Memorandum by the Second Secretary of Embassy in France (Williamson)17

At the request of Mr. Charles E. Stuart, Executive Vice-President of the Export Import Bank of Washington, I this morning took him to call upon M. de la Baume, Chief of the Commercial Section at the Ministry for Foreign Affairs, and M. Bousquet, also of that Section, who is in charge of American affairs. After outlining the object of his trip abroad, Mr. Stuart asked a number of questions which brought forth the following observations:

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The French Government does not adhere to the policy of unconditional most-favored-nation treatment. It however does extend conditional most-favored-nation treatment predicated upon reciprocity. Succinctly, it is willing to accord through the medium of bilateral commercial treaties minimum tariff on all items save those embraced in a list of exceptions annexed to the treaty. So far as possible these exceptions are restricted to items in which the other contracting country has no vital interest. There is no present prospect of abandoning the policy described above in favor of a reversion to the unconditional most-favored-nation system.

The French Government attaches considerable importance to commercial insurance and foresees the development of that aid to commerce. As practiced commercial insurance is not applicable to private contracts but is extended in the case of the sale of French goods to foreign states and municipalities, particularly in countries such as those of Central and Southeastern Europe. Commercial insurance however has its greatest development as concerns the U. S. S. E. where of course purchases abroad are a Government monopoly. At present French banks underwriting commercial insurance for sales to the Soviet are covered up to 60% by French Government guarantee. It is possible that this guarantee may shortly be given a wider spread so as to cover 75% to 80% of the amount involved. It is hoped that the policy may tend to restore confidence on the part of exporters.

Stabilization of currencies is far the most important factor in the restoration of world trade and in the breaking down of trade barriers. The French Government earnestly hopes that stabilization may take place as soon as possible since until that time the element of uncertainty is such as to hamper bilateral commercial agreements. As matters now stand, agreements entered into today may be nullified in their benefits tomorrow through fluctuations in exchange and the consequent alteration of cost price levels. Once stabilization takes place it may be possible to proceed upon a program of reducing trade barriers, but until then each country must protect its production against the results of monetary instability. France itself is firmly attached to the maintenance of the franc upon the present ratio to other currencies and will endeavor so to maintain it. While no predictions for the future may be made it is nevertheless conceivable that at some future date, were a general international stabilization agreement arrived at, France might find it convenient slightly to devaluate the franc in accord with the general arrangement.

The French representatives welcome Mr. Stuart’s suggestions relative to the encouragement of the tourist traffic to France and felt that as he stated, much might be done were the American public acquainted with prices of hotels, railroads, etc., in France, and educated [Page 224] as to the means of economical travel and sojourn in this country. Hotel prices and many other costs here have been considerably reduced and it is believed that not only is this circumstance not known to the general public abroad but also that the public is not acquainted with the method of availing itself of the various facilities for traveling in France which may now be had at a reasonable figure.

While there has been considerable comment in the press concerning the possibility of a credit loan to the Soviet, there have been no tangible developments whatever in that direction. The possibility is still in mind and some formula may yet be found which would make possible the granting of credits to the Soviet but at the moment the idea remains completely nebulous.

For some time the French Government has been studying the advisability of a modification of the quota system. Developments now point to a much more radical modification than that heretofore contemplated. No precise details can yet be given concerning the manner in which the change will operate since it is not yet decided upon. However, the Council of Ministers is meeting in the next few days for a preliminary discussion of the matter to be followed by further meetings devoted to the same subject. It would appear probable that the quota system will be abandoned (not in one step but progressively), in order that France may regain its economic liberty. Possibly—although this was not stated in so many words—quotas may be maintained against those countries which refuse to meet France half way in scrapping the quota systems. It would appear that the more normal procedure of tariff protection will be substituted for the temporary and extraordinary system of quota protection. In this way France hopes to go a long step forward in leading the nations back to traditional economic principles which will ultimately make possible the breaking down of commercial restrictions. Until the exact procedure is determined upon, it is of course too early to consider whether the American approach to the Franco-American commercial treaty negotiations should be altered so as to lay less stress upon the quota advantages and more emphasis upon tariff advantages. It is to be hoped, however, that the enunciation of the French policy will come in ample time to enable the American Government, if necessary, to alter the basis on which the commercial conversations are undertaken so as to take into consideration the new customs set up in France. In any event, any step taken by France which minimizes the importance of quotas would facilitate negotiations, although in the Embassy’s opinion it is certainly to be expected that if the French Government even partially abandons quota protection, radical tariff augmentations in certain fields will prove a corollary.

H[arold] L. W[illiamson]
  1. Transmitted to the Department by the Ambassador in France in his despatch No. 1985, June 29; received July 9.