611.6131/448: Telegram

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

89. Your 161, July 9, midnight. References are to your numbered sections.

Your 1. For reasons outlined in Section 1 of Department’s 85, July 8, 6 p.m., which you may use in your discretion as a basis for your explanations of Department’s position, the Department cannot accept the bilateral principle in the extension of most-favored-nation treatment, which would alter the basis heretofore adhered to in our commercial agreements with the Soviet Union.

Your 2. While you should make every effort to obtain an undertaking to purchase $40,000,000 worth of goods the Department does not insist on this figure as a sine qua non of an agreement. You should of course endeavor to obtain a figure as near this amount as possible and you should not accept a figure less than $36,000,000, approximately the amount of purchases during each of the past 2 agreement years.

Your 3. As has been made clear in the Department’s 70, June 23, 6 p.m., 77, July 1, 3 p.m., and 85, July 8, 6 p.m., the agreement of the Soviet Government to restrict its exports of coal to the United States to 400,000 tons is a sine qua non for the inclusion of the provisions granting unconditional most-favored-nation treatment to imports from the Soviet Union.

It has been ascertained in the strictest confidence that the American importer of Soviet coal and the Amtorg Corporation have recommended the acceptance of the undertaking to limit Soviet coal exports to the United States to 400,000 tons.

Your 4. The Department is prepared to accept a termination clause worded as follows:

“If the law of the United States of America shall not permit the complete operation of the foregoing provisions with respect to the above-mentioned products, the Union of Soviet Socialist Republics reserves the right, within 15 days after January 1, 1938, to terminate this agreement in its entirety on 30 days’ written notice.”

Your 5. The introductory phrase in the American-French agreement is acceptable. The wording of the paragraph should be as follows:

“Subject to the requirement that no arbitrary discrimination shall be effected by the United States of America against importations from [Page 421] the Union of Soviet Socialist Republics and in favor of those from any third country, the foregoing provisions shall not extend to 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.

Your 6. The Department prefers the wording to be used in the press release as given in Section 5 of its 85, July 8, 6 p.m. You should point out that the proposed statement does not state that the Soviet Government has promised to restrict its exports of coal to 400,000 tons, but that it has informed this Government that as a matter of fact such exports will not exceed the figure mentioned.

Hull