611.003/3123a

The Acting Secretary of State to the Minister in Canada ( Robbins )

No. 313

Sir: On November 3, 1933, instruction No. 103 was sent you with regard to certain difficulties facing American shipping interests on [Page 42] the Great Lakes. Page 7 ff. of the same instruction40 referred to the question of Canadian discrimination against indirect shipments via the United States and the possible enactment of retaliatory legislation in this country.

The Legation has been previously instructed in this regard, namely No. 168 of February 29 and No. 195 of April 9, 1928, and replies were made in despatches Nos. 492 of June 25, and 500 of June 29, 1928,41 and in personal letters of March 5 and 31, 1928, from the Honorable William Phillips, then Minister at Ottawa, to the Honorable William Castle, Under Secretary of State.42 The latter replied under date of March 9, 1928.42 It is understood that all of the correspondence in the matter is available at Ottawa, as well as copies of recent despatches from the American Consulate General at Vancouver dated January 6 and 31, and February 1, 1934, mentioned in your despatch No. 421 of February 23, 1934,41 file No. 631.

During the period of economic depression, there has been an increased attention in this country toward measures designed to protect national interests. Bills have been introduced in both Houses of Congress which have as their object retaliation against Canadian legislation which has resulted in the diversion of traffic from American ports to Canadian ports. These bills are being favored by the elected representatives of those states, the railroad, storage, port, shipping, and other transportation interests of which are hopeful of restoring some measure of the movement thus transferred. For your information, copies of H. R. 1637, H. R. 4493, S. 1525 and S. 2282, introduced during the Seventy-third Congress, are transmitted herewith.42 You will observe that they are all of the same character, i. e., they provide for the imposition of a ten per centum duty on articles imported into this country from a third country through territory contiguous to the United States, but in the event that the contiguous country permits transshipments without penalty through the United States into its territory then the act may be suspended.

The considerations which have heretofore influenced this Department in opposing such bills are set forth below, for your information:

(1) Since legislation of this character may be regarded as retaliatory, it must be pointed out that the general policy of this Government has been to avoid, whenever possible, recourse to retaliation with its resultant disturbances to economic interests and the cordiality of international relations. The flow of trade should normally be by means of the most economical, convenient and satisfactory routes, with ample competitive port and transportation facilities fully available to American importers and exporters. The effect of the passage of [Page 43] such legislation would be artificially to force American trade through certain channels without regard to the economies or conveniences afforded by other routes.

(2) Further, it is apparent that the extra duty would fall on the goods of third countries to which in many cases we have already promised most-favored-nation treatment.

(3) This Government in its relations with other governments has often emphasized these views. For example, American exporters objected to certain regulations of the Polish Government whereby shipments to that country through third countries, particularly Germany, were subjected to certain customs and other penalties. These regulations operated to the serious detriment of our trade. In diplomatic negotiations with the Polish Government we took the position that the interests of trade itself are paramount and stated that we could not acquiesce in measures whereby Poland sought artificially to obstruct economical avenues for our trade and to force it from natural channels for the benefit of particular ports and distribution agencies.

Poland sought by means of this discrimination against indirect shipments via Germany to obtain certain concessions desired from that country. This Government objected on the ground that Poland was not justified in sacrificing the interests of American trade in order to obtain from a third country benefits for itself. Our representations were successful.

(4) The enactment by the Congress of the legislation now contemplated might cause foreign countries to object on the ground that we are not justified in interfering with the routing of their trade in order to obtain certain benefits for our port, railroad and shipping interests. Negotiations of considerable consequence to American exporters might accordingly be prejudiced and this Government embarrassed in its efforts to remove future difficulties of a similar character.

(5) I consider that the enactment of the legislation mentioned would be inimical to American interests of greater national importance than those represented by our port and transportation agencies and that, generally speaking, the best interests of the United States would be served by discouraging legislation of this sort in this country as well as abroad.

Such considerations have from time to time been presented to those interested in the passage of this legislation. Nevertheless, it is clear that this group is gaining strength and that such a bill may ultimately be enacted into law. The present attitude of certain Congressmen is illustrated by the speech made in the House of Representatives on April 10, 1934, by the Honorable George W. Edmonds of Philadelphia, Pennsylvania, which is to be found on pages 6550–6554 [6337–6341] of the Congressional Record of that date. The principal arguments therein, which will be of use to you in conferring with Canadian officials, need not be repeated here.

I believe that the above-mentioned considerations which have impelled this Department to oppose such legislation in this country [Page 44] and abroad apply to Canada as well as to the United States. In other words, if a number of countries should enact legislation similar to that in force in this regard in Canada and that which has been proposed in the United States, the net effect in Canada, a great exporting country, would be adverse. I propose to continue to oppose the enactment of such legislation in this country on broad grounds of general policy. It would be difficult to justify opposition to it in so far as Canada alone is concerned.

If you perceive no objection, please take up this matter with the Prime Minister in the sense of this instruction. I leave to your discretion the time of your raising this subject and the decision as to whether you should give him a written communication.

Very truly yours,

William Phillips
  1. Ante, pp. 3940.
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