611.6131/456: Telegram
The Ambassador in the Soviet Union (Davies) to the Secretary of State
[Received July 17—8:05 a.m.]
176. Department’s 93, July 14, 8 p.m. After extended conference yesterday believe it possible to now close promptly agreement, unilateral in character, with commitment for $40,000,000 purchases, but only if most-favored-nation principle is applied to exports as well as to imports. The Department’s objections to the inclusion of such an exportation clause were emphasized repeatedly to the Foreign Office officials, They replied in what appeared to be a fair spirit but insisted upon the principle involved, and expressed the hope that the situation could be worked out in a manner that would meet the requirements of both sides.
The immediate solution which would be acceptable to the [Foreign Office officials?] would be the incorporation into draft of section 1 as contained in the Department’s telegram 85, July 8, 6 p.m., of a paragraph which would be a unilateral version of the paragraph concerning exportations found in article I of the Netherlands agreement, excepting the last sentence thereof, followed by the second paragraph of article XI of the Netherlands agreement. They explained, however, that the exact wording of the exportation clause was not of importance provided that the language would assure that they would not be discriminated against or placed in a worse position than other countries enjoying most-favored-nation treatment.
In order to forward the negotiations two alternatives were discussed.
- 1.
- That if agreement aforesaid were acceptable to the Department,
they would give us a written undertaking that they would not object
to any future change in the language of these provisions, provided
only that they were not discriminated against and that this
understanding could be incorporated [in?] an exchange of notes in
which Litvinov’s note might
read approximately as follows: [Page 428]
“In reply to your letter of today’s date concerning the possibility that the Government of the United States may find it necessary at some future time to propose the alteration of the provisions of paragraphs (blank) of article I of the commercial agreement number (blank), I beg to state that the Government of [the] Union of Soviet Socialist Republics will raise no objection to any such alteration, provided that it involves no discrimination in the case of natural or manufactured products exported from the territory of the United States of America to the Union of Soviet Socialist Republics as compared with similar products exported to any third country which enjoys most-favored-nation treatment in this respect.”
- 2.
- If it were desired to secure an early signature of the principal agreement, the exportation clause might be entirely omitted at the present time and the two parties might, through an exchange of notes, agree to work out in the near future a supplementary agreement assuring the Soviet Union most-favored-nation treatment with respect to exportation taxes, rules, regulations, et cetera, with provision for the abrogation of the principal agreement now signed by the Soviet side should the parties fail to reach an understanding on the supplementary agreement within a period of, say, 60 or 90 days, provided notice of such abrogation is given within 10 days after the expiration of such period.
It is my opinion in connection with this exportation clause [that?] with them it is a matter of national pride and that fact coupled with present difficulties will make it exceedingly difficult to secure [any?] further concession with reference to it. In case the Department cannot accept either of these formulas and has any other suggestion for overcoming the difficulty in question I would appreciate it if the Department could supply me with drafts of the Department’s proposals, or any suggestions as to further procedure. They were willing to accept any reasonable formula which will assure them against discrimination and, if such formula could be found promptly, we could close the matter at once; or, if it requires time, we can close the principal agreement promptly and agree to provide supplementary agreement later as aforesaid.