The Secretary of State to the Ambassador in Germany (Dodd)
119. Your 148, September 22, 5 p.m. and 150 of September 26, noon.17a The principles involved in this case extend far beyond the mere question of American prune exports to Germany. Our whole trade relations with Germany would probably be seriously jeopardized if Germany were to embark upon a general policy of customs quotas. I am very much concerned over this matter, and I wish to impress on you the necessity of bringing our position in a forceful manner to the attention of responsible German authorities. For the present I prefer to keep our representations on an oral basis.
This Government has always opposed the adoption of quota systems. If adopted, however, we have insisted that the relative position of our trade should not be altered and that American exports should be given a share of any quota equal to our proportionate share of average unrestricted imports. The trade of all countries is thus restricted in a like degree. However, under this prune quota, Yugoslavia will be in a position to more than double her usual exports to Germany and this increase will be at the expense of usual American exports, since American prunes subject to the higher rate of duty cannot possibly compete with those prunes permitted entry at the lower rate of duty. The German action thus curtails American trade and makes possible an expansion of Yugoslav trade. The advantage to Yugoslavia is obvious and such an advantage would seem certainly to fall within the meaning of paragraph 4 of Article 7 of the commercial treaty.18 Furthermore it seems inescapable that with the exhaustion of the American quota there would result a higher rate of duty for further imports of American prunes than for Yugoslav prunes, and a clear violation of paragraph 2 of Article 7 would then arise.
I want you to take up this matter orally with some person in authority and endeavor to work out some reasonable solution of the problem.
You should make it perfectly clear in your discussion that this Government considers that a customs quota which is not allocated on a proportionate basis is discriminatory and contravenes the treaty rights of the United States.
Furthermore, as paragraph 4, Article 7 of the treaty specifically provides that we do not have to ask for the extension to us of advantages given other countries, please bring this consideration to the attention of [Page 481] the German Government to the end that it take the necessary steps to assure American exporters of the right to avail themselves of the quota already allotted them.