550.S1/1186: Telegram
The Chairman of the American Delegation (Hull) to the Acting Secretary of State
[Received July 26—1:45 p.m.]
167. Department’s 174, July 25, 6 p.m.84 In view of the inconclusiveness in some respects of the discussion between Davis and the other members of the Organizing Committee as to precise meaning of the reservation85 made by Davis in regard to action taken by the American Government to carry out the purposes of the farm bill and in view of the extremely vague language employed in the terms of the truce itself (refer to part 1 b section 2 of the draft annotated agenda submitted by the Preparatory Commission of Experts) it is open to question whether the imposition of tariffs on competing fibers would or would not violate the tariff truce. It is virtually certain however that some other governments would take the view that it was in violation especially since in our cables to Davis based on distinct conversations with the Department of Agriculture at the time he was instructed only to call precise attention to taxes on the identical commodities (and manufacturers thereof) that were subjected to the processing tax. However, on the other hand the “new initiative” phrase in the terms of the tariff truce may possibly cover that action.
Whether or not this action is regarded as being in violation of the truce it is certain to receive widespread attention and probably be used as justification for new restrictive measures on the part of other countries. The practically universal judgment will be that we are adding substantially to our already extremely restrictive system of customs. It would seem to be that the indirect consequences of the action will be in part to further curtail American sales of wheat and cotton. Furthermore, it is expected that this action would rob our recent proposals in the field of commercial policy of their chief significance and stand in the way of any new initiative by us.
I do not believe that such considerations as Tugwell86 sets forth in his letter will [furnish?] any serious weight even in the countries which might benefit from the increased price of raw cotton and wheat. The fact that for the first time we were imposing tariffs on commodities [Page 734] such as jute and silk heretofore on the free list will be the only clearly recognized fact especially within the British Empire and Japan.
In view of these conversations I urgently recommend that the present view of Agriculture that such action is necessary should be closely reexamined and careful consideration given to the countervailing disadvantages. Would it not be feasible to defer the imposition of duties on indirectly competing fibers until it is seen whether their use increases detrimentally and imports grow abnormally? I would emphasize the foregoing.
It would be extremely important that if it be decided to levy compensatory duties on indirectly competing fibers that these duties be closely adjusted so as not to create any new disadvantage. It is furthermore suggested that in the event that this action is taken Agriculture prepare a carefully supported statement explaining the reason for their action justifying in detail each compensatory rate suggested and indicating that it is the absolute minimum consistent with effecting the purposes of the farm bill and emphasizing that it is not intended to modify the competitive situation in favor of domestic producers. This statement should be made public when the action is taken.