862.504/363
The Ambassador in Germany (Dodd) to the Acting Secretary
of State
[Extract]
No. 317
Berlin, December 5,
1933.
[Received December 14.]
Subject: Apparent Contravention of our Treaty of
Friendship, Commerce and Consular Rights with Germany, by German Law
of June 1, 1933, for the Decrease of Unemployment.
Sir: Referring to previous correspondence
on the above subject, I have the honor to transmit herewith a copy
of the Embassy’s note No. 66 of September 23, 1933,5 sent to the Ministry of
Foreign Affairs in compliance with the Department’s telegraphic
instruction No. 114 of September 21. 6 p.m., and, in copy and
translation, Note Verbale No. III A 3508,
dated November 23, 1933, from the Ministry of Foreign Affairs,
written in response to the Embassy’s note above referred to.…
. . . . . . . . . . . . . .
As it appeared desirable to secure a consensus of opinion of the
officers of the Embassy and Consulate General most in touch with
this situation, before the departure of Consul General Messersmith
on leave for the United States, a conversation was held at the
Embassy on December 1 at which Messrs. Messersmith and Beitz of the
Consulate General, the Acting Commercial Attaché, and various
members of the Embassy staff were present. Mr. Messersmith states
that it was his opinion that the law of June 1, 1933, introduced
undoubted discrimination against the sale of American goods in
Germany and that American trade is still
[Page 469]
suffering from this discrimination. While
urging that every possible effort should be made to further press
this question of discrimination at the Foreign Office, Mr.
Messersmith stated that he did not believe that any form of
commercial retaliation should be resorted to at the present time.
Apart from the usual risks with which such action would be fraught,
Mr. Messersmith expressed the opinion that an obscure struggle for
predominance is proceeding between the moderates and the extremists
in the present German Government. The former realize the dangers and
objections of tolerating discriminatory practices such as those
introduced by the law of June 1, 1933, but that their hour has not
yet come. The extremists, on the other hand, would be capable of
resorting to combative measures with reckless alacrity. It was his
opinion that the coming months would show which element was the
stronger. Meantime, while keeping the question open by
representations, our Government should avoid resorting to commercial
retailiation. For the time being this point of view seems safe and
conservative.
Respectfully yours,
For the Ambassador:
J. C. White
Counselor of Embassy
[Enclosure—Translation]
The German Foreign
Office to the American
Embassy
No. III A 3508
Note Verbale
Supplementing its note verbale No. III A
3113 of September 30, 1933, and in reply to note verbale No. 66 of September 23, 1933, from the
Embassy, relative to the Law for the Reduction of Unemployment
of June 1, 1933, the Foreign Office, on the strength of a
re-examination of the matter in question, has the honor to
inform the Embassy of the United States of America as
follows:
The German Government cannot concur with the interpretation of
the American Government that, under the provisions of Section 2
of the Law of June 1, 1933, a bounty is in effect allowed on
certain German products. From the explanations, already given in
the note verbale of August 30, 1933—III A
2622—appearing in sub-paragraph II, 1 of the “Explanatory Notes
to the Law governing Tax Exemption for Replacement Acquisition”,
a copy of which is enclosed herewith,6 it is quite obvious
that the reduction of the income tax, the corporation tax and
the trade tax, which takes place in accordance with the
above-mentioned law, cannot be interpreted as a bounty to firms
on their expenditures for the acquisition or manufacture of
machines, implements, etc.
[Page 470]
Even if the tax reduction in question might essentially be
interpreted in some way as tantamount to a bounty on merchandise
of German production, objections thereto based on Article VIII
of the German-American Commercial Treaty could nevertheless not
be deduced. For the bounties and drawbacks in the meaning of
this agreement refer exclusively to internal taxes (consumption
taxes, turnover tax), to transmit duties and to certain charges
which have been paid on merchandise of American origin or on
non-American merchandise imported by American citizens. Hence,
there is no connection between Article VIII, above referred to,
and the Law governing Tax Exemption for Replacement Acquisition
(Ersatzbeschaffungen).
Neither can the German Government regard as valid the citation of
the general principle concerning freedom of commerce stipulated
in the beginning of Article VII of the German-American
Commercial Treaty. The term freedom of commerce derives its
concrete significance from the various treaty provisions
governing traffic in commodities and those governing the legal
status of the citizens of both countries. But Section 2 of the
Law of June 1, 1933, violates none of the agreements in the
German-American Commercial Treaty. It must be pointed out,
furthermore, that the law affects only a limited field and that
even there it does not hinder American trade from entering into
competition with German industry on the German market. The
question whether American machines, implements, etc., can hold
their own against the German supply is, after all, a question of
prices and before declaring that it is impossible that they
should do so all factors must be taken into account that have to
be considered in connection with price formation. At any rate,
the principle of freedom of commerce does not mean a guarantee
of profitable sales in interstate commerce, in so far as this
depends upon government measures on the part of the importing
country—and that is what its application in the foregoing
connection would amount to.
To its regret, the German Government is therefore not in a
position to give consideration to the representations made in
the note verbale of September 23 against
the Law governing Tax Exemption for Replacement Acquisition.
Berlin,
November
23, 1933.
