611.6131/516: Telegram

The Secretary of State to the Chargé in the Soviet Union (Kirk)

120. Your 211, July 31, 11 p.m. The Department appreciates the very able manner in which you presented the Department’s point of view in the discussions with the Soviet officials and confirms the position which you took and which you should endeavor to maintain in all respects.

1. You may inform the Soviet authorities that there is no way in which this Government could modify any rate of duty in the few days left before the present agreement expires.

2. In the circumstances you are authorized to effect an exchange of notes renewing the current agreement for 12 months provided the Soviet Government agrees to increase the minimum guarantee of purchases. In view of the increasing value of our generalization, it would be extremely difficult for this Government to agree to a renewal of the agreement unless it includes a figure of 45 or 50 million.

However, in view of the deep interest of the Soviet authorities in an agreement involving duty concessions on the part of the United States, we are willing to explore with the Soviet Government the possibility, which we regard as dubious, of negotiating a trade agreement between the two countries during the period of the new agreement.

3. You should point out, however, that if, contrary to present expectations, it should ultimately be found possible to negotiate a trade agreement involving concessions on products of interest to the Soviet Union, in addition to the valuable concession of generalization to Soviet trade of duty concessions granted in other agreements, this Government would expect to obtain as a quid pro quo a correspondingly greater concession from the Soviet Union.

4. This Government in negotiating agreements under the authority of the Trade Agreements Act reserves for countries which are the principal or important suppliers duty concessions on the products in question. In this connection you may indicate that various important concessions have already been granted on flax manufactures and that other concessions on these products are under consideration in agreements now being negotiated. The Soviet Union would of course receive the benefit of such concessions by generalization under agreements similar to the one about to expire.

5. Under the Trade Agreements Act this Government may not reduce any duty by more than 50 percent nor, as you have indicated, may it remove any item from the dutiable list. It is obviously out of the question for us to agree to give any preference to purchases of manganese ore from the Soviet Union. It is the policy of the United [Page 615] States neither to request nor to grant preferential treatment in respect of governmental purchases of foreign goods.

6. The new agreement must be signed by August 5 in order that it may come into force on August 6. Since the current agreement was proclaimed by the President, the renewal must also be proclaimed. The Soviet authorities doubtless will wish to have the renewal approved by the Soviet of People’s Commissars. Proclamation and approval should take place as of August 5.

7. The text of the principal exchange would read as follows:

“In accordance with the conversations which have taken place, I have the honor to confirm on behalf of my Government the agreement which has been reached between the Governments of our respective countries that the agreement regarding commercial relations between the United States of America and the Union of Soviet Socialist Republics recorded in the exchange of notes between the American Ambassador and the People’s Commissar for Foreign Affairs on August 4, 1937, which came into force on August 6, 1937 upon proclamation thereof on that date by the President of the United States of America and approval thereof by the Soviet of People’s Commissars of the Union of Soviet Socialist Republics on the same date, shall continue in force until August 6, 1939. This agreement shall be proclaimed by the President of the United States of America and approved by the Soviet of People’s Commissars of the Union of Soviet Socialist Republics.”

If the Soviet authorities should desire to have some indication in the note that consideration will be given to the possibility of trade-agreement negotiations, you are authorized to add after the words “until August 6, 1939” the words “unless superseded by a more comprehensive commercial agreement.”

8. The related exchange of notes of the current agreement concerning purchases would be repeated without substantive change except for the insertion of a higher figure.

9. The related note concerning the coal tax would be changed to read as follows:

“With reference to the agreement signed today continuing the agreement concerning commerce between the United States of America and the Union of Soviet Socialist Republics which came into force on August 6, 1937, I have the honor to state that the Embassy has been informed that the authorities of the Treasury Department of the United States will admit coal of all sizes, grades, and classifications (except culm and duff), coke manufactured therefrom, and coal or coke briquettes, imported from the Union of Soviet Socialist Republics free from the import tax provided in section 601 (c) (5) of the Revenue Act of 1932, as amended, during the life of the agreement unless other treatment is required by controlling judicial decision hereafter rendered.”

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10. The note concerning the coal quota would be repeated with an appropriate change to indicate that the commitment applies to “the year beginning August 6, 1938.”

11. The issuance of a press release concerning the new agreement will be the subject of another telegram.

Hull