550.S1 Washington/680
Memorandum by Mr. Henry L. Deimel, Jr., of the Division of Near Eastern Affairs, of a Conversation Between American Representatives and the Rumanian Minister (Davila)
Mr. Wiley opened the discussion and covered the subject in much the same outline as it had been covered by Mr. Livesey in discussions with the Ministers of other countries. With reference to the possibility of de facto stabilization of the currencies Mr. Wiley indicated that this had appeared as very much a technical problem; that there was a possibility, though not a probability, of its being agreed upon for the principal currencies before the Conference assembles, but that this depends entirely upon the judgment of technicians and largely upon the British position.
With reference to the return to a gold standard Mr. Wiley stated, in reply to the Rumanian Minister’s query, that the idea of a central gold fund known as the Fraser idea was not thought feasible, for various practical reasons. On the subject of silver Mr. Wiley explained the suggestion as to proposed legalization of the use of silver in metallic currency reserves as intended to countenance the use of silver for that purpose to the extent of 5 per cent of the cover, or reserve, which is of course only one-fifth of the proportion in the proposal explained by Mr. Livesey elsewhere, or 5 per cent of the currency. Mr. Wiley did not make any mention of the proposal for synchronization of public works programs by the different governments, (a suggestion which will probably prove of little particular interest to Rumania since the government of that country has been for some years engaged in a program of railroad improvement out of the proceeds of its foreign loans and has recently had to divert a portion of the funds earmarked for that purpose to ordinary budgetary purposes). Mr. Wiley also spoke of the confidential nature of these discussions, stating that nothing would be given out concerning them by the Department and that it was hoped that nothing would be published by the other governments; that we would appreciate their being regarded as confidential.
The Minister raised the point of our attitude toward the proposed normalization fund for use in connection with the abolition of exchange controls. He said that evidently the American Government did not think much of this proposal, to which Mr. Wiley replied “absolutely [Page 563] not.” The Minister then suggested for consideration the instance of an agricultural country which had by great effort succeeded in balancing its budget. He pointed out that owing to the seasonal nature of its income, based as it is upon the seasonal returns from agricultural crops, it might for short periods require help from such a fund. He pointed out that agricultural countries have no interior financial market to which they can resort for temporary budgetary purposes and stated with great emphasis that it should be clear that some international arrangement simply has got to be worked out to help them. To this Mr. Wiley replied that it was hoped that the general economic portion of the program would serve to alleviate the conditions the Minister referred to. He added that the American Government would not oppose the idea of a normalization fund, but that it merely considered the plan impracticable and that in any event it could not possibly go to Congress to seek an appropriation for the purpose of contributing to such a fund. The Minister suggested that in his opinion it might be possible for such a proposal to be put up to Congress by distinguishing between loans to individual governments and an advance to an international institution, such as the Bank of International Settlements, to be used for a purely international purpose.
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The Rumanian Minister stated that the idea of a network of bilateral commercial treaties generalized under the unconditional most-favored-nation clause was a little difficult for him to understand and that it provided difficulties for the agrarian bloc of countries which would want to inject the system of regional preferential tariff for the countries of Southeastern Europe. He referred to Rumania’s commercial treaty with Germany and said that the most-favored-nation clause had proved an obstacle to the carrying out of this policy. He said that a conference at Bucharest of the agrarian bloc, called for May 5, had been postponed until June 4 in order that an idea of the Washington conversations might be available, and he referred to the Polish memorandum of fifteen points53 recently handed to the Secretary as being the policy of the agrarian bloc. An animated discussion followed between the Minister and Dr. Feis, the highlights of which may briefly be summarized as follows:
The Minister asked where the element of reciprocity lay if the tariff treaties were generalized, to which Dr. Feis replied that we did not consider reciprocity and the unconditional most-favored-nation clause [Page 564] inconsistent, and in reply to the Minister’s further question as to where the reciprocal nature of such an arrangement lay, he observed that our idea did not contemplate exclusively reciprocal arrangements. He stated that we were advancing this policy in complete frankness and good conscience, not as a policy designed for our particular nationalistic benefits but because we sincerely felt it was the only practical way by which actual reductions in the general tariff level could be achieved. The Rumanian Minister agreed that the unconditional most-favored-nation policy would be an ideal practice if it could be realized by all. He had, however, discussed this subject with his colleagues to whom it had already been explained; he found that they had no clear idea of it and now he could not get it. He proceeded to elaborate the idea of a system of generalized treaties with certain preferential arrangements inside, the latter seemingly to constitute the major part of the system.
Dr. Feis replied that we preferred the unconditional most-favored-nation policy if we could get general acceptance for it. Otherwise we might have to abandon the idea and resort to exclusive preferential agreements of our own. The unfortunate result would be a series of tariff struggles. He repeated, however, that there might be exceptions defined in advance to the unconditional most-favored-nation clause, to which the Minister replied that it was precisely the scope of those exceptions that the agricultural bloc was interested in. To this Dr. Feis observed that the exceptions proposed by the agricultural countries constituted the most difficult form of the question that could possibly be put up to us, namely an exception to our disadvantage and against our own farmers. He pointed out that our farmers were equally as bad off as those of Eastern Europe and therefore, as well as for political reasons, it was exceedingly doubtful that we would even try to accept such a proposed preferential system. He referred to our new agricultural program and stated that we were interested in cooperating internationally on that basis; that there was a possibility of an international agreement to restrict production as was now being discussed at Geneva. To this the Minister replied that the agrarian countries have not been asked to that Conference, admitting however that the American Government was not responsible for that.
The Rumanian Minister referred to the Department’s attitude on the subject of Danubian grain preferences expressed several months ago (specifically in connection with our refusal to waive most-favored-nation rights with regard to the preferences envisaged in the commercial treaty between Rumania and Germany). At that time, the [Page 565] Rumanian Minister observed, the Department had indicated that it would be willing to agree to some preferential exceptions. Dr. Feis rejoined that the particular exception the Rumanian Minister was proposing would be the very hardest one for us to consider.
The Rumanian Minister then observed that there was a difference between an agricultural country whose economic situation was based entirely upon its farmers and that of an industrial country. He observed that the one hundred million people comprising the agrarian bloc have nothing to sell but their agricultural products and might not be able to agree to any arrangements unless special treatment of those products was provided; he observed that the failure of the representatives of one hundred million people to agree might severely affect the results of the Conference. He emphasized several times that it was a matter of dollars and cents to us; that if the agricultural activities of the agrarian bloc were adequately favored they would provide a market for industrial products, whereas otherwise they would have to seek to industrialize themselves. He wished to point out that difficulty to the general acceptance of the unconditional most-favored-nation clause very clearly as it was a very real difficulty, and he added that, while he realized it would be politically difficult for the American Government to accept anything which might injure the Kansas farmers, it was to be remembered that in order to agree upon an international basis a compromise as to national interests was often necessary.
To this Dr. Feis again referred to the projected international wheat agreement54 and observed that even this was by no means uncontested; that there were plenty of people who considered that such an agreement would be contrary to the American farmers’ interests.
The discussion proceeded for some time along the above lines, the various points being repeated several times, and finally wound up with some emphasis upon the point that, while the American Government favored the generalization of tariff concessions under the unconditional most-favored-nation clause, it did not wish to propound that clause absolutely rigidly and undogmatically [sic] but would consider such appropriate exceptions as might be proposed. The door was not absolutely shut to the possibility of some preferential grain arrangements, although Dr. Feis repeatedly emphasized that such arrangements would be quite the most difficult for the United States to consider favorably.