Foreign Relations of the United States Diplomatic Papers, 1934, General, the British Commonwealth, Volume I

840.515 Gold Bloc/21

The Director of the Economic Relations Section of the League of Nations ( Stoppani ) to the Economic Adviser, Department of State ( Feis )¹

Geneva , 28 August, 1934.

Dear Feis: I very much regretted indeed to have been unable to meet you during your holiday in Europe. I should also have relished very much the chance of discussing with you the recent developments in commercial policy, both American and European.

I gather from your letter of August 21st that you are particularly interested in the meaning and consequence of the network of clearing, compensation and other very specialised commercial agreements which are being done almost daily between the countries of the Continent. I think it is very difficult to discover any general line in this intricate mass of individual actions which are merely prompted by urgent and daily necessities. Some of course maintain that we are in presence of a new commercial policy which is likely to remain in force and to be developed in the future. Personally I don’t believe very much in it, although this might be true as to certain particular problems. In my opinion these arrangements, which hardly deserve the name of treaties, are merely concluded under the pressure of circumstances. They are to be attributed mainly to two principal causes, i. e. the monetary depreciation and the monetary and financial difficulties, the second taking the form of “devisen control”. Very often these cause …² is exploited by the interests concerned. But it is certainly to these two facts that one must look in order to find the starting point of these specialised agreements. There is of course a difference between clearing agreements and compensation agreements. The first is generally made in order to obtain total or partial payment of sums due to the citizens of State A by giving State B the possibility of exporting certain quantities of goods. The second is merely the exchange of certain quantities of a given category of goods against a corresponding quantity of another. But of course the two things generally go together and they prevail particularly whenever the difficulty of “devisen control” or the difficulty of payment exists. Clearing and compensation offices have been established and regular technique has been developed for their execution. The policy of quotas which is applied by most European States makes of course this sort of agreements the more necessary as they allow of overcoming the obstacle of quotas by ensuring to both parties a certain advantage. No sensible person can of course doubt that the sort of momentary and reciprocal equilibrium obtained by these arrangements can only be obtained by a further depression in international trade, even among two given countries. It is the suppression of the surpluses. Everybody seems to know that, but no particular country can, even [if] it were willing to, change the trend of things. We have been studying and following these developments so far as we could, but it is impossible for us to know in detail the exact working of these agreements, whose execution becomes a current and daily business of the Administration.

I do not think that much would be gained if all these different applications were published and it would hardly be possible.

I am sending you under separate cover a few documents (see list attached)³ of a merely informative character. The Economic Committee in its last session, held in July, and at which Mr. Thorp,⁴ of the American Administration was present, has decided to go more thoroughly into the study of these so-called new methods of commercial policy. Besides, I understand that the French Government will raise this question at the Second Commission of the coming Assembly of the League of Nations which begins on September 10th. The discussion will certainly be interesting and we will certainly be asked to study the problem further, which we will be able to do pretty well since we can count upon the collaboration of the inventors and masters of this system such as the French, the Italians, the Dutch, the Swiss, the Austrians, etc.

I shall not fail to let you have anything that comes out of the discussion, and of our work. To make a long tale short, I personally believe that the time will have to come when some sort of international action will try to reestablish, with the help of an intelligent international collaboration, such monetary situations, particularly in the European countries, as will allow of placing their common trade on a different footing. A considerable movement is growing, even in the most protectionist countries such as France and Switzerland. Of course there is to be feared particularly in the case of Germany—who would participate both as subject and object of an international reconstruction action (“action d’assainissement”),—that political tendencies will go rather in the direction of further isolation than in the direction of international understanding and collaboration. If so, I really don’t know what will come out of it. It is possible that at the given moment certain groups of countries, who are wanting to come back to sounder conditions in economic life, might begin to consult among themselves. That is why, in a certain note⁵ which I have already sent (made on Mr. Child’s⁶ request), and also in a further note prepared for the Economic Committee (Hors-Série 84), I have put forward—as I shall continue to do—the idea of preliminary conversations between the Governments of the United States, Great Britain, and the five countries of the so-called “gold bloc”.

I am afraid this is about all I can tell you at the present moment. You will of course receive anything that might be of interest for the study of the problem you are concerned with.

With best regards,

Yours sincerely,

P. Stoppani

1. Transmitted to the Economic Adviser by the Vice Consul at Geneva in his letter of August 29.
2. Document mutilated at this point.
3. Not printed.
4. Willard Thorp, American member of the Economic Committee of the League of Nations.
5. Not found in Department files.
6. Probably Richard Washburn Child, Special Adviser to the Secretary of State in his capacity as Chairman of the American delegation to the London Economic Conference.