The Minister in Portugal (Caldwell) to the Secretary of State

No. 73

Sir: Referring to my Despatch No. 70 of October 26, 1933,28 I have the honor to report that I had an interview today with the Prime Minister, Dr. Oliveira Salazar, who gave me the impression of keen intelligence and immense energy.

Dr. Salazar said that he was greatly interested in the efforts which were being made by President Roosevelt in America to overcome the difficulties of the crisis, but that he had been very much disappointed to read in the newspapers recently that no immediate steps were to be taken to stabilize the dollar on a definite basis. By this remark I took him to be referring to the gold standard. He went on to say that in former times, commercial rivalry between nations had taken the form of tariff wars; that today the same rivalry seemed to be expressed in constant changes in the standard of value. He said that the two great currencies of the world were the dollar and the pound and a contest between these two currencies, to see which one could stay below the other, would be in his judgment more ruinous to international trade than a serious tariff war.

In reply to the observations of Dr. Salazar, I merely remarked that, so far as I understood the matter, the devaluation of the dollar had been motivated not by the external relations of the United States nor by its commerce, but by the immense difficulties in which all Americans found themselves on account of the huge volume of internal debts which had to be paid on a basis of low prices.

As Dr. Salazar gave me the opportunity to do so, I raised the question of flag discrimination which I had discussed with the Foreign Minister, Thursday, taking the matter up entirely from the point of view of its economic consequences. I said in this connection to Dr. Salazar that when flag discrimination was once given up, as it seemed to be under the agreement of October 14, for a great maritime nation like England, the possible benefits to Portuguese shipping of continuing the policy for other nations seemed negligible. Injury to a few lines of American ships under continued flag discrimination, defeat of any [Page 655] growing purpose for closer commercial relations between the United States and Portugal and her colonies, seemed to me to be the only possible results of the policy which appeared to be indicated. All this would be, at the present moment, a great pity.

Dr. Salazar replied that he agreed substantially with what I had said, and that for that reason he was thinking of the new agreement between England and Portugal as merely a first step; that he felt very certain that long before the treaty with England went into final effect for the colonies on July 1, 1936, a commercial agreement with the United States would make possible the same advantages which had already been promised to British ships.

The approach to the problem along economic lines with Dr. Salazar seemed to me to be more effective and useful than any discussion of the purely legal and technical phases of the problem under the most favored nation agreement of 1910.

Again, as in my talk of October 26 with the Foreign Minister, Dr. Caeiro da Mata, I gained the very definite impression that, both with the Foreign Minister and with the Prime Minister, the question of flag discrimination is at the present time entirely secondary and incidental to the negotiation of commercial treaties with the United States, France and other countries. From the Portuguese point of view, the first condition of such treaties would be an ample protection to the regional marks of Portuguese wines.

Respectfully yours,

R. G. Caldwell
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