Foreign Relations of the United States, Diplomatic Papers, 1933, General, Volume I

550.S1 Economic Commission/37: Telegram

The Acting Secretary of State to the Chairman of the American Delegation (Hull)

Washington, July 13, 1933—7 p.m.

139. Your 121, July 11, 2 p.m. and 126, July 13, 10 a.m. Department’s 134, July 12, noon. Department understands that your “agreement not to increase trade barriers” would safeguard the exercise of all mandatory provisions of our tariff and related laws and that this agreement could therefore be made immediately effective as a modus vivendi if approved by the President. It is presumed also that it might be acceptable to a considerable number of governments of some commercial importance but that difficulty may be expected in obtaining the adherence of some great commercial countries. Eventually this Government will have to decide its requirements as to the number and description of other signatories on which American signature must be made conditional. This question is reserved.

In the matter of agreement for the reduction of duties, you point out the difficulty of formulating any feasible basis for a multilateral undertaking looking forward to a general reduction of duties. It would perhaps be best that your resolution propose instead that all Governments undertake to reduce duties by negotiating bilateral treaties and generalizing the reductions by operation of the unconditional most-favored-nation clause.

Your “agreement for the abolition of quantitative restrictions” might not even require our signature since we have no such restrictions but, as you point out, its acceptance on our proposal would logically require us to abstain from imposing quantitative restrictions under Section 3 (e) of the Industrial Recovery Act. In the latter regard this Government must reserve its position until it is determined how many and what countries will accept the obligations proposed under the agreement for the abolition of quantitative restrictions. The agreement not to increase trade barriers will contain in reservation (f) an undertaking not to impose quantitative restrictions except in certain defined situations.

The following discussion concerns the lettered reservations and exceptions to the agreement not to increase trade barriers:

(a) should safeguard all mandatory provisions in our tariff and related laws including convict labor and forced labor clauses (see protocol and Senate reservation, 1927 convention).

(b) It is believed delegation is in best position to suggest detailed draft. General principle is acceptable.

(c) Department suggests “taxes or duties imposed on imported products merely to offset internal taxes on domestic products”.

(d) Department suggests “additional duties imposed upon goods sold abroad for less than at home or benefiting directly or indirectly from governmental or other bounties”.

(e) Approved.

(f) Department believes that American proposal might substitute for the general “vital interest” clause of the 1927 convention⁶⁸ a phrasing descriptive of the social purposes of our Industrial Recovery Act and that if it prove necessary to accept a reservation regarding depreciated currencies this can be done by subjoining the latter in specific terms to this description, keeping the substance of the reservation applicable to these two situations only. We suggest as defining the basis of the American reservation the following: “New or additional duties or restrictions necessitated by national measures of an emergency character designed to raise wages, shorten hours, and improve conditions of labor, which may result in increased costs and prices”. Any new or additional duties or restrictions authorized under the above circumstances shall be imposed only for the purpose of preventing an unreasonable influx of imports. They should not be more than sufficient to meet the emergency and should continue in force only for the period of the emergency. They should not be designed to reduce foreign trade in the commodities affected below the level of a pre-determined period but only to prevent drastic increases of imports above the level of such period. They should not be imposed or applied in such manner as to discriminate against the trade of any country in the products concerned.

Some such phraseology as the above seems more appropriate for general resolutions than a definite provision such as yours prescribing a 2–months comparative period. In any actual convention it would be necessary to make entirely specific provisions along these lines. We suggest as more satisfactory than your provision regarding the 2-months period something like the following, the various percentages of course being subject to adjustment by agreement:

“No new or additional duty authorized under the above circumstances shall be imposed on any commodity unless, during a period of (say) 2 months the imports of the commodity shall have exceeded (say) 5 percent of the estimated domestic consumption, and unless they shall have exceeded the average imports during the corresponding months of the 3-year period, 1930, 1931 and 1932

(1) By at least (say) 10 percent in the case of any article of which the imports during the 2-months period have either exceeded (say) 20 percent of domestic consumption, or have constituted a materially larger proportion of domestic consumption than during normal years preceding 1930;

(2) By at least (say) 50 percent in the case of other commodities”.

If the delegation finds it necessary to accept a special reservation relating to depreciated currencies it will be essential, in specifically phrasing the agreement, to include further definite limitations of the extent and conditions of application of any new duties or restrictions predicated thereon.

Department approves your final paragraph to clause (f) suggesting however elimination of the phrase “conditions of application of”.

For your information. The foregoing suggestions are the result of a study by State, Treasury, Commerce and Tariff Commission experts.

Phillips

68. Article 5, International Convention and Protocol for the Abolition of Import and Export Prohibitions and Restrictions, signed at Geneva, November 8, 1927, Foreign Relations, 1928, vol. i, p. 336.