611.60F31/119a

The Department of State to the Czechoslovak Legation

Aide-Mémoire

Pursuant to the request of the Minister of Czechoslovakia for an indication of the views of the American Government as to the possibility of placing the commercial relations between the United States and Czechoslovakia on a more stable basis by substituting a commercial agreement of longer duration for the exchange of notes of March 29, 1935, which provides for reciprocal unconditional most-favored-nation treatment and is terminable on thirty days’ notice by either party, this subject has been receiving the careful attention of the American Government.

It is a matter of public knowledge that the commercial policy of the United States in its broad lines is based upon the principle of reciprocal and unconditional most-favored-nation treatment. In accordance with this principle the tariff reductions granted by the United States in reciprocal trade agreements concluded with foreign countries are applied to the products of third countries which have agreements with the United States providing for most-favored-nation treatment of [Page 161] their trade, or which in the absence of such agreements do not discriminate against the commerce of the United States. The exchange of notes of March 29, 1935, between the Governments of the United States and of Czechoslovakia gives definite assurance that, as long as this temporary agreement is allowed to remain in force, Czechoslovak products imported into the United States will receive the benefit of all reduced duties proclaimed in connection with the comprehensive trade agreements program upon which the Government of the United States is embarked, the special relations between the United States and Cuba being, of course, excepted.

The provisions of the present agreement are regarded by the Government of the United States as an unsatisfactory permanent basis for its relations with Czechoslovakia for two reasons. In the first place, the reservation regarding preferences to certain Danubian countries is considered to be too comprehensive. In the second place, the United States is not satisfied that the provisions of the present agreement have in fact served to afford the commerce of the United States equality of treatment as compared with that accorded the commerce of other countries.

With respect to the first point, it may be recalled that in the Exchange of Notes of March 29, 1935, the Government of the United States acquiesced on a temporary basis in the extension by Czechoslovakia of certain preferences to these countries in the following terms:

“The United States will not invoke the provisions of the present temporary agreement to obtain the advantages which have been or may be accorded by the Czechoslovak Republic to Austria or Hungary.

“The United States will refrain from invoking the present temporary agreement to obtain advantages which the Czechoslovak Republic is at present according to the commerce of Yugoslavia and Rumania, pending a satisfactory agreement with respect to this matter in connection with a comprehensive trade agreement between the two countries.”

As a result of its examination of this question the Government of the United States considers that its acquiescence in any corresponding exception in an agreement of more permanent character than that provided by the exchange of notes of March 29, 1935, must be conditioned upon the following principles:

1.
That preferential treatment of the trade between Danubian countries, whether this preference takes the form of special tariff rates or relates to the allocation of import quotas or exchange, or consists of any other measure, shall be exclusively applied by means of clearly defined, publicly announced and uniformly administered measures, and shall relate to specified commodities only.
2.
That such preferential treatment as is established under these conditions shall be effected by reduction in existing tariff duties, [Page 162] taxes or restrictions in favor of the trade of Danubian countries and not by the imposition of new or increased duties, taxes or restrictions on the trade of other countries. By restrictions, a reference is here included to such measures as control and allocation of foreign exchange and similar practices.
3.
That the commodities to which special measures of preference of any sort in favor of the trade between Danubian countries may be applied be restricted to those produced in the Danubian countries which on the basis of ascertainable facts are of specific interest to Danubian suppliers to Czechoslovakia.
4.
That before preference is established on any commodity for the trade of Danubian countries, the Czechoslovak Government communicate its intentions with respect to that commodity to the Government of the United States in order that such safeguards may be provided as are found necessary to give due protection to the competitive interest of the United States in the Czechoslovak market.
5.
That the United States regards recognition of inter-Danubian preferences as an emergency policy with no permanent implications.

Such comment as the Czechoslovak Government may offer in regard to the foregoing considerations will be received with interest and will be given careful consideration. In the event the Czechoslovak Government should desire to include some continued measure of exception for preferential treatment of the trade of other Danubian countries in a more permanent commercial agreement with the United States, the Government of the United States would be particularly interested in learning on what products and to which specific Danubian countries the Czechoslovak Government may contemplate the extension of preferential treatment. It may in this connection be pointed out that it would be difficult for the Government of the United States to conclude a more permanent agreement regulating the commercial relations between the United States and Czechoslovakia without being more specifically informed in this respect.

With respect to the second point above mentioned, namely the treatment accorded American commerce under the present agreement as compared with treatment of the commerce of countries outside of the Danubian area, particularly in relation to the special measures of import restriction, exchange allocation, and other methods for the control of trade, the Government of the United States has found itself unable to judge adequately whether the trade of the United States has actually been receiving the treatment contemplated. Accordingly, this Government considers it essential that, before incorporating in a new and more permanent agreement the provisions in the present one, or before attempting to formulate any new provisions in lieu thereof, it be fully informed of the nature and methods of administration of the trade control and exchange control measures at present employed by Czechoslovakia and of any special agreements which [Page 163] may have been entered into by Czechoslovakia with other foreign countries in regard thereto.

The comments which the Czechoslovak Government may desire to make at its early convenience in regard to the foregoing considerations will be awaited with interest.