Memorandum by the Assistant Secretary of State (Sayre)

The Swiss Minister called by appointment to see the Secretary at ten o’clock on October first. The Secretary asked me to be present at the interview. After a few pleasant remarks, the Secretary began [Page 737] by asking the Swiss Minister whether the European countries did not see that they are traveling the pathway of economic suicide and that unless something is done to correct the present trend only disaster can result. The Swiss Minister replied that this is true in theory but that in the world of fact no government felt able, unaided, to prevent that present trend. The Secretary suggested that in spite of the mistakes of the former Administration in its tariff policy this Administration is sincerely anxious to lead the way toward a liberalization of world trade, and that we hoped we could rely on countries like Switzerland to back us up in this effort. This is the reason why we felt so deeply the announcement of the Swiss reduction of quotas on American automobiles for 1935 to half the present quota. The Minister replied that the Swiss Government was only fighting for its life in self-defense and that the quotas were the only way his Government had of fighting its economic battle. He suggested that tariffs would not prevent the country being flooded with imports from such countries as Japan. The Secretary explained to the Minister that for Switzerland to cut in half the American quota just on the eve of pending negotiations for a trade agreement put the United States in an impossible situation, since it could not succeed in its program of tariff negotiations with other countries if it allowed trade restrictions to be imposed just on the eve of trade negotiations. Padding tariffs and imposing quotas for bargaining purposes can not but result in heightened rather than in lowered trade obstacles.

At this point, the Secretary found it necessary to leave to attend the press conference, and the Swiss Minister asked if he might talk the matter over further with me. I of course said I should be very glad to do so. We then withdrew to my office when [where] the Swiss Minister and I had a very frank talk together. He asked me what it would be possible, under the present circumstances, for the Swiss Government to do. I replied that I did not feel that I could make suggestions to his Government. I explained to him, however, that I hoped he would understand that it was not a feeling of resentment on the part of our Government which prevented going forward with negotiations. I explained to him that once countries began to pad tariffs and cut quotas on the eve of negotiations our whole trade agreements program must end in failure, that padding was the dagger which would strike at the whole heart of our program, and that if other countries once saw that we were willing to negotiate with a country which had just padded its tariffs or reduced quotas on the eve of negotiations, every country would do the same and there would be an end of all hope, for our liberalizing program. I explained to him that this Government is very sincerely anxious to liberalize foreign trade, as I suggested [Page 738] Switzerland must be also, and that whatever made such a program impossible would be against the ultimate best interests of his Government as well as my own. I therefore suggested that if the Swiss Government insists upon the American automobile quota being cut in 1935 I did not see how it was possible for us to go forward with a trade agreement with Switzerland at this time. When he asked again “how can we possibly correct the situation”, I suggested that, although I could make no proposals to his Government nor was I in a position to make any commitments of any kind without consulting the Secretary, nevertheless he might see fit to recommend to his Government the withdrawal of the announcement of the cut in the 1935 quota and substitute in place thereof an announcement to the effect that since it was hoped in the near future to open trade negotiations with the United States the present quota for automobiles should remain, during say the first six months of 1935, unchanged; i. e., 25 percent of the 1932 quota would be allowed from January 1 to June 30, 1935, and that no announcement as to further quotas could be made until the Government knew what the trade picture would look like later on. I said that if the Swiss Government made some proposal of this kind we would at once give it study and serious consideration. I was careful, however, in no way to commit myself as to what the outcome of such study would be. The Minister replied that he would at once cable this recommendation to his Government as coming from him himself.

The Minister next brought up the question of where the negotiations should take place. He said that it seemed impossible to carry them forward in Washington inasmuch as the experts at the disposal of his Government were so deeply occupied already at Berne that it would be impossible to spare them to send them to Washington. He further said that there was no one in this country who could carry on the contemplated negotiations and he therefore hoped that it would be possible to conduct the negotiations at Berne. I replied that I should be glad to consider this matter and that, although until further consideration no reply could be given him, I could at least assure him that the question of where the negotiations should be held would not be a sufficiently serious problem alone to block the negotiations.

The Minister next asked me how soon we could begin negotiations if the present difficulties were straightened out. I replied that we had hoped that Switzerland would be among the first of the countries with which we would negotiate but that due to her recent action we had had to allow her place in the schedule to be taken by another country, and that now the time of our experts was so filled up that I could not promise that Swiss negotiations could be taken up until the work on some of the other countries had further progressed.

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At the completion of the interview the Minister expressed himself as understanding entirely our position and said that he would at once cable to his Government the recommendation suggested above.

F. B. Sayre