611.6131/526
The Chargé in the Soviet Union (Kirk) to the Secretary of State
[Received August 23.]
Sir: With reference to my despatch No. 1530, of August 6, 1938,33 transmitting the documents relating to the renewal of the Commercial Agreement between the Government of the United States and the Government of the Union of Soviet Socialist Republics, I have the honor to inform the Department that, as my telegram No. 232, August 5, 8 p.m., and previous messages cover the principal subject matter of my conversations with the Soviet authorities in the premises, there would appear to be no occasion to amplify the statements already submitted.
The actual conversations at the Commissariat for Foreign Affairs leading to the signature of the documents in question were, owing to the protracted delay on the part of the various Soviet authorities involved in responding to the repeated and insistent requests of this Embassy for an expression of views on the subject of renewal, actually confined to a period of five days in which only three meetings were held. In that time, however, the points of difference between the views of the United States and of the Soviet Union were clearly revealed and may be briefly stated. The Government of the United States favored the renewal of the current agreement on the basis of an upward adjustment of the minimum guarantee of purchases in the United States by the economic organizations of the Union which in the agreement effective as of August 6, 1937, had been stipulated to the amount of forty million dollars. The Soviet authorities on the other hand wished to obtain a reduction of customs duties on certain of the imports from the Union into the United States as well as other facilities which would enable the Soviet Government to increase its export trade with the United States in order to reduce the excess of Soviet purchases in the United States over Soviet sales to the United States which, it was variously estimated, amounted to approximately fifty million dollars for the twelve months covered by the current Commercial Agreement. These customs reductions and other facilities, however, could not, both for reasons of policy and of legislative restriction, be granted by the Government of the United States. The Soviet authorities, accordingly, declared that they would not acquiesce in any increase of the minimum guarantee of purchases in the United States and, furthermore, as it was considered impracticable to effect a temporary prolongation of the current agreement pending efforts at adjustment of the matter of Soviet exports to the United States, [Page 622] the agreement expiring on August 6th was renewed for a period of twelve months without an increase in the minimum guarantee of purchases over that stipulated in the agreement about to lapse.
Certain factors emerged in the brief course of these negotiations. The Soviet authorities are dissatisfied with the present course of Soviet-American trade and, without aspiring to effect a balance in that trade, are emphatic on the necessity of reducing the difference between the exports to and imports from the United States as registered at present. Furthermore, in order to reduce that difference they envisage the possibility of effecting an immediate benefit to Soviet exports by facilitating imports into the United States as well as the more remote possibility of eventually increasing those imports not only by enlarging the market for Soviet products in the United States but especially by broadening the commerce between the two countries through the negotiation of a trade agreement. Finally, in the impossibility of obtaining concrete satisfaction as regards the foregoing desiderata the Soviet Government was not inclined to make what they regard as concessions in connection with the terms of the agreement forming the present basis of their commerce with the United States.
Other factors of a more concrete application were developed in the recent conversations at the Commissariat for Foreign Affairs. The Soviet authorities were informed that the increasing value to Soviet trade through the constant and accelerated development of the Trade Agreement policy of the United States is a concrete benefit accruing to the Soviet Union from the trade agreements between the United States and other nations already negotiated and in process of negotiation. It was explained that these advantages inure to the benefit of the Soviet Union through the most-favored-nation treatment which it enjoys by virtue of the grant thereof through the negotiation each year of a commercial agreement with the United States. The Soviet authorities, however, choose to reject the fact that these benefits are actual and concrete and furthermore assume the position that most-favored-nation treatment once granted, as it was in the agreement last year, constitutes an accomplished fact and therefore a factor eliminated from present and future consideration in negotiations relating to commercial agreements between the two countries. In particular they made it quite clear that the interest of the Soviet Government in obtaining most-favored-nation treatment last year had been due almost entirely to the fact that it would permit the exemption of Soviet coal from the payment of the import tax which was regarded as a concrete and actual benefit and that the larger and more general benefits to Soviet commerce which would result from the extension of the most-favored-nation treatment was considered of very secondary importance. In brief the Soviet authorities declare that the Soviet Government [Page 623] in its commercial and even political relations with other countries is guided solely by considerations relating to a concrete, tangible quid pro quo and, in the case of commercial negotiations, one that is subject to precise computation, and reject all generalizations or even deducible facts and all larger aspects of international association. It is on the foregoing basis, it would appear, that the Soviet authorities were either unable or unwilling to accept the values enunciated by the Department as a quid pro quo for an upward adjustment of the minimum guarantee of purchases from the United States in the negotiations relating to a renewal of the Commercial Agreement between the two countries.
In conclusion I venture to submit, for the consideration of the Department in preparing future negotiation looking to the renewal of the present Commercial Agreement, the following suggestions which present themselves as a result of the experience developed in the recent negotiations. The articles of the Agreement provide that both parties shall start negotiations regarding the extension of the current Agreement not less than thirty days prior to the expiration of the Agreement. It is suggested therefore that on or before that time the Government of the United States should instead of engaging in informal discussions address a formal communication to the Soviet Government setting forth the conditions on which it would be willing to enter into a new agreement and requesting that Government to signify its approval of those terms or express its views thereon. If, in reply, the Soviet authorities submit additional considerations or requests for concessions those requests may be judged on their merits and such counter-proposals as the circumstances may warrant may be presented as basis for negotiation. The matter of chief importance, however, is that the initial conditions proposed should represent what are regarded not as a basis for negotiation but as the absolute requisites for reaching an agreement and at no time should there be any indication that those requisites may be reduced even for the sake of preserving the continuity of commercial relations with the Soviet Union. Otherwise an opportunity is given to the Soviet authorities to prolong the discussions on lines which merely indicate the fundamental divergencies between the two countries on commercial policy without in any way advancing the practical achievement of the purpose of the negotiations.34
[Page 624]I have the honor to transmit herewith for the Department’s information copies of two informal memoranda35 based on the Department’s instruction which formed the background for discussions at the Commissariat for Foreign Affairs and of which copies were handed to officials there.
Respectfully yours,
- Not printed.↩
- In an attached memorandum of September 12, 1938, Edward Page, Jr., of the Division of European Affairs commented in part: “I am not sure that it would he advisable … only to set forth the absolute requisites as initial conditions on which to enter into any new agreement. It would seem more advisable to establish a basis for negotiations as in the past, in which such requisites would naturally appear. If only the absolute requisites are presented, the Soviet officials, in accepting them, would probably be criticized for giving in to us without receiving anything in return” (611.6131/526).↩
- Neither printed.↩