. . . . . . . . . . . . . .
On October 8, 1935, during a visit to Tallinn of Mr. Robert F.
Kelley, the Chief of the Division of Eastern European Affairs at the
Department of State, the latter had a conversation with Mr. E.
Wirgo, the Chief of the Foreign Trade Bureau of the Estonian
Ministry for Foreign Affairs, on the subject of Estonia’s desire to
modify its commercial treaty with the United States. During this
conversation it became apparent that it was the wish of the Estonian
Government not to modify the above treaty, but to negotiate a
reciprocal trade treaty with the United States of the kind with [which?] the latter is now concluding with
other countries. There is attached hereto a memorandum36 covering the most
important points touched upon in the above-mentioned
conversation.
While in Tallinn, Mr. Kelley was given to understand that the
Estonian reply to the Legation’s note of September 27, 1935, on the
above subject would be forthcoming almost at once. This did not,
however, prove to be the case, and it was not until today that the
Foreign Office in Tallinn delivered to the Legation the note setting
forth the wishes of the Estonian Government in respect to a new
commercial treaty with the United States.
There is attached hereto a copy of the foregoing note, of which the
original is in the files of the Legation. After having studied this
note the Legation requested from the Foreign Office further
information concerning the following statement which is made in
paragraph (4) of the note:
Inasmuch as the above average seemed to be rather high, the Foreign
Office was requested to explain the manner in which the sum in
question had been reached. As a result the material which is
contained in enclosure No. 437 to the present despatch was handed to the
Legation.
In conclusion it may be pointed out that in accepting the above note,
the writer made the remark that in view of the fairly large number
of treaty proposals which were now under consideration by the
Government of the United States and of the time which would be
required to make the necessary study in Washington of the Estonian
proposal, a response thereto would probably not be forthcoming for
some months. The writer was thereupon advised informally that,
should it not be found possible to come to an understanding on the
subject of the new treaty before May 26, 1936, the date on which the
present treaty is to expire, Estonia might possibly be willing to
give consideration to a proposal foreseeing the prolongation for the
period of one year of the treaty which is now in existence if made
to it by the United States.
[Enclosure—Extracts]
The Chief of the Foreign Trade Department of
the Estonian Ministry of Foreign Affairs (Wirgo) to the American Chargé (Carlson)
791–W
Tallinn, 20 December,
1935.
Sir: The Estonian Government has
carefully studied the memorandum and documents attached thereto,
presented by the American Legation to the Estonian Foreign
Office on September 27, 1935. Highly appreciating the wish of
the United States to see the normalization of international
trade relations, and desiring to contribute as far as possible
to the obtaining of this end, the Estonian Government can,
nevertheless, not be a pioneer in this matter. Estonia would be
prepared to adhere to the principle of equality of opportunity
and treatment, so well expressed in the U. S. A. memorandum, but
unfortunately it would be able to follow this principle to a
full extent in the forming of its policies only in case the
principle is also accepted, if not by all of Europe, then at
least by the countries which hitherto have been the best
customers for Estonia’s produce.…
It is clear that Estonia, whose foreign trade in 1934 formed
0.08% of the total foreign trade of the world, cannot ignore the
wishes of such countries, as are the best buyers of its
products, even though these demands, from the point of view of
the “do ut des” principle, [Page 200] sometimes violate the most-favored-nation
principle. If, however, the U. S. A. would provide greater
facilities for Estonia’s exports and would contribute to a
considerable increase in the purchases of the U. S. A. in
Estonia, the problems of the Estonian–U. S. A. trade would be
solved automatically without Estonia being compelled to give
full consideration to the “do ut des” principle.
2. However, the principle of “equality of opportunity and
treatment” has been of practical importance only in cases where
the customs barriers of the country offering such treatment are
not kept at heights which render the exports to that country
entirely impossible. Should it become evident that Estonia’s
principal export commodities would be subject to prohibitive
tariff rates upon importation into the U. S. A., this kind of
“equality” could not provide a normal basis for the development
of the exchange of commodities. For this reason Estonia can not
leave the question of individual tariff rates out of
consideration in the forthcoming negotiations.
3. With regard to the principle of balanced foreign trade
accounts between two countries, Estonia also deems it advisable
that the principle of bilateral treatment be replaced by that of
a multilateral treatment. The latter principle implies, however,
that it be recognized not only within the limits of relations
between any two countries, but by all countries. Estonia has at
present fairly considerable so-called “frozen sums” tied up in
several countries which unfortunately can not be liquidated in
any other manner, but by artificial directing of imports to such
countries. Before the world crisis, Estonia made use at its own
discretion of all funds credited to it in other countries. It
has now been deprived of this possibility and is compelled to
reckon with the principle of bilateral balancing of trade.
This question is in logical relation with the question of
restrictions in the foreign exchange transactions. Recently it
seemed possible to predict, if not a complete removal, then at
least a considerable alleviation of these restrictions in
Europe. Also in Estonia the restrictions on the foreign exchange
transactions are actually applied far more leniently than was
the case, for example, a year ago. Unfortunately, however, the
general position now obtaining in Europe is different. Several
European countries have this year enforced restrictions, which
reach beyond the requirements of balanced foreign trade accounts
between two countries, by permitting imports from a country only
to the extent of 60% of the exports to that country, while
others which throughout the crisis years and up to the present
have been able to manage without exchange restrictions, have
recently introduced a control over foreign exchange
transactions. This fact further curtails Estonia’s freedom of
action and compels it to consider not theoretical maxims but the
requirements of practical life. All of these circumstances
compel the European countries and at [Page 201] times also Estonia to act in its foreign trade
in a manner which, from the point of view of the purely
most-favored-nation principle, may in certain cases be
interpreted as discrimination. Since, however, this kind of
foreign trade system in Europe has totally deprived Estonia of
freedom of action, it also cannot follow a different policy if
it does not want to completely ruin its economics, and
particularly its export trade. For this reason it is unable to
accept to their full extent any references to
discrimination.
4. As far as the trade between Estonia and the U. S. A. is
concerned, it is known that during the past ten years
(1925–1934) Estonia has paid on the average over ten million
Est. crowns annually more for the goods imported from the U. S.
A. than it has been able to sell to the latter. During the
period from 1925 to 1934, Estonia’s total exports reached the
highest point in 1928, having amounted to Ekr. 127,109,000, and
the lowest point in 1932, having totaled Ekr. 42,571,000. The
annual exports during the ten year period averaged Ekr.
86,784,000, while the annual imports during this period averaged
Ekr. 83,363,000, the annual favorable balance thus having
amounted to Ekr. 3,421,000. These figures are the best proof of
what proportion the favorable balance of U. S. A. trade with
Estonia constitutes with the general totals of the latter’s
foreign trade.
It must be mentioned at this point that, as long as Estonia had
full freedom to make use of the surpluses which had accrued from
the trade with other countries, it had no unsurmountable
difficulties in overcoming the unfavorable balance of its trade
with the U. S. A. At present, where this freedom no longer
exists, it is able to purchase U. S. A. products only when it
knows which source it is able to use for making payments for
these purchases. Such source may only be created from the money
obtained from the U. S. A. against Estonia’s exports, since
otherwise, should Estonia, for instance, desire to use another
source, it may happen that the latter has been blocked for other
purposes. If, however, Estonia continues its purchases in the U.
S. A. without giving consideration to the possibilities of
effecting payments therefor, “frozen” funds may accumulate in
Estonia to the credit of the U. S. A., which hardly would be
desirable to either country.
5. From the foregoing, it must be concluded that the question of
the facilities Estonia may promise to the U. S. A. in the new
agreement, is entirely dependent on what the U. S. A. itself is
prepared to offer to Estonia.…
Consequently, Estonia must, first of all know whether the U. S.
A. is prepared to guarantee the admission of its products to the
United States, and if so, in what quantities. Before this
question is settled, Estonia will not be able to assume and
declare its definite attitude towards the proposals made by the
U. S. A.
[Page 202]
In order to facilitate action on the part of the U. S. A.,
suggestions are made below not only regarding the tariff
reductions to be offered, but also concerning quotas for which
such reductions are to be allowed, with regard to some of the
products already mentioned by Estonia as well as those which
Estonia believes not to be able to leave out of consideration
during the negotiations opened. This would enable the U. S. A.
to grant to third countries the tariff reductions only to the
extent of the quotas provided for in the agreement signed with
Estonia. For a further alleviation of the position of the U. S.
A. it might also be provided that in case it appears, after the
lapse of one year, that most of the tariff quotas obtained by
Estonia have not been made use of by the latter, the parties may
come to an agreement regarding the reduction of this quota,
raising at the same time the quota allotments for other lines
where the allotments provided for in the agreement have not
proved to be sufficient. This matter might be discussed in
detail after an agreement had been reached regarding the
principles that are being set up.
[The remainder of this note comments on details of tariff
schedules on particular products, and in regard to items for
inclusion in a draft agreement.]
I avail myself [etc.]
