550.S1 Economic Commission/28: Telegram
The Acting Secretary of State to the Chairman of the American Delegation (Hull)
121. Your 106, July 6, 10 p.m. The President feels that in our 10251 and 10351a he has outlined as specifically as is possible now the general policy that should guide you in your negotiations there. We feel that this will enable you to discuss with the assembled nations the pros and cons of an international agreement more or less to conform to this program. As a result of those discussions, it should be possible to ascertain to what extent the adherence of other nations can be secured and to formulate specific proposals for submission here for approval. To answer your No. 106 more specifically, the Delegation is authorized to agree to a prolongation of the tariff truce in its present form for say 1 year and to make it clear, if you think it not sufficiently clear, that the compensating tax which might be imposed here as a result of the processing tax, which is purely compensatory, would be permissible under the truce. Action by the President under the Industrial Recovery Act52 would of course also be permissible but would be invoked only to prevent flooding our market from outside in such a way as to destroy the purpose of the Act. You might point out that the end we have in view would not alone benefit ourselves but the rest of the world and it has already done the latter by raising the prices of commodities we buy and raising the prices of commodities we sell in competition with others.
2. Our policy should be to oppose further imposition of import quotas and to advocate the gradual removal of those that exist. Suggest that you explore this and submit with your recommendations any proposals along this line.
3. Our policy naturally would be to reduce the level of tariffs by multilateral agreements, but we do not see how this can be dealt with in a practical way until we reach the stage where there is more or [Page 704] less a stationary price level and more stable currencies because fluctuating currencies can so modify tariffs as to upset any tariff arrangement which might be made. If, however, you can find some formula that will take care of this when prices improve and become more stable, it is worth considering.
The President suggests that you might explore the possibility of agreement permitting the importation of goods up to say 5 per cent of existing domestic consumption where importation is now excluded by tariff. This would, of course, involve a lowering of present duties and perhaps a system of license to importers and would require approval or authorization by Congress. This is along lines of the President’s discussions with Secretary Hull.
4. This Government is inclined not to insist on most-favored-nation rights as regards concessions mutually extended to each other by the parties to a multilateral agreement for horizontal reduction, provided that the agreement operates to reduce tariffs among its parties without increasing them with countries which do not participate. We deem it inadvisable, however, to take a definite position until the question is more fully discussed and explored. We suggest, therefore, that the Delegation, after it has reached definite conclusions on the subject, submit, for consideration, its specific recommendations.
5. Reference is made to Department’s telegram Nos. 114, July 7, 5 p.m. and 119, July 7, 11 p.m.53 as regards sugar.
The Delegation might proceed further with discussion of production agreements with reference to coal, copper, oil and lumber, with full realization that any agreement would require Congressional approval.