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

No. 1314

Sir: In my No. 1307 of April 21, 1933, I replied at some length to the Department’s instruction No. 182 of April 4, 1933, and in my reply mentioned that I was expecting at any moment to receive a note on the subject from the Minister for Foreign Affairs. This note has now been received, and a copy is enclosed herewith.* I also enclose a copy of my reply to this note, which I am taking personally to the Minister for Foreign Affairs. I trust that what I have said to the Minister will commend itself to the Department.

Respectfully yours,

Robert P. Skinner
[Enclosure 1]

The Latvian Ministry for Foreign Affairs to the American Legation

The Ministry for Foreign Affairs has given thoughtful consideration to His Excellency the American Minister’s notes dated January 23 and March 9, in which His Excellency has made reference to several articles [Page 610] in the local newspapers and the attitude of the Latvian authorities with regard to the importation of products into Latvia originating in the United States.

After having made inquiries of the competent authorities, the Ministry for Foreign Affairs has come to the conclusion that the protests of the American Minister regarding the violation of certain clauses of the commercial agreement of Latvia and the United States are unfounded.

Though the balance of trade and the balance of payments of Latvia with the United States of America have always been unfavorable, yet no discrimination has been shown with reference to the importation of American goods. In 1932 the Exchange Commission has sanctioned the transfer of funds to cover the payment of American goods and commercial debts in the amount of Lats 3,744,369.60 which is 5.58% of the total permits issued by the Foreign Exchange Commission in that year. Taking into consideration the general shrinkage of trade, the proportion of American participation in Latvian imports has not thus decreased, but even increased, namely, the American share in the total of Latvian imports shows 3.5% for 1931 and 3.7% for 1932. Also in 1933 the foreign exchange permits for transfers to the United States have remained approximately in the same proportion.

That no discriminatory practices have been applied to American trade in this country is to be seen also from the attached list showing the amount of American goods which the Commission Regulating Imports has authorised to be imported into Latvia during the 3rd and 4th quarter of 1932.

Up to now the value of American goods coming to Latvia by far exceeds the amount of Latvian goods that go to the American market. In the last twelve years the adverse trade balance of Latvia with the United States is approximately 85, 3 million Lats, which is not an insignificant sum counting Latvia’s turnover. Besides, consideration must also be given to the fact that a considerable quantity of American products reach Latvia indirectly by transit over other countries (Denmark, Germany, etc.).

In view of these facts the Ministry of Foreign Affairs cannot concur in the conclusion made by the American Minister that American interests are not recognised.

It may also be noted in this connection that disregarding the acute depression existing in 1932 Latvia has paid America for goods and other transactions the sum of Lats 3,744,369.61 but has actually imported goods valued at Lats 3,164,000.

With reference to the articles appearing in the press and the discussions by various organisations regarding the necessity of adapting new principles in foreign trade policy, the Latvian Government cannot [Page 611] be held responsible for originating the principle of reciprocity in foreign trade relations or for recommending to purchase more of the necessary import goods in those countries to which Latvian products go. As the American Minister may be aware, such policy was and is proposed in the first place by some of those great countries in Europe to which Latvian exports find their outlet. It is natural that Latvia cannot disregard totally these tendencies, having to safeguard her vital export trade interests. Latvia would, however, be highly content if the United States Government would exert its enormous influence and induce the greater powers to abandon this policy and to recognise and apply in practice the most favored nation principle without any restriction.

Latvia having no other means of paying for imports than its export goods, an increase of American imports in this country during the period of depression can be brought about only by an increase of Latvian exports to the United States, and the Latvian authorities would highly appreciate such possibilities.

Finally, it may be observed that Mr. K. Kacens, referred to in the American Minister’s note of March 9th, is neither a director of the Department of Trade and Industry of the Ministry of Finance, nor a member of the Commission regulating imports.—

[Enclosure 2]

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

No. 176

The American Minister has the honor to acknowledge the receipt of a Note from His Excellency, the Minister for Foreign Affairs, dated April 20th, 1933, (610.63/33—8740), respecting difficulties encountered by intending importers of American goods as contrasted with the facilities enjoyed by importers of goods of non-American origin. Mr. Salnais mentions, especially, Notes from this Legation dated January 23rd and March 9th, 1933, but omits to comment upon Mr. Skinner’s preceding discussions with Mr. Zarins which gave rise to the Notes, and, in the course of which the situation was more particularly described and many instances were given to the Ministry of discrimination against American goods. Many additional cases could be given, except that the intending importers have supplied the data in confidence, for various reasons. Even at this moment Mr. Skinner has before him an application for an import license, signed by a Riga firm, in which a request was made for permission to import . . . . . kilograms of a certain article from the United States, . . . . . kilograms from Great Britain, and . . . . . from [Page 612] Canada, upon which favorable action was taken with respect to goods from Great Britain, alone. Mr. Skinner has before him still another application for the right to import identical quantities of goods of a certain kind from the United States and Great Britain, upon which the proper authority took favorable action respecting the British goods, alone. It would be unprofitable to multiply these examples, especially as Mr. Skinner does not understand that the facts are questioned.

Mr. Skinner comprehends sympathetically the troubles with which the Government is laboring, and which do not greatly differ from those with which many governments are struggling at this time. He has no desire to offer ill-considered criticism, and would be glad, indeed, to assist the Latvian Government in any proper way. This said, he must point out to Mr. Salnais, as he did also to his predecessor, Mr. Zarins, that the complaints of discrimination are not “unfounded” but are substantial and arise from the unconcealed policy of the administrative authorities to force buying orders for goods away from the United States on account of exchange conditions. Importers who previously obtained all their supplies from the United States have been compelled to find substitute goods elsewhere. The good-will built up after many years of effort is being gradually undermined, and, unless a remedy can be provided, the damage to American trading interests in this market will be permanent rather than transitory. Mr. Skinner desires to point out that the question is not whether more or less goods are received from the United States than are exported to the United States from Latvia, but whether or not treaty rights are respected. The Latvian Government has assumed the obligation to extend to importers from the United States “most favored nation” privileges, and it has furthermore guaranteed that any advantage extended to the goods of any other foreign governments “shall simultaneously and unconditionally, without request and without compensation” be extended to goods from the United States. Mr. Skinner is confident that Mr. Salnais will agree that these rights are now withheld, and must therefore request that the practices complained of be abandoned and that full treaty rights be restored.

The object which the Latvian Government obviously has in mind, namely that of the preservation of its exchange balance, can be attained without penalizing importers of American goods. It is not sufficient, in explanation of refusals to license American goods, that dollar exchange is not immediately available with which to pay for them. It is quite possible, when dollar exchange is unavailable, to authorize importers of American goods to acquire exchange on other countries which the importers themselves can dispose of for dollar exchange.

Mr. Skinner has pleasure in assuring Mr. Salnais that the United States Government is doing its utmost to bring about the abandonment [Page 613] of the various restrictions upon trade which are causing so many inconveniences at the present time. Nor has it failed at any moment to do its own part in maintaining constantly an open door policy in the United States, as a consequence of which the goods of all countries are received on equal terms; nor has the Government of the United States at any moment failed to recognize all treaty rights of every description. It is quite true that the Latvian Government did not invent the restrictive policies which so generally prevail and from which the most certain mode of escape is by a return to obligations imposed by treaty, and, in so far as limitations upon imports are necessary, to so impose them that they shall fall upon all countries alike, whereupon none can complain and the vicious circle by which trade is now confined may be broken.

In conclusion, Mr. Skinner must re-state that his Government, having steadfastly maintained all of its obligations under the treaty with Latvia and with the friendliest disposition for the Latvian Nation, naturally expects the same treatment from the Government of this country.

  1. The list annexed to the enclosure has not been copied, being irrelevant. [Footnote in the original.]