Foreign Relations of the United States Diplomatic Papers, 1933, The British Commonwealth, Europe, Near East and Africa, Volume II

660P.1111/3

The Minister in Latvia (Skinner) to the Secretary of State

No. 1307

Riga , April 21, 1933.
[Received May 2.]

Sir: I have the honor to acknowledge the receipt of the Department’s Instruction No. 182, dated April 4, 1933, in regard to discrimination against American trade. I regret to infer therefrom that the feeling prevails in the Department that particular cases of discrimination have not been enquired into and dealt with appropriately, and especially as such is not at all the case.

1. Our trade relations with Latvia are covered by a guarantee of “most favored nation” privileges. Yielding to circumstances, the Latvian Government has set up a system of complicated contingents and “valuta” regulations, the latter more trying than the former. Thus, when the importer obtains a permit to bring in certain goods he may be, and if the goods are of American origin, frequently is, refused a permit to purchase exchange with which to pay for them. Large committees dispose of these questions, and it is not easy to establish responsibility. The fact is undeniable, however, that importers of American goods are advised to place their orders in Great Britain or Germany, as they can obtain “valuta” with which to pay their bills. In numerous instances the Consulate and the Commercial Attaché’s office have intervened successfully; in others, importers have quietly refrained from purchasing desired American goods, and in still many other cases, possibly the most numerous class, intending importers of American goods have evaded the restrictions by the use of influence. I am handicapped in my efforts to overcome obstacles to particular importations by the usual refusal of the importer to give particulars upon which official action might be based, lest reprisals against him follow.

2. Whenever information of a specific character is available respecting obstacles placed in the way of importing American goods, officers of the Legation have appealed to the competent authorities. Invariably, action is promised but long delayed. In some instances representations have been successful, in others partially successful, and at other times they have failed. I have, myself, personally, and in writing, dealt with the Minister of Foreign Affairs on these matters, and in despatches to the Department have disclosed the situation, among these despatches being my No. 88 of February 26, 1932; No. 201 of May [March] 30, 1932; No. 292 of April 25, 1932; No. 657 of August 24, 1932; 1096 of January 26, 1933.⁴ On March 30, 1932, I left an Aide-Mémoire with the Minister of Foreign Affairs, a copy of which is enclosed herewith. On January 23, 1933, after a conversation, and to assist the Minister, I sent him a formal note, a copy of which is enclosed herewith, and on March 9, 1933, having in the meantime received no reply, I sent him another.

3. As the correspondence above mentioned discloses, I have complained orally and in writing, in season and out of season, about trade discrimination. I suspect that under the preceding Government the amiable dispositions of the Minister followed by inaction arose from lack of authority on his part; that is, the committees dictated to the Government and not the Government to the committees. At all events the Government in which Mr. Zarins was Minister for Foreign Affairs fell some weeks ago before I could obtain from him any statement in reply to my complaint that our Treaty rights were not being respected. The question remained open and in a most unsatisfactory state when the Ministry fell.

4. Early in March a new Government was formed, with Mr. Salnais as Minister of Foreign Affairs. At my first meeting with him in his present capacity I pointed out various facts, and especially that I was awaiting an answer to my enquiries. He promised to familiarize himself with the circumstances, and I have heard unofficially that some sort of a note is being drafted at the present time in the Foreign Office, with respect to which I shall report as soon as I receive it.

5. I anticipate that the Latvian Government, if and when they terminate their policy of avoidance, will say that they were not the only ones to invent restrictions and contingents, that they have been forced into their present position, that we buy little from them, whereas other countries buy a good deal, and finally, that necessity knows no law. It is a fact, I believe, that the British, who are the best customers of this country, constantly urge the local Government to direct their purchases into British channels, and the implied threat of losing British trade is used to our disadvantage.

6. The Department mentions four cases discussed at the Conference of American Government officers, held on February 23, 1933. The following are the particulars:

Underwood Typewriters: The intending importer, after consultation with the Commercial Attaché, consulted a certain Mr. Kacens, of the Import Regulating Committee, and eventually secured the foreign exchange permit;

Tractor Parts: In this case the local representative of the Ford Motor Car Company was informed that there were no dollars available, and that American parts invoiced in dollars could not be brought in. He was told to buy his parts elsewhere, and as the importer was obliged to fill the order within a limited time, he procured the goods in England rather than drop out of the business. He gave the information in confidence and did not desire any of our officials to intervene;

Petroleum Products: The director of the Standard Oil Company stated to the Commercial Attaché that he had been compelled to resort to barter in order to get money out of the country, and had made one transaction involving 20,000 lats worth of Latvian lumber. This information was given in confidence;

Spark Plugs: In this matter the importer, who also represents the Ford interests, applied for an import permit for 1,000 kilograms of spark plugs from the United States; 200 from Germany; and 100 from England. The permit received by him authorized him to import 300 kilograms from England and none from the United States. This importer, as above related, spoke in confidence, and as he imports from several countries and not alone from the United States, was unwilling to endanger his position with the authorities by stressing the American case and obtaining action from the Legation.

Thus, while it is often impossible to force the particular case upon the attention of the authorities, I have used the information to the best advantage in my general representations.

7. A quarterly report asked for in the last paragraph of the Department’s Instruction will be provided, but it might be remarked in this connection, that the Department is always informed respecting new laws and decrees affecting trade, and of our action in such cases, in separate despatches.

8. The Legation and the Consulate, and the Commercial Attaché, as well, are cooperating to the fullest extent and are doing their utmost in difficult circumstances to relieve our trade of its burdens. I have never failed to have prompt and effective assistance in these matters from all of our representatives.

Respectfully yours,

Robert P. Skinner

[Enclosure 1]

Aide-Mémoire

The American Minister called upon His Excellency, the Minister for Foreign Affairs, today, to express the concern of the Government of the United States over the various trading restrictions which have been put into effect in Latvia in consequence of the economic crisis. Mr. Skinner reiterated that the difficulties of the situation were fully appreciated and that he had no desire to add to them unnecessarily, but rather to be of practical assistance if that were possible. On the other hand, his Government expected that in the application of restrictions, either upon the importation of goods, or upon the purchase of exchange, the spirit of treaty obligations would be respected more carefully than now appears to be the case.

As respects the importation of American goods, it was recognized that the share of the United States might not always easily be determinable, but certainly a share corresponding to the average annual imports from the United States over a period of several years preceding the adoption of restrictions might constitute a fair standard. It would be possible to prevent a fair distribution of importations into Latvia just as certainly by restrictions on the purchase of exchange as by an arbitrary distribution of imports, themselves.

As respects the purchase of exchange, Mr. Skinner expressed regret on hearing that the Latvian Government had given assurances that countries with which Latvia enjoyed a favorable trade balance would receive first consideration, and he believed it to be a fact that firms in the United States were not obtaining their proper proportion of the whole. Any arbitrary arrangements of this kind must necessarily provoke great dissatisfaction, as the obviously fair method would be to grant a uniform percentage of all applications, so long as complete satisfaction is impossible.

Mr. Skinner pointed out that the theory now accepted in Latvia, to the effect that countries with which Latvia did not have a favorable trade balance, were to receive consideration last, was quite erroneous. Importations from the United States are not absorbed by purchasers in Latvia as a result of idle chance, but because the commodities imported are required, and in due course are employed for the production of the very articles which are subsequently exported from Latvia. It is impossible, therefore, to declare categorically that either exports or imports are entitled to special favor, the necessity for both standing on a parity. In a note received from the Ministry some days ago, it was mentioned that the sale of exchange would have to continue upon a restricted basis until fresh capital were brought into the country. Mr. Skinner felt sure that Mr. Zarins would agree that fresh capital, as, for example, further deposits from the General Motors Acceptance Corporation, would be most unlikely so long as remittances were governed by the uncertain rules which now prevail and which were giving considerable dissatisfaction.

Mr. Skinner concluded by hoping that at an early date business would improve and that these vexatious incidents would cease to arise. He was confident that the Latvian Government, upon reconsideration, would deal with American trade and commerce on no less favorable terms than those which were assured to the United States under the commercial treaty.⁵

Riga , March 30, 1932.

[Enclosure 2]

The American Minister (Skinner) to the Latvian Minister for Foreign Affairs (Zarins)

Riga , January 23, 1933.

Excellency: I have the honor to call your attention to the deliberate efforts of those in authority to prevent importers of goods in Latvia from purchasing supplies in the United States, in violation of the commercial agreement between the United States and Latvia signed on April 20, 1928.

It is well known in trading circles that discrimination has been practised during a considerable period, and in the public press of this city, on January 19, it was conspicuously announced that the Council of the Bank of Latvia had come to the conclusion that foreign goods should be imported from those countries which bought Latvian products and that instructions had been given to draw up a project for enforcing this point of view more completely.

While the Government of the United States sympathizes with the Government of Latvia in its endeavors to meet a difficult economic situation, it nevertheless remains a fact that this should and may be accomplished with due respect to treaty engagements. I must, therefore, invite you to inform me at an early date whether it is proposed to continue the practises to which I have alluded, and in the contrary event, to indicate to me the ways and means whereby American trade hereafter shall enjoy access to the Latvian market on equal terms with those of other countries.

I avail myself [etc.]

[File copy not signed.]

[Enclosure 3]

The American Minister (Skinner) to the Latvian Minister for Foreign Affairs (Zarins)

No. 159

Riga , March 9, 1933.

The American Minister presents his compliments to His Excellency the Minister for Foreign Affairs and desires to refer to his note of January 23, 1933, to which no definite answer thus far has been returned in regard to discriminatory practices applied to American trade in this country, notwithstanding the guarantees set out in the commercial agreement between the United States and Latvia signed on April 20, 1928. Mr. Skinner hopes that an early reply will be made to his inquiries.

In this connection he would also call attention to an article published in issue No. 2, of 1933, of the Ekonomists a publication for which it is understood that the Ministry of Finance is responsible, under the heading of “The Effect of Contingents and Valuta Restrictions on our Imports.” The author of this article is Mr. K. Kacens, director of the Department of Trade and Industry of the Ministry of Finance, and a member of the Commission for Regulating Imports. In this article Mr. Kacens sets forth the view that the most favored nation principle is generally regarded as impracticable, and the further opinion that the policy of regulating imports and valuta operations gave the Government of Latvia the opportunity of directing purchases to those countries that purchase Latvian goods. Mr. Skinner would be glad to know whether the Latvian Government accepts responsibility for this publication and for the view expressed by Mr. Kacens.

4. None printed.
5. Treaty of Friendship, Commerce and Consular Rights, Foreign Relations, 1928, vol. iii, p. 208.