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

No. 2533

Sir: With reference to my despatch No. 2530 of August 4, 1939,30 transmitting the documents relating to the prolongation until August 6, 1940, of the commercial agreement which was concluded in 1937 and renewed in 1938 between the United States Government and the Government of the Union of Soviet Socialist Republics, I have the honor to amplify certain phases of the negotiations which were not dealt with in the Embassy’s telegram No. 427 of August 4, 1939, and previous messages to the Department on this subject.

. . . . . . . . . . . . . .

A number of factors developed during the meeting of July 29. Mr. Mishustin, as well as the other Soviet officials present, appeared to manifest both interest and pleasure in the fact that the Department had indicated that it was exploring actively the possibility of finding a basis under the Trade Agreements Act for undertaking trade agreement negotiations by which reductions on the duties of certain Soviet goods imported into the United States might possibly be granted. They showed familiarity with the trade agreement which the United States had recently concluded with Turkey,31 and inquired whether this treaty had been negotiated under the Trade Agreements Act. Although Mr. Mishustin asserted briefly that the trade balance between the United States and the Soviet Union was too unfavorable to the latter and that consequently the duties on certain Soviet goods such as caviar should be reduced, he neither insisted thereon nor defended his views when it was pointed out to him that American importers were prepared to purchase certain Soviet merchandise, such as anthracite, timber, caviar, and flax, in larger quantities than during past [Page 836]agreement years, but had been prevented from doing so by the Soviet Government’s curtailment of the exportation of those products. Moreover, in connection with the question of the purchase of manganese by the United States Government, although Mr. Mishustin and the other Soviet officials appeared to be somewhat surprised that probably less than 800,000 tons of manganese would be purchased from all sources, including domestic, none of the officials pursued the matter. In fact, it may be said that, in respect of both duty reductions and manganese purchases, the Soviet officials seemed to be reluctant to discuss matters relating to Soviet-American trade and appeared to be primarily interested in ascertaining the views of the United States Government. Furthermore, not even an allusion was made to the point raised in the memorandum of July 22 of the People’s Commissariat for Foreign Trade32 relating, as this memorandum states, to the “forthcoming naval orders to be placed with American shipyards concerning which there is an agreement in principle between both governments”.

The second and last meeting with the Soviet authorities which took place on July 31 was of very short duration. It was attended by Mikoyan, People’s Commissar for Foreign Trade, and the other officials who had been present at the previous meeting. Mr. Mikoyan stated briefly that he had been prepared to meet what he termed “the proposal” of the United States Government that the Soviet Government should consent to an upward adjustment of guaranteed purchases; that he would have agreed to purchase fifty million dollars worth of merchandise from the United States during the forthcoming agreement year had the United States acceded to the demands set forth in the memorandum of the People’s Commissariat for Foreign Trade of July 22, but that he was prepared to renew the agreement without change, if the United States was not willing to accede to those demands. Paradoxically, however, he made it plain that he had no interest whatsoever in the fact that the United States Government, upon the renewal of the current agreement, was prepared to explore further, if the Soviet Government so desired, the possibility of finding a basis for negotiating a commercial agreement under the Trade Agreements Act even though certain duties on Soviet merchandise imported into the United States might thereby be reduced. He gave the impression, moreover, that he would be completely indifferent to any proposal on the part of the United States Government which did not embody an immediate and tangible quid pro quo for some concession on the part of the Soviet Government.

In respect of the Department’s request that the Embassy endeavor to obtain Soviet figures covering the value of the orders placed by [Page 837]Soviet organizations in the United States during the past agreement years, it seems clear, in view of the fact that the Embassy on several occasions requested Mr. Mishustin to furnish these figures and was informed by him each time that no data other than Soviet customs statistics were available, that the Soviet authorities regard information of this nature as confidential. Upon each refusal to furnish the data in question I took occasion to emphasize the fact that under the various commercial agreements the Soviet Government has declared that it intends to purchase a fixed amount of merchandise in the United States and accordingly, as a matter of record, the United States Government desires to ascertain from the Soviet Government the value of the orders placed in the United States by Soviet organizations.

I venture the opinion in conclusion that, if a demand had been made this year by the United States that the Soviet Union increase appreciably the amount of its purchases in the United States, it would have undoubtedly led to protracted negotiations, and if insisted upon to the end, would have probably brought about at least a temporary lapse of the agreement. I am of the opinion, furthermore, that the fact that the Department granted the Embassy authority to suggest to the Soviet authorities that an upward adjustment of guaranteed purchases was warranted, and to insist, if it had been necessary, that under no circumstances was a reduction thereof acceptable, placed the Embassy in the most advantageous position to negotiate the renewal of the agreement with the least possible delay.

Respectfully yours,

Stuart E. Grummon
  1. Not printed.
  2. For text of the agreement signed at Ankara on April 1, 1939, see Department of State Executive Agreement Series No. 163, or 54 Stat. 1870.
  3. Not printed; but see telegram No. 400, July 22, 1939, 4 p.m., from the Chargé, p. 824.