The Chargé in the Soviet Union (Grummon) to the Secretary of State
[Received 5:40 p.m.]
400. My telegram No. 363, July 4, 4 p.m. In relation to the aide-mémoire left with Potemkin during the interview reported in my telegram [Page 825]under reference the Commissariat for Foreign Trade in a memorandum delivered today expresses its readiness to begin immediate negotiations in Moscow for the renewal of the commercial agreement for 1939–40.
The memorandum then draws attention to the large unfavorable balance against the Soviet Union in Soviet-American trade which for the period 1929–38 inclusive amounted to $507,000,000 and for the 11 months of the present agreement from August 1938 through June 1939 according to the “preliminary Soviet customs statistics” to $43,300,000, resulting from Soviet “imports” of 58.7 million dollars as against exports of 15.4 million dollars. The memorandum continues that it should be also taken into account that the Soviet Union exports to the United States for the most part raw materials, which as a rule do not compete with domestic production in the United States and imports from the United States manufactured articles production of which as a rule does not require the importation of raw materials. The memorandum concludes:
“In view of the above, the Commissariat for Foreign Trade considers it essential to reduce the unfavorable balance in Soviet-American trade by a reduction of 50% in the existing high tariff duties in the United States on dressed and dyed caracul and squirrel (skins) and also on caviar, sturgeon and great sturgeon (beluga). The Commissariat for Foreign Trade considers it essential to receive a written declaration from the American Government that the latter, during the year 1939, will reduce by the established procedure the above-mentioned duties by 50%. The Commissariat for Foreign Trade considers it is essential that the American Government in a special letter should declare to the Soviet Union that it is prepared to purchase within the course of 4 years 800,000 tons of manganese out of the special appropriations for the purchase of strategic raw materials. Under these conditions and having in view certain forthcoming naval orders26 in American shipyards concerning which there is agreement in principle between the two Governments, the Commissariat for Foreign Trade of the Union of the Soviet Socialist Republics under instructions from its Government expresses its agreement to an increase of imports from the United States to the Soviet Union from $40,000,000 to $50,000,000 for the 1939–1940 treaty year.”
My aide-mémoire mentioned in paragraph 1 above followed closely the terms authorized by the Department’s telegram No. 73, June 27, and included an expression of the view that an upward adjustment of Soviet purchases would under the circumstances be justified, although it did not specifically request such an adjustment. Although the identical request for specific tariff reductions and for manganese purchases are dealt with in the Department’s 73, June 27, and 84, July 8, [Page 826]I shall await such further instructions as the Department may care to give me before seeking an interview with the appropriate officials of the Commissariat for Foreign Trade.