611.6131/512: Telegram
The Secretary of State to the Chargé in the Soviet Union ( Kirk )
116. Your 201, July 25, 9 p.m. Apparently the Soviet authorities are considering the possibility of asking us to renew the present agreement for a short period during which they hope we will enter into a new agreement involving duty reductions on our part. Unless you perceive objection, please seek an early occasion to inform Litvinoff that if this is the case, the only manner in which we could grant duty reductions would be by the negotiation of a trade agreement and that, [Page 609] because of the very difficult problems involved, we would be reluctant to consider the negotiation of such an agreement with the Soviet Union. We would not look with favor upon renewal of the present agreement for a brief period. The procedure established here for the negotiation of an agreement under the Trade Agreements Act22 includes the giving of public notice and the holding of public hearings and requires a period of at least 5 months and frequently longer. Hence, for the purposes which the Soviet Government may have in mind, a renewal of the present agreement for 1 or 2 months would be out of the question.
You may also repeat the substance of what we discussed in telegrams 85 and 9423 to the effect that it is our belief that the present agreement should be renewed for a period of a year with an upward adjustment in the minimum guarantee of Soviet purchases to take into account the increasing benefit to Soviet trade of agreements being negotiated under the Trade Agreements Act. The Soviet Union will undoubtedly receive considerable benefit from the conclusion of the agreements which are now under negotiation, as will be seen from the tables which were transmitted to the Embassy.24
It is assumed that the Soviet authorities are bearing in mind that if the present agreement should lapse, the basis on which Soviet coal has been held by our Treasury Department to be free from the import tax would be destroyed. It is assumed that the Soviet Government would prefer to have this basis maintained without interruption and to avoid the certainty that the tax would be reimposed in the absence of an agreement.