811.114 Great Britain/420
Memorandum by the Under Secretary of State (Phillips)
At Secretary Morgenthau’s7 request, I attended a meeting in his office this morning, together with a number of Treasury officials.
It appears that an incipient rum row fleet is again appearing on the horizon and, from all accounts, will rapidly expand. Due to the high cost of legal liquor, the bootleggers have the field entirely to themselves, so much so that no legal liquor is now passing the Canadian border into the United States. Saint Pierre is the rendezvous for the smuggling business; already some 14 to 20 ships, almost exclusively under the British flag, are now operating from these headquarters. The liquor in question comes largely from Cuba and the West Indies and is of a very cheap quality.
Mr. Morgenthau expressed the hope that, in some way, the British Government could be persuaded to stop this abuse and pointed out that, should the situation be reversed and American smuggling ships appeared off the British coast, he felt certain we should hear promptly from the British through British official sources. I expressed doubt whether we could get the British Government to take any definite action and that, after all, the protection of our own frontiers was a matter for ourselves. I asked whether Mr. Morgenthau was convinced that we had gone the limit in using our own resources to prevent smuggling. Mr. Morgenthau readily admitted that we had not yet done so. I ventured the remark that possibly the Canadian liquor producers might be decidedly interested in the situation, in view of the fact that their legal trade with the United States had been taken from them by smugglers operating under the British flag; if that were so I did not see why they could not bring pressure to bear upon the Canadian Government and upon Mr. Bennett personally, in order that he, in turn, might make direct representations to the British Government. I added that the Canadian Prime Minister was in an advantageous position to deal with the British Government in such matters and that, according to my understanding, he was shortly going to London. Mr. Morgenthau said that he was going to see a representative of the Canadian producers and would put before him this suggestion.
The advisability of having a Vice Consul at Saint Pierre was discussed. Secretary Morgenthau was most anxious to have this done. His thought was backed by most of those present. I said that I would [Page 396] gladly look into the possibilities of this, but that it might be deemed more practicable to send to Saint Pierre some other kind of an agent,—that a Vice Consul would perhaps be too conspicuous a person for the work in hand.8
After the meeting Mr. Morgenthau told me personally that he was waiting further information and that it would be best to delay any action at the present time of sending anyone to Saint Pierre until he had communicated with me again.
P. S. During the conversation I asked whether, in the opinion of the gentlemen present, a 50% reduction in the tariff on Canadian liquors would be of help, in which case the Department would study the problem carefully to see whether this could be carried out promptly. Mr. Morgenthau replied that a 50% reduction would not meet the problem facing the Treasury, inasmuch as bootleg liquor was so cheap that it would still be able to undersell liquor legally imported even with a 50% reduction in tariff. Everyone present seemed to agree to this statement of Mr. Morgenthau.