550.S1/697: Telegram
The Secretary of State to the Chargé in Great Britain (Atherton)
83. For Davis. Growing out of the discussions here this Government has decided to put forth proposals for the establishment of what might be called a tariff truce beginning with the meeting of the Organizing Committee. You are accordingly instructed to bring forward at a suitable time during the meeting of the Organizing Committee two proposals which are intimately connected with each other.
1. Propose to the Committee that included with the invitations to the Conference there should be sent a notification that, at the opening of the Conference, the American Delegation intends to propose a tariff truce. The detailed provisions of this proposal will be studied further here and sent to you at a later time. It will be necessary, however, for you to sketch to the Organizing Committee the general outline of the proposal. Our understanding is that as long as the terms of the proposal of which notice might be circularized by the Organizing Committee are at least as broad as the terms of the actual draft resolution which will be brought before the Conference, there should be no difficulty when the Conference meets in proceeding with the consideration of the draft resolution.
The proposal that we will embody in the draft resolution, as it is tentatively vizualized by the President, would be that immediately upon the convocation of the Conference all the Governments will be [Page 579] asked to join in a “gentleman’s agreement” to be carried out in good faith that all governments should refrain, during the period of the truce, from creating or making any material upward modification in tariff rates, imposing any new restrictions or enhancing any existing restrictions against the importation of goods which would give domestic producers an additional advantage as compared with foreign producers. (The latter part of the above provision is to take care of such changes in the tariff as those which might be made under the new Farm Bill now being considered by Congress, in accordance with which tariff changes may be made to offset the burden of new domestic taxes imposed on certain types of products; this would not change the balance of advantage as between foreign and domestic producers and thereby operate to create any new obstacle to international trade.) Furthermore, the “gentleman’s agreement” would provide that the governments should agree to introduce no additional direct or indirect subventions in the expansion of their export industries nor any discriminatory trade methods nor any additional measures to promote dumping, etc. All of these features and possible necessary limitations dealing, for example, with bills already in the course of passage will have to be further studied and defined, and will unquestionably arise for discussion at the Conference itself after the proposal has been made.
The President is of the opinion that the period of the Conference is the natural term for such a truce and our proposal is likely to run along that line. The British, in their discussion on that point, stated that they wished to reserve decision as to the duration of the truce. The French, however, accepted. The provisional nature of the truce may be stressed, in order to make it clear that it is not intended to stereotype indefinitely the existing situation.
2d. Circularization of this proposal for a tariff truce, sent at the same time as the invitations to the Conference, would in itself be a notice of intention that we plan to introduce the resolution.
It appears highly desirable that, during the weeks that will intervene between the meeting of the Organizing Committee and the meeting of the Conference, there also should be some form of “gentleman’s agreement” in the spirit of the truce proposal, above outlined, to achieve the same result during the intervening period.
You are, therefore, requested to propose to the Organizing Committee that it adopt and publish the following resolution for that purpose:
“The Organizing Committee of the Monetary and Economic Conference, convinced that it is essential for the successful conclusion of the Conference that the measures of all kinds which at the present time misdirect and paralyze international trade be not intensified, recognizes the urgency of adopting at the beginning of the Conference [Page 580] a tariff truce, the provisions of which shall be laid down by common agreement.
The Committee, further convinced that immediate action for this purpose is of great importance, strongly urges all governments which will participate in the Conference to abstain from all initiatives which might increase the many varieties of difficulties now arresting international commerce. One of the main motives which brings the governments together in Conference is to surmount these obstacles; the Committee firmly urges all governments, during the period that will intervene before the Conference, to act in conformity with the spirit of this objective.”
The result sought by this resolution is to bring into effect 6 weeks before the summoning of the Conference the conditions aimed at in the tariff truce. The adoption by the Organizing Committee of this resolution should have an excellent effect in encouraging public opinion and in enabling the governments to lead public opinion towards the support of the main tariff truce proposal. It should, on the one hand, serve to safeguard, during the intervening period against new initiatives and, on the other hand, have a favorable effect on international commerce and world prices.
The text of the resolution for the initial period which is quoted above was evolved in discussions with the French and British Delegations in Washington. It cannot be taken to represent an agreement because it has been strictly understood throughout all the discussions that have taken place in Washington that no agreements were reached. However, the quoted text does represent a meeting of judgment here as to what was likely to prove mutually acceptable.
The provisions of the second stage, namely that of the truce coming into effect after adoption by the Conference itself were also carefully discussed with both Delegations and progress was made in defining the outlines and terms of a proposal that might prove mutually acceptable for that purpose; however, these discussions were not conclusive and further interchanges will probably have to ensue during the intervening weeks.
Please consult with Sir John Simon as to the proper form in which the two parts of the truce proposal should be brought before the Organizing Committee, in order to ensure that they will be strictly in order both at the meeting of the Organizing Committeee and the Conference. It is our thought that you should, in all events, give formal notice that the United States will make a tariff truce motion on June 12 and request the Organizing Committee that advance notice of this intention be sent with the invitation.
If you have any suggestions as to the form or as to the manner in which this matter should be handled, please transmit them to the Department.