Foreign Relations of the United States Diplomatic Papers, 1935, The British Commonwealth; Europe, Volume II

660i.116/26

The Minister in Estonia (MacMurray)⁹ to the Secretary of State

[Extracts]

No. 611

Riga, January 31, 1935.
[Received February 14.]

Sir: I have the honor to recall that, in the Department’s mail instruction (No. 21) of December 12 last to the Legation at Tallinn,¹⁰ the Chargé d’Affaires was directed to make certain representations to the Estonian Government on the subject of discriminations against American trade: and that a copy of that instruction was enclosed in the Department’s No. 105 of December 12 to this Legation,¹¹ advising me that I would be further instructed with a view to my making supplementary representations on the occasion of the visit to Tallinn which I am to make in the latter part of February. The Chargé d’Affaires, Mr. Carlson, has meanwhile acted upon the instructions referred to above, and in a letter dated January 3 (of which I enclose a copy herewith)¹² he has made a preliminary report to me upon the way in which his representations were received by the Estonian authorities.

I have further to refer to the Department’s telegram (No. 55) of December 5, 5 p.m.,¹³ directing this Legation to prepare a report on such discriminations in Latvia, similar to that which the Consul in Tallinn had made, in regard to Estonia, in his No. 43 of October 6.¹⁴ The report thus called for is in preparation, and will, it is hoped, be ready in the near future.¹⁵

From the instructions cited above, it appears that it is the intention of the Department to urge strongly upon the Government of Estonia, and also that of Latvia, its remonstrances against such comparative disadvantages as may be imposed upon American trade in the two countries. And if, upon considering the present despatch and such further reports as are shortly to be made by this Legation and that at Tallinn, the Department still considers that such protests are expedient and desirable, I shall of course consider it my duty to carry out in both capitals, to the best of my ability, the Department’s policy in that respect. I acknowledge, however, that I should do so not only in the conviction that the contemplated protests would prove substantially unavailing, but with very grave doubts whether they would not in fact prove prejudicial to the trade interests which we are seeking to further.

Being considerably perturbed by the problems which the Department’s instructions suggest, I felt it advisable to call Mr. Carlson into consultation, together with Mr. Hodgdon, Consul at Riga, and Mr. Abbott, Third Secretary of this Legation. I accordingly directed Mr. Carlson to come to Riga for the week-end of January 20, and on the 21st discussed the matter fully with him and with the other officers referred to. The following comments fairly represent, I believe, the views in which we all found ourselves spontaneously and whole-heartedly agreed.

As regards the possible effectiveness of such protests, I would point out that the burden of proof lies upon us; and that we are not actually in a position to establish concretely a basis for our complaints. It is not that I or the other interested officers in our Legations and Consulates in the two countries are, in our own minds, doubtful of the existence of some degree of discrimination (on however trivial a scale) against American goods: we are, on the contrary, all convinced that in both countries our trade labors under disadvantages as compared with that of Great Britain, in the first place, and of Germany, in the second. For we are familiar with the strong economic pressure which impels both Latvian and Estonian authorities to favor giving the largest possible share of their import trade to the countries on which they are dependent for the marketing of their own exports; we are aware of the very intricate and exacting mechanisms of tariffs, quotas, import licenses, and exchange regulations, which afford unlimited opportunity for manipulations by which any administrative preference can be clandestinely made effective … I venture to submit that for one government to urge upon the consideration of another a complaint which it is not in a position to substantiate is to risk rebuff and a loss of confidence, good will and influence, as well as failure in the immediate purpose.

So much relates to the formal difficulties of presenting the matter effectively; but there are inherent in the situation of these Baltic countries fundamental elements from which, under present conditions of world trade, there inevitably result tendencies favoring certain other countries, to our disadvantage. These newly-independent nations have neither the population, the territory, the natural resources, nor the geographical position, to furnish the basis for their creating (individually or collectively) any considerable industrial or mercantile development. For their mere subsistence, they are dependent wholly upon agriculture; and for the maintenance of any decent modern standard of livelihood they are dependent upon the possibility of exporting a sufficient quantity of the very limited range of agricultural produce that can be raised in their northern situation. They have, in fact, virtually nothing to live by, except the export of forest products, butter, bacon, and flax: but these things, produced in over-abundance, can avail them only as there are markets to buy them. And all the neighboring countries offer the same products in similar overabundance. The only takers, roughly speaking, are the United Kingdom and (in a more limited degree) Germany. But not only is the British market importuned by all the producers of Eastern Europe; its Government is harassed by the demands of the British dominions for preferential treatment of their similar products, and has furthermore embarked upon a policy of making home agriculture more nearly self-supporting. With Germany, Latvia has had to adopt clearing arrangements, with the resultant necessity of maintaining a bilaterally balanced interchange.

. . . . . . . . . . . . . .

By our complaint in Tallinn (which is of course in close relationship with Riga) we have already raised questions which, I fear, will plague us so long as international trade continues to be overshadowed by the tendency towards bilateral balancing. But the question immediately before us is whether, in the phase of the matter now reached, we should proceed to force an issue as to such discrimination as exists against our trade. And my own judgment is that it would be ill-advised to do so. I would urge, therefore, that unless the discriminations should take a more tangible form, or unless a more opportune conjuncture should present itself, we content ourselves with merely a friendly notice that we could not assent in principle or in practice to an interpretation by which the clause regarding the encouragement and promotion of British trade, in the Anglo-Latvian and Anglo-Estonian Trade Agreements,¹⁶ would have the effect of impairing our right to favored-nation treatment. And I have no doubt that, in both countries, it would be possible to obtain such reassurance as we could find in statements that the authorities intend no discrimination against us, will investigate the possibility of its existence, and will do whatever may be necessary to guard against it. I should not, however, feel that I had fulfilled my responsibilities if I were merely to obtain and report such assurances to the Department, leaving it to be inferred that they constituted a satisfactory response to our complaints. For they would, almost of necessity, be scarcely more than nominal; and the basic disadvantageous circumstances would remain at least substantially unchanged. But while realizing that fact, I nevertheless feel that such merely formal reassurance is all that we are in a position to seek without a serious risk of bringing on developments more harmful to our present interests, and to our international trade policies, than the rather trivially disadvantageous conditions now existing.

I accordingly venture to request that the Department review the matter in the light of these comments, and instruct me further as to its views and intentions after such a reconsideration of the various elements involved.

Since the preparation of this despatch, I have received from Mr. Carlson, and take occasion to enclose herewith, a copy of the memorandum, dated January 23,¹⁷ in which the Estonian Foreign Office replied to the representations which he had embodied in his memorandum of the 3rd instant,¹⁸ in pursuance of the instructions contained in the Department’s No. 21 of December 12 last.

Respectfully yours,

J. V. A. MacMurray

9. The Minister was accredited to Estonia, Latvia, and Lithuania, with residence at Riga.
10. Foreign Relations, 1934, vol. ii, p. 131.
11. Not printed.
12. Not printed. For the Chargé’s report on his representations, see his despatch No. 283 (Diplomatic), January 29, supra.
13. Foreign Relations, 1934, vol. ii, p. 616.
14. Ibid., p. 130.
15. See despatch No. 645, March 14, from the Chargé in Latvia, p. 552.
16. For text of the trade agreement between Great Britain and Latvia, signed at London July 17, 1934, see League of Nations Treaty Series, vol. cliv, p. 25; and between Great Britain and Estonia, signed at London July 11, 1934, ibid., vol. clii, p. 131.
17. Not printed.
18. Not printed; but see despatch No. 283 (Diplomatic), January 29, from the Chargé in Estonia, p. 179.