considerable opposition in the United States to the importation of Soviet coal and emphasize that this Government in order to justify the removal of the tax, must be in a position to show some increased tangible benefit to American industry under the new agreement. You should further point out that the stipulated figure of $40,000,000 would be very little more than the actual amount of Soviet purchases during the present agreement year, and that in agreeing to this figure the Soviet Government would in fact merely be agreeing to continue its present rate of purchase.