611.60F31/112
The Minister in Czechoslovakia (Wright) to the Secretary of State
[Received October 22.]
Sir: Pursuant to the Department’s confidential telegraphic instruction No. 20, September 17, 12 noon, I have the honor to transmit herewith an exhaustive report27 upon the operation of the temporary agreement with the Government of Czechoslovakia of March 29, 1935, which has been prepared by the Commercial Attaché after detailed discussion with me of each of the points therein advanced, as well as of the value of the statements made or information obtainable concerning allegations of discrimination.
It will be seen that whether by reason of fortuitous coincidence of other factors or, perhaps, in anticipation of the increasing tendency of reputable authorities of this country to endorse the principles underlying your Trade Agreement policy—which I have reported in previous despatches, especially my No. 279 of September 16, 193527—Czechoslovak trade to the United States has materially increased within the last six months, while, on the other hand, certain American products are receiving more favorable treatment in Czechoslovakia at the present. A general statement of these facts, while supported by the valuable study of the situation made by the Commercial Attaché, is neither adequate nor sufficiently detailed to answer satisfactorily the Department’s specific inquiries; therefore the accompanying report should be considered as the principal reply to the Department’s instruction.
The answer to the question whether the terms of the existing Modus Vivendi have in fact been lived up to by the Czechoslovak Government should fall within the following divisions:
[Page 157]Commerce in commodities obtained from Austria, Hungary, Rumania, and Yugoslavia—relations with which nations were expressly exempted by the Temporary Agreement at the possible expense of American commodities of similar nature—has, in the main, continued in proportion to the ability of these countries to supply them, the degree of Czechoslovak demand, and the limitations imposed by frozen credits. For example, even if the other factors reported in previous despatches had not combined to limit the importation of American lard, the importation of live hogs from countries other than the United States would have continued, regardless of any desire of this Government to fulfill the spirit of the Agreement or of certain consumers to obtain American products. That is to say, the price of American lard has recently been too high and the competition of products from exempted countries, as well as that arising from domestic production and the increasing quantity of substitute products, has worked against American interests to a degree and in such a manner as to preclude any justifiable allegation of discrimination with regard to that product.
The commodities which have benefitted and which have not benefitted by the operation of the Agreement, are clearly set forth in the tables embodied in or accompanying the Commercial Attaché’s report.
With regard to specific discriminations practiced against articles of American manufacture it may be said that such discrimination through exchange control as has been practiced against American articles, will be seen from Pages 11 and 14 of the Commercial Attaché’s report to have been in connection with prunes and apples; together with discrimination as regards quality of prunes and differential customs duties as regards apples.
With regard to quotas, it should be borne in mind that in many instances this often abused and misunderstood term refers to an apparent quantitative allocation which is frequently entirely offset by the fact that prohibitive duties render impossible the realization of the quota. This has not been the case, however, in such commodities as lard (see above) and nitrate of soda, for in the first case the total amount imported was reduced by the circumstances to which I have referred, while in the second the percentage of quota allocated to the United States remained the same, but the total was reduced on account of decreased demand and increased local production. In the case of apples, however, the report of the Commercial Attaché will show that apparently flagrant discrimination has been practiced against American apples—both by seasonal arrangements, by curtailment of exchange facilities, and by arbitrary classifications as to methods of packing.
With regard to automobiles, the question of discrimination, while [Page 158] remaining as intangible in many places as it has unfortunately been for some time, is very clearly set forth in the relevant portion of the accompanying report. It cannot be denied, for example, that the figures quoted by Mr. Woods29 show that importations of French cars have, in certain months, exceeded the amount established by the quota, and this cannot be explained upon the ground that quota balances accrue from one month to another, because such facilities have been denied to American automobiles. As in certain months the American quota has been raised, however, we should be prepared to meet the assertion that French cars were accorded the same temporary privilege. The statements made by dealers and other interested parties speak for themselves and, as I have reported in previous despatches, feeling is running higher against the measure of protection which is given to cars of Czech manufacture and the inordinately expensive prices which such cars command. There is no doubt that more pointed criticism will soon be directed against a continuation of this practice, and may achieve results if the statements of the reputable officials to which I have referred can be considered as indicative of the Government’s policy. As an example of this feeling I improved a recent opportunity to ask Mr. Jan Masaryk, son of the President, a direct question on this point: after expressing his opinion that the entire policy of protection and quotas followed by the Government were economically unsound and most unsatisfactory to the consumer, he stated that he had always heard that preferential treatment was accorded to cars of French manufacture but that he had never been able to prove it. Without in any way abusing the opportunity thus afforded, and addressing myself solely to the contention that it would be highly advisable for both countries if this allegation could be denied, proved, or definitely clarified, Mr. Masaryk said that he was completely in accord and would endeavor to investigate the matter further and inform me. His attitude and statement, together with the points advanced in the Commercial Attaché’s report upon this subject, present the most accurate picture of this phase of the situation that it is possible to obtain at this moment. I know of no other way in which this allegation can be proved or disproved than to have the matter flatly and frankly brought up, when and if preliminary discussions for a Trade Agreement take place.
I have taken due note of Czechoslovakia’s interpretation of “equitable and fair treatment” as defined in the note of the Minister of March 29, 1935, and invocation of this interpretation has not as yet seemed necessary.
No difficulty has been encountered in obtaining material for these reports concerning global quotas, because global quotas are applicable, [Page 159] as far as Czechoslovakia is concerned, only to a very small number of commodities—such as rice, lard, butter, eggs and nitrates.
As the enclosed report by the Commercial Attaché has been prepared at my request, pursuant to the Department’s instruction under acknowledgment, he has sent no copies to the Bureau of Foreign and Domestic Commerce. Mr. Woods requests, however, that if no objection be perceived, the Bureau be furnished with such of the accompanying copies as may be available.
Respectfully yours,