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

550.S1/1213

The Chairman of the American Delegation (Hull) to President Roosevelt

August 5, 1933.

My Dear Mr. President: I beg to submit herewith a report⁸⁹ of the American Delegation to the Monetary and Economic Conference at London as follows:

Summary of Work of Monetary and Economic Conference

preparation for the conference

On the initiative of the Powers which participated in the Lausanne Conference, the League of Nations decided to convene a Monetary and Economic Conference to consider the measures necessary to solve the other economic and financial difficulties which are responsible for, and may prolong, the present world crisis.⁹⁰ Accordingly, the Council cf the League of Nations set up a small Committee for the Organization of the Conference; and a Preparatory Commission of Experts, on which the United States was represented, was appointed to draw up a Draft Annotated Agenda.⁹¹

On the initiative of the United States a so-called tariff truce⁹² (more accurately, a trade barriers truce) was instituted. When the Conference began its work, fourteen states had, subject to various reservations, acceded to the truce, thereby agreeing that they would not, before June 12 nor during the proceedings of the Conference, adopt any new measures which might increase the many difficulties now adversely affecting international trade, subject to the right to withdraw from this agreement after July 31, 1933, on one month’s notice. Forty-seven states afterwards acceded to the truce, making a total of sixty-one states, representing nearly 90% of the trade of the world.

the work of the conference

The Conference convened on June 12, 1933, with Ramsay MacDonald as its President. Representatives of sixty-four states attended. Serving in an advisory capacity were the International Labor Office, the International Institute of Agriculture, the Bank for International Settlements, and the Economic Committee, the Financial Committee, the Organization for Communications and Transit of the League of Nations.

After seven plenary meetings the Conference established two commissions and various sub-commissions to deal with the subjects on its Agenda. This organization of the Conference is shown below:

Monetary and Financial Commission

Mr. Cox⁹³ (United States) President

sub-commissions

I. Immediate Measures of Financial Reconstruction	II. Permanent Measures for the re-establishment of an international monetary standard.
Credit Policy;	Functions of Central Banks;
Price Levels;	Coordination of their policies;
Limitation of Monetary Fluctuations;	Monetary Reserves;
Exchange Control;	Silver.
Indebtedness;
Resumption of International Lending.

Economic Commission

Mr. Colijn (Netherlands) President

sub-commissions

I. Commercial Policy.	II. Coordination of Production and Marketing.	III. Measures other than customs duties and prohibitions.
Return to normal conditions of trade;	Wheat and other foodstuffs (sugar, wine, coffee, etc.);	III-a. Direct and indirect Subsidies (Especially shipping subsidies. )
Progressive abolition of trade restrictions and foreign exchange control:	Raw materials (coal, timber, etc.);	III-b. Indirect protectionism;
Tariff and Treaty Policy; including the regime of the most-favored-nation clause.	Industrial and agricultural agreements, etc.	Marks of origin;
		Veterinary and phytopathological questions.

There was a general discussion of public works in the Economic Commission.

the work of the monetary and financial commission

First Sub-Commission

This Commission was appointed to deal with the existing emergency—depressed price levels, frozen loans abroad, foreign exchange abnormalities, etc. Senator Couzens was our representative upon it.

At the outset the British introduced a resolution⁹⁴ urging that monetary action should be employed to raise prices and suggesting in particular open market operations by central banks to this end. The discussion that ensued developed rather definite alignments between the gold standard countries and countries off gold. The former would not emphasize or quite agree as to the efficacy of monetary means alone to raise prices. They suggested that the first essential was confidence, and that to this end budgets should be balanced and reasonably conservative practices followed by central banks.

The British themselves were far from specific in indicating what other factors than an easy central bank policy might be brought to bear to raise prices. Before any conclusion was reached on the British resolution, the discussion was shifted to problems of indebtedness. The discussion was general and again no definite conclusions were reached.

Drafting committees, however, were appointed and proceeded with their undertaking. The differences, however, between the gold standard countries and others, including the United States, delayed and gradually halted the drafting proceedings. Impartial observers at the Conference, it is fair to say, agreed that the question of temporary stabilization⁹⁵ was unduly emphasized and exaggerated, and that a number of topics listed on the agenda might in any event be considered, while still others could have been considered to a provisional extent. As affairs developed, however, it later appeared that the only question within the jurisdiction of the committee with the consideration of which there was general agreement to proceed was that of indebtedness.

In the discussion⁹⁶ that took place on this question in the drafting committee there was a sharp line of division between the creditor countries and the debtor countries. Debtor countries were anxious to obtain a final settlement of their obligations on a reduced scale consistent with present economic conditions. Several of the debtor countries went farther and insisted that creditor countries should reduce their tariff walls in order to permit payment of indebtedness in goods and services. The Greek Delegation even proposed special commercial treaties for this purpose in disregard of the most-favored-nation clause. As against this, the creditor countries took the position that debt settlement should not be final, but temporary, pending possible recovery of international trade and prices. They furthermore refused to make any special concessions to debtors in the way of tariff reductions although they were inclined to recognize some obligations to facilitate general recovery of international trade. All were in favor of stimulating the establishment of creditor organizations to deal with debtors who found themselves in difficulties; but whereas there was some tendency on the part of debtor countries, particularly Rumania, to ask that a system of semi-compulsory arbitration of debts should be set up, the creditor countries took the position that these organizations should operate in a wholly voluntary manner.

The discussion ended in the unanimous adoption of a resolution⁹⁷ based upon an original British text and embodying for the most part the position taken by the creditor countries.

Second Sub-Commission

The Second Sub-Commission was created to deal with permanent measures for the reestablishment of an international monetary standard. Our representative on this Commission was Senator Pittman. At the opening meeting on June 19, he submitted a resolution.⁹⁸ The resolution dealt with both gold and silver. The gold section urged the return as soon as practicable to an international gold standard, the elimination of gold from circulation, and the freeing of central bank reserves now impounded by law above the ratio of 25 per cent. The clauses calling for a return to the gold standard were immediately adopted by the Commission, with a British amendment adding that time and parity should be for each country to determine. The remaining clauses together with the whole question of an improved operating basis for the future gold standard were turned over to a drafting committee. Another drafting committee was appointed under the chairmanship of Senator Pittman to deal with silver.

Second Sub-Commission—First Sub-Committee (Silver)

Senator Pittman’s committee produced both a resolution and a signed agreement. The resolution⁹⁹ proposed the stabilization of the silver market by stopping government sales of silver not balanced by government purchases. Governments were to refrain from reducing the silver content of their subsidiary coinage, and an agreement was to be sought between silver producing countries and countries holding large stocks of silver with a view to balancing sales and purchases within the group. This agreement was actually signed on July 22.¹ The chief feature of the agreement is that sales of silver by India are not to be greater than certain specified amounts and are to be absorbed by special purchases of silver for coinage purposes by Australia, Canada, the United States, Mexico, and Peru. The limits placed upon sales of silver by India are such as would not have interfered in the slightest with the actual sales of that country in recent years. The special purchases of silver to offset Indian sales are to be made chiefly by the United States. The agreement is to run for four years from January 1, 1934.

Second Sub-Commission—Second Sub-Committee (Cold Standard)

Senator Pittman made Mr. Warburg his representative on this committee. The first business of the committee was those clauses of the gold section of the Pittman resolution that had not already been adopted. The first of these was designed to confine gold to central bank reserves, eliminating it from circulation. All the delegates readily agreed to eliminating gold coin from circulation; for the United States was practically the only country where it circulated. When it came to eliminating gold bullion, however, the French objected. Their present laws require them to redeem their currency in gold bullion; and they were afraid that if their public learned that they were contemplating a standard under which neither gold coin nor gold bullion could be obtained for bank notes, there would be a run to acquire gold while the present laws still held.

The clause of the Pittman resolution calling for the reduction of the legal reserve requirements of central banks to 25 per cent was revised² to bring it more into conformity with actually functioning banking systems, but the central idea was retained.

Having gone at least part way toward confining gold to central bank reserves and freeing these reserves for use internationally, the Committee then adopted a resolution designed to widen the network of central banks administering the gold standard and to provide for close and continuous cooperation among them. It then turned to an important resolution introduced by Mr. Fraser of the Bank for International Settlements designed to stabilize the operation of the gold standard. The resolution lays down the principle that the primary function of a central bank is to maintain in equilibrium the international balance of payments of its country, thereby avoiding persistent one way international movements of gold. So far as is consistent with the performance of this primary function, however, it is stated that central banks should cooperate in putting into effect a policy designed to moderate the upward and downward swings of general business activity. This resolution was put through without change in the course of one meeting of the committee, with the exception of the United States. Mr. Warburg made a reservation. He stated that he could not accept the resolution definitely until he had submitted it to the Treasury, the Federal Reserve Board, and the Federal Reserve Bank of New York, and had obtained their views upon it. It was at this point that the work of the Committee was interrupted by the reaction of the gold standard countries to President Roosevelt’s message of July 3.³

Just as work was resumed on July 13, a reply⁴ was received to Mr. Warburg’s cable of June 30.^4a The reply criticized the substance of the pending resolution, and it suggested that such a statement of principle subscribed to by our Government at this time might lead to a misunderstanding of our intention relative to the gold standard. Mr. Warburg was not in London at the time, but Senator Pittman attended the meeting of the Committee and stated that in view of the cable just received from Washington, the American Delegation could not consider further the resolution previously accepted under reserve by Mr. Warburg. His action seemingly caused surprise to the other countries represented on the Committee and they brought about an immediate adjournment of the meeting. Some affected to claim that the American Delegation having been foremost among those insisting that the discussions should continue, should not thus obstruct.

This attitude was considerably allayed when, on the basis of a second cable from Washington, a formula was developed for communicating to the parent Sub-Commission the resolution which the American Delegation was no longer in a position to discuss. The Delegation agreed that it would be proper for the Rapporteur of the Committee to quote in full the text of the resolution, stating that agreement had been reached “by all governments represented on the Sub-Committee on Technical Monetary Problems, except that of the United States, which considered discussion of the question at this time premature, it being understood that the Federal Reserve Banks would be glad to confer at an opportune time with other Central Banks on questions of this character to the extent that they are compatible with national policies.” The resolution⁵ was communicated with this explanation to the Sub-Commission at its final meeting on July 20. It was not made the subject of discussion or action at this time.

The drafting committee further stated that it had not been able during the present session to complete its work on the gold exchange standard, methods of economizing gold, and the distribution of monetary reserves. This was merely a way of glossing over the fact that these were questions which the gold standard countries felt they could not safely discuss in view of the present disturbed condition of their public opinion at home. It is probable, too, that the American Delegation would have had to state in regard to a number of the proposals that would have been made under these headings that they were subjects for central banks to discuss rather than for government representatives. Other countries did not find it necessary to make this distinction, either because the heads of their central banks were their representatives on the committee or because most of the questions raised had already been fully discussed by their central bank governors at the monthly meetings of the Bank for International Settlements. Even had Governor Black⁶ or Governor Harrison⁷ been present in the Committee, however, we should have had to proceed with extreme caution until the outlines of our future monetary policy should become clearer. It was as much in the interest of the United States as of the gold standard countries that the work of the Committee at this stage should cease.

the work of the economic commission

On the economic side the Conference agreed to no treaties.

The Sub-Committees, whose reports were all adopted by the Conference, passed certain unanimous resolutions and agreed unanimously on certain principles. As this session of the Conference was cut short, the resolutions took the form of seeking to provide for some continuance of the work. The Sub-Committees considering the coordination of production and marketing^* requested certain bodies or governments to take further steps as follows (pages 21, 24–29):^†

Product	Request Addressed to	Action Desired
Coffee	Exporting countries.	To submit proposals to the Secretary General of the Conference with a view to forming an international organization (coffee) or convening a subsequent meeting.
Cocoa	Producing countries.
Copper	“   “
Sugar	Bureau of the Conference.	Keep in touch, take steps for continuance of negotiations, and perhaps summon a conference.
Wine	International Wine Office (Economic Committee of the League, International Institute of Agriculture).	To follow the points of the plan drawn up.
Coal	Competent organs of the League.	To follow and consider safeguarding of all interests.
	Council of the League.	To call Conference if six months have brought no results.
Tin	Producing countries not members of International Tin Commission.	To negotiate and join the organizations restricting output.

The Sub-Committee (Conference) adopted a declaration of conditions to which should conform any agreements for coordination of production and marketing, such conditions being designed to make such agreements effective and also fair to consumers (page 19 of Report).

Under the head of indirect protectionism there was recommended a Conference to deal particularly with customs formalities and a diplomatic conference to continue the work on veterinary measures on the basis of the draft conventions drawn by the Economic Committee of the League. The Bureau of the Conference was requested to provide for the continuance of the work relating to marks of origin (page 32).

On quotas, exchange controls, and other trade restrictions, on tariffs and the most-favored-nation clause, and on bounties and subsidies, the Conference was just passing the stage at which each delegation stated its position and just entering the stage of detailed examination, negotiation, and compromise. It is, therefore, difficult to estimate the chances of any success. In general, each country advocated the abolition or reduction of all barriers to its commerce (including shipping and other subsidies granted by other countries), except of kinds which it is itself practicing to such a degree that it is estopped from urging the case; and, in general, each country either defended its own practices as just or as necessary, or indicated its willingness to abandon such practices provided other countries did this, that, and the other either before or simultaneously. Undoubtedly, there was a wide desire to diminish barriers to commerce, but, on the other hand, the statements indicated many points on which apparently no concessions were likely to be made and there is danger that the refusal of concessions in various countries will prevent any significant progress from being made. Great Britain was the most insistent on the reduction of quotas, “excessive” tariffs, and shipping subsidies, but showed no willingness to make concessions of her own and, after the presentation of the last American proposal, indicated an intention of increasing rather than diminishing her tariff. But uncompromising statements doubtless were to some extent made to establish good bargaining positions.

The only views which the Report designates as unanimous were (1) that “excessive” tariffs should be lowered, and (2) that, in principle, quotas (quantitative limitations on the importation of merchandise) and exchange controls should be gradually abolished. But this agreement of views was little more than verbal, the essential differences and difficulties being roughly as follows:

The agreement “in principle” to abolish trade restrictions (as distinguished from tariffs) was so limited by interlocking reservations that progress must be very difficult. In addition to stabilization of currencies as a pre-requisite, the proposed abolition of quotas was hedged with reservations relating to agriculture (France, Great Britain), manufactured articles as long as agricultural products are restricted (eight Eastern European states), and all products as long as tariffs are not reduced (Switzerland, Belgium, Czechoslovakia, France). Great Britain led the attack on quotas, reserving her own, and was generally supported by countries not using such restrictions; but several countries defended quotas as less bad than tariffs because they are transitory, and for other reasons.

Similarly, the unanimous opinion that “excessive” tariffs should be reduced indicates no easy advance toward the elimination even of the latest additions to tariff structures. The British led in the attack on excessive tariffs, but took the position that their own tariff structure is still in the making and should be raised while excessive tariffs are being lowered (Chamberlain’s closing speech).⁸ The British and some countries argued against any uniform percentage cut in all tariffs, alleging, without analysis of the point, that such a cut would require greater “sacrifices” from “low tariff” countries. The British proposed resolutions condemning the fallacy of the “favorable balance of trade”, and various countries pointed to the necessity of creditor countries relaxing restrictions so as to receive payment in goods.

In the Sub-Committee on bounties and subsidies there was in general the same effort on the part of countries not granting bounties to have other countries abolish them while the other countries stood pat or defended the practice in whole or in part. The British were successful in having the Sub-Committee take up shipping subsidies first, but even in regard to this the Sub-Committee was only getting down to detailed consideration when the Conference closed.

While many of us thought that having sought the Conference and indicated beforehand a disposition to join in a substantial way in carrying out the professed objects and purposes of the Conference, that the British would within a few days after its meeting offer a more or less comprehensive and basic proposal. It was disappointing to observe, as the Conference proceeded, that neither the British nor any other delegation made any substantial proposal to the Conference that would contemplate a program of any particular breadth or depth. It is true, in this connection, that the Cubans and certain other delegations from small countries offered different sorts of limited proposals,⁹ but they had such defects in one way or another that they did not attract any general or favorable comment.

It was during the last days that the American Delegation presented to the Conference a proposal¹⁰ for an agreement among the nations to reduce trade barriers gradually over a period of time, to make the unconditional form of the favored-nation doctrine, with a reasonable exception in favor of broad international efforts for reduction of trade barriers, the universal basis of commercial policy, and to extend the life of the tariff truce to a reasonable period beyond the final adjournment of the Conference. This proposal offers a basis upon which a world program might be developed during the course of the recess and the meeting of the Conference to follow.

It is a matter of satisfaction that Mr. Colijn, Chairman of the Economic Commission, delivered two or three addresses in support of the feasibility of this American proposal as a basis for discussion and consideration by the sub-commission on commercial policy. Mr. Bonnet,¹¹ Mr. Chamberlain, and other heads of delegations from important countries likewise made special reference to this American proposal and indicated that it might afford a suitable basis for the development of a comprehensive policy and plan of the Conference for final and favorable action as the same related to the reduction of trade barriers, the removal of unfair methods and trade practices, and the liberalization of commercial policies generally.

The American Delegation sought three main objectives at the Conference. The first was to keep thoroughly alive and to preserve the integrity of the fundamentals of practical economic international cooperation, the same to be carried out within the range and spirit of the subject matter of the Agenda; secondly, to use all efforts at every stage to keep the Conference going and to effect steady and uniform progress until the chief purposes of its mission had been accomplished; and third, to present a proposal sufficiently broad and with sufficient substance as would fully reaffirm and keep alive the policy of reducing trade barriers to a level of moderation and implementing that policy to the extent of proposing that the nations agree substantially to reduce their respective trade barriers over a period of time. It is believed that in accordance with the numerous favorable expressions of leaders in the Conference, this proposal will in September be made the basis of consideration of what would ultimately comprise a comprehensive program on the economic side.

Thus the American Delegation presented to the Conference all of the draft resolutions¹² embodied in its instructions except that referring to the removal of exchange restrictions.

The future work of the Conference is organized in detail. The Conference has created two permanent continuing agencies, first a Bureau consisting of the sixteen most important and most widely representative nations, and secondly, an Executive Committee consisting of the offices of the Conference and the President, Vice President and rapporteurs of the main Committees. These bodies, one or both, will meet in September with the fullest possible powers to take any action necessary within the scope of the Conference to advance the work of the Conference, whether by calling local or regional or special meetings, by organizing studies, or by reconvening the full session.

Notwithstanding the conservative nature of the foregoing comment on the meeting and proceedings of the Conference thus far, it is my definite opinion that the dominant forces at the Conference representing the principal countries still realize just as keenly as during our conversations with them at Washington during April and May¹³ that there must be world economic rehabilitation; that this clearly requires the restoration to a normal extent of international finance and commerce; that all the processes of exchange and distribution are so completely shackled and obstructed by absurdly extreme trade barriers and other economic impediments as to render imperative the reduction or removal by concerted action of the nations of the excessive or unreasonable or indefensible tariff rates, quotas, exchange restrictions, and other conditions that hopelessly break down the processes of exchange and distribution.

Naturally the world economic structure presents infinite complexities dealing with which will tax the patience, the wisdom, and the ingenuity of the statesmen, especially in the important countries of the world. This condition presents all the stronger reason why they should gird themselves for the further prosecution of this difficult but absolutely necessary undertaking. There is general agreement that all the nations should resort to every possible domestic policy or even temporary expedient to check the ravages of panic and to restore conditions as far in the direction of normal as may be possible. The general view likewise prevails that in addition to and beyond any and all domestic programs, of both an emergency or temporary and permanent nature, there must gradually be restored as a part of the permanent policy, especially of the surplus producing and creditor nations, a basic economic policy of international cooperation, the reasons for which are set forth in the Agenda in a most definite and concrete manner.

It is probable that the entire combined policies of both economic and military disarmament are at present hanging in the balance in the face of the universal assault by the forces of extreme and exclusive nationalism. The reason and the necessity, therefore, are all the stronger for perseverance and persistence by the leading nations of the world to overcome these purely nationalistic efforts to the extent of saving and preserving the most practical and basic phases of both the domestic and international contentions. The economic welfare of 85% of the population of the world hinges on the success of this contest. Its prosecution, therefore, is wise, practical, and most urgent.

I herewith attach the full “Report of the Bureau to the Conference”¹⁴ on the last day of its session which undertakes succinctly to give a substantial account and summing up of the work, the program, the proceedings, and the progress of the Conference to the date of its recess. A still more elaborate and detailed account of the proceedings of the Conference, especially as it relates to the attitude and action of the American Delegation and the questions considered in the commissions and sub-commissions of which American representatives were members I herewith attach in the individual reports¹⁵ which they kindly prepared at my request. The wheat negotiations¹⁶ were conducted through the Department of Agriculture with the result that I have not been kept advised as to the details of their accomplishment.

Respectfully submitted,

Cordell Hull

89. Prepared by Mr. Hull aboard the President Harding and submitted to President Roosevelt at Hyde Park, August 5, 1933.
90. For correspondence relating to these origins of the Conference, see Foreign Relations, 1932, vol. i, pp. 808 ff.
91. League of Nations, Monetary and Economic Conference, Draft Annotated Agenda (Official No.:C48.12.1933.II [Conf. M.E.I.]).
92. Ante, p. 605.
93. James M. Cox, Vice Chairman of the American delegation.
94. Journal of the Monetary and Economic Conference, p. 70; for discussion, see ibid., pp. 70–73, 78–81.
95. See communication of July 5 from the American delegation to the Secretary General of the Conference, p. 692.
96. Journal, pp. 80, 87, 92, 102–104, and 109.
97. Journal, pp. 207 ff.
98. Journal, p. 66; for discussion, see ibid., pp. 66, 71, and 117.
99. Journal, p. 209.
1. For text of the agreement and correspondence relative to ratification by the United States, see pp. 763 ff.
2. Journal, p. 117.
3. See telegram No. 19, July 2, 6 p.m., p. 673.
4. Telegram No. 138, July 13, 6 p.m., to the Chairman of the American delegation, p. 713.
5. Not printed.
5. Journal, p. 210.
6. Eugene Robert Black, Governor, U. S. Federal Reserve Board.
7. George Leslie Harrison, Governor, Federal Reserve Bank of New York.
8. Except that on timber, which adjourned until October “As useful negotiations are in progress”. [Footnote in the original.]
9. These and later page references are to the final Report of the Bureau to the Conference. [Footnote in the original.]
8. For summary, see Journal, p. 232.
9. For Cuban proposal, see Proposal in Regard to an Inter-governmental Agreement for Stabilizing World Production of Sugar so as to Maintain the Equilibrium Between World Supplies and Demand (Conf. M. E./C. E./14); see also telegram No. 75, June 28, 7 p.m., from the Chairman of the American delegation, p. 659.
10. Ante, p. 728.
11. Georges Bonnet, French Minister of Finance.
12. See “Memorandum on Policy for American Delegation,” p. 622.
13. See pp. 489 ff.
14. League of Nations, Monetary and Economic Conference, Report of the Bureau to the Conference (C. 435, M.220.1933.II. [Conf. M.E.22(1)]).
15. Not printed.
16. See pp. 787 ff.