Memorandum by the Secretary of State

The Soviet Ambassador came in at his own request to discuss trade relations. He remarked that he was not emphasizing the fact that [Page 817]his country was buying far more from the United States than the latter from the Soviet Union, but that one could not help but take notice of this disparity. The Ambassador then led up to a proposal that this Government under its authority to expend $100,000,000 during the next four years in the purchase of strategic raw materials should buy from the Soviet Union an average of 200,000 tons of manganese per year for four years at an estimated value of nearly $12,000,000. He added that the United States is now buying more than 40 percent of its manganese imports from the Soviet Union, and he requested that we raise this amount to an average of nearly 50 percent under the war stock purchases referred to. I replied that, of course, the Soviet Union buys more from us than we do from her, but that our goods in most respects are of such superior finish and quality, especially machinery, that it is more to the interest of his country to buy our goods, even at what she may consider fairly high prices, than it would be to buy inferior goods elsewhere at lower prices. In any event, it is to the interest of the Soviet Union to buy from us as she is buying, regardless of the balance of trade question.

I went on to say that we are doing our utmost in this country to develop international trade everywhere by encouraging the lowering of trade obstructions and the reopening of trade channels, with the result that not only the United States but the Soviet Union and other nations would share in the benefits of such increased trade; that, of course, as a part of this broad policy we are immensely interested in increasing trade with his country as we are with any great nation, compared with smaller nations and their limited amount of trade activities. I then added that when our business conditions are fairly good, we import millions of dollars of raw materials; that naturally when business is not so good our imports fall off enormously as has been demonstrated since 1929; that if and when business does come back to a normal volume our purchases, especially of raw materials from abroad, would rise billions of dollars above the present level, and then a country like the Soviet Union would recoup in many ways.

I then brought up the facts and figures pertaining to Soviet exports of santonin to this country, and pointed out how his country was flooding the market with the entire amount needed by the United States, how the price as a result had gone down to a most discouraging level and how a number of Congressmen for a considerable time have been strongly seeking embargo tariffs so as to shut off this commodity entirely, or practically so. I added that it would, in my judgment, be much better from the standpoint of his country as well as mine if his Government would restrict its sales of this commodity substantially, in order that the American industry might survive and in order to let the price go back to a reasonable level, thereby making even Soviet [Page 818]exports worthwhile, and that this would probably avoid the ultimate success of the embargo tariff seekers within one or two years from now. The Ambassador seemed impressed with the foregoing and said that, if I would send him a memorandum of actual figures, he would take the matter up and see what he could do about it. This I am to send him before he leaves for Moscow on next Saturday.20

In conclusion I reiterated that, of course, I was in sympathy with any plans or purposes that might be calculated to improve the trade situation between our two countries. I said that I would be glad to emphasize his suggestion about the increased purchase of manganese to those whose function it will be to handle the matter, but that I could make no pledges beyond expressing my favorable interest in the idea and my entire disposition to bring all phases to the attention of the officials who are to make the purchases. The Ambassador seemed to be fairly satisfied with this.

C[ordell] H[ull]
  1. July 1, 1939.