The Ambassador in France (Straus) to the Secretary of State
[Received November 17.]
Sir: I have the honor to refer to the Embassy’s despatch No. 668 of February 28, 1934,73 and previous correspondence concerning the efforts, which were finally successful, to secure a share in French imports of nitrate for the past season. As the Department will have learned from my telegram No. 828 of November 8, 1 p.m., 1934,73 as the time arrives for the partition of licenses for the current season the [Page 211]United States again finds itself threatened with being shut out of the nitrate market here.
The present situation is sketched in a memorandum of a conversation of November 6 between an officer of the Embassy and M. Baudier of the Ministry for Foreign Affairs, and in a memorandum prepared on November 7 by the Assistant Commercial Attaché.74 It may be remarked concerning the first memorandum that the visit to M. Baudier was a pro forma one made not with any expectation of concrete results but with the purpose of checking on the attitude of the Ministry for Foreign Affairs on the subject. No satisfaction has ever been obtained from M. Baudier with regard to nitrate problems, his attitude being consistently one of vagueness and courteous obstruction. However, he is an official who cannot be ignored since he evidently has a considerable voice in general policies as concerns foreign purchases of nitrate. The sources of information quoted by the Assistant Commercial Attaché confirm certain of the statements made by M. Baudier and at the same time throw into relief certain factors omitted by him. It is believed that the latter memorandum accurately reflects the situation.
As may be observed, the chances of obtaining for the United States an allocation of nitrate licenses for the present season are less than in the past and will doubtless become increasingly so in future years. It may be remembered that in the instance of the past season an American share was obtained only by virtue of Germany having passed on to the United States a portion of its allotment. Obviously, American producers should not be dependent on arrangements with third countries. The Embassy is convinced that arguments advanced to the French based on maintenance of the “open door” will not prove effective. If time were not such an essential element it would seem expedient to obtain the necessary guarantee of annual American participation through the introduction of an appropriate provision in the ultimate commercial treaty with France.75 Such not being practicable before the allocation of this season’s licenses, other means must be sought.
The only practical procedure to this end, short of the granting of a quid pro quo, would appear to the Embassy and Commercial Attaché to lie in insisting upon rights given the United States by the terms of the Franco-American quota agreement of May 31, 1932.76 Paragraph A of the agreement provides for most-favored-nation treatment as regards quotas and restrictions. The French would doubtless respond, with accuracy, that there is no quota on nitrate. However, the nitrate [Page 212]regime would seem plainly to fall under “restrictions on importations” and so to be covered by the agreement.
Furthermore, according to the provisions of paragraph B it is agreed that the quota on a product, the importation of which from the United States was inferior to 10% of total imports from all countries in 1931, shall be fixed at the level of imports from the United States in 1931—this provision not to apply to quotas affecting agricultural or fishery products. If we insist on the putting into force of this clause as regards nitrate we should be entitled annually to licenses for 21,659 metric tons, the French figure for imports of nitrate from the United States in 1931.
Endeavoring to anticipate the reaction of the French Government to a claim put forward on this basis, it might be replied by it, first, that despite the inclusion of the phrase “import restrictions” in paragraph A, in actual fact only the word “quota” is employed in paragraph B and that, as previously stated, there is no quota on nitrate. We, on the other hand, could of course maintain that “restrictions on importations” is included by inference in paragraph B. Further, the French Government might argue that it is stipulated that the provisions of paragraph B do not apply to quotas affecting agricultural products and that nitrate is used for agricultural purposes. This argument would appear specious as, regardless of the use made thereof, nitrate is certainly an industrial and not an agricultural product and is used for industrial purposes as well as agricultural. Finally, the Government might maintain that there is a difference between natural and synthetic nitrate, that this season’s imports will be largely of natural nitrate and that American shipments in 1931 were in the main synthetic. The answer to this seems to be that the French tariff schedule fails to differentiate between the natural and synthetic product so that it would be inconsistent to do so for licensing purposes. The French Government may likewise assert that the allocations to be given Chile and Norway are made in pursuance to agreements affording France a quid pro quo.
The Embassy cites in some detail the obstacles which possibly would be encountered in basing the American position regarding nitrates on the guarantees contained in the quota agreement, since it is only fair to state that the French Government would probably not easily yield to representations predicated on the 1932 understanding. On the other hand no other recourse seems to remain to the United States for securing an assured annual share in nitrate imports.
I should appreciate it if the Department would give careful study to the wisdom of insisting on an annual allocation of 21,659 tons of nitrate in virtue of the provisions of the quota agreement. This figure, [Page 213]although only half of that finally obtained last season and but a quarter of that for the previous season, is more than the American trade can reasonably expect to gain in future years under a continuation of the licensing system if protection is not accorded. If the Department has any other and more advantageous procedure to suggest it would be welcomed. I should appreciate a telegraphic reply to the present despatch.
It would seem to me well, in view of the probability that the French Government may shortly again approach the Department with regard to the initiation of commercial treaty negotiations, if the Department would invite the attention of M. de Laboulaye to the nitrate situation with a view to the Ambassador’s communicating the Department’s observations to his Government. Obviously any action taken by the French Government in further restriction of free trade between the two countries could not but be prejudicial to the pending negotiations.