611.5831/195

Memorandum by the Chief of the Division of Western European Affairs (Moffat)

The Swedish note of October 11, 1934, is exceedingly discouraging and, it appears to us, discloses a shortsighted inclination on the part of Sweden to attempt to take advantage of her present relatively satisfactory trade position with the United States. We do not have before us full figures showing the proportion of all Swedish imports which enter the United States free of duty but we do know that the three products covered by our note of last January, newsprint paper, sulphate and sulphite woodpulp, last year accounted for 83 percent of the total value of Swedish exports to the United States, against a Swedish free list for American imports of approximately 41 percent.

Sweden’s trade has suffered less from the depression than has ours. Our exports to Sweden have declined from $42,000,000 in 1923 to $18,000,000 in 1933, a drop of roughly 59 percent; Sweden’s exports to the United States on the other hand have decreased from $36,000,000 in 1923 to $31,000,000 last year, a decrease of only 14 percent. It is, therefore, clear that it would be relatively much more to the advantage of Sweden than to the United States to discuss “stabilization” of trade at anything approximating the present level. We have been hounded by a large number of countries who resent their adverse trade balance with the United States. Sweden is one of the few countries which exports more to the United States than it buys from us and while we do not advocate using on Sweden the unsound arguments which have been advanced to us by certain other countries we do not believe [Page 726]that we should lose sight of our good bargaining position. To Sweden’s argument that they are a relatively low tariff country (which is true) we can reply that their low tariffs have not prevented a decline in our exports of 59 percent in the last ten years and that our treatment of their commerce has held to a very low figure their own decline in this market in the same period.

It would be dangerous to assume that the position taken in the Swedish note represents anything like their final position. The fact that Sweden is a low tariff country did not prevent her negotiating a treaty last year with Great Britain20 involving a (long) list of tariff reductions on both sides. In the Swedish Committee we have been working for some time on possible concessions to Sweden and we have already agreed on recommendations for reductions in duty on a considerable number of products. It is true that these products do not represent a large amount of trade in comparison with their shipments of paper and pulp but it seems to me clear that the reductions if made would materially expand their exports. We did not ask for many tariff reductions of Sweden. To be exact we asked for fifteen. We believe that if Sweden enters the negotiations in the right spirit we can make it worth her while to grant these reductions. In certain cases, we might be willing to acquiesce in smaller reductions in duty than those which we requested in our note of last January.

To agree to meet the Swedish wishes as set forth in their note of October 11th in a trade agreement would, in our opinion, be a serious mistake. It would involve our sacrificing one of the few favorable bargaining positions which we occupy. It would be a grave disappointment to those people in the United States who expect our trade agreement program to be used as a means not of achieving a tariff truce but of making real inroads on trade barriers. We believe that we would subject ourselves to a considerable amount of adverse criticism, and perhaps ridicule, in this country if we negotiated a trade agreement with Sweden along these lines. We believe that it would be good policy for us to make further attempts to get the Swedes to enter the negotiations in the same spirit in which we are approaching them. If we are unable to do this and the Swedes still feel that it is important to give some reassurance to the trading public in both countries that the present position will not be disturbed then we suggest that we propose to the Swedes that we give such assurance not by a form of trade agreement but by an exchange of notes, these notes would be linked with an assertion that pending the conclusion of a comprehensive trade agreement involving real reductions [Page 727]on both sides, we were giving one another reciprocal assurances respecting present rates. We believe that such an exchange has a very definite psychological advantage over any sort of limited trade agreement. It moreover leaves us in a position of greater freedom with regard to termination since Sweden if she obtains practically all she wants in a limited trade agreement covering a fixed period would not be particularly keen on further negotiations to improve our position.

The Swedes have never given us an answer to our statement of our desiderata which we submitted last January. If they have prepared a reply incorporating their desiderata as an annex to a draft treaty, and a statement of what they would do for us as another annex, it seems to us that we should in all fairness agree to receive these documents, making it clear to the Swedes that we by no means share their philosophy nor commit ourselves to go forward with the negotiations but that we merely suspend judgment of our final reply until we see what they actually have to offer.

In line with our efforts to get the Swedes to approach these negotiations in a different spirit we believe that it might be helpful for us after further exchanges of views with the Swedes to send a frank telegram to Mr. Steinhardt at Stockholm stating our problem and asking his assistance in finding out the precise position of Sweden and her real objectives.

Pierrepont Moffat
  1. League of Nations Treaty Series, vol. cxl, p. 317.