462.00R296/5916
The Secretary of State to Mr. John F. Robb, Cleveland, Ohio
Sir: Reference is made to your letter of April 20, 1935,88 suggesting that in view of the German restrictions on payments due American [Page 431] creditors and default on foreign bond service, this Government impose restrictions on the transfer to Germany of payments owed by Americans, with a view to effecting a reciprocal offsetting of credits and debits between the United States and Germany.
The suggestion is one which has been advanced many times in more than one quarter and has not failed to receive careful study, the result of which points clearly to the conclusion that such procedure would not be in the interest of the United States. The disadvantages arising out of the direct cost of imposing the governmental controls upon foreign exchange remittances to Germany which would be entailed, and out of the restrictive effect upon trade which would result from such control upon commercial and financial transactions in this country, would not be offset by any advantage in the way of increased payment of German obligations to American nationals since, in view of our customary excess of exports to, over our imports from, Germany, as well as our creditor status in relation to that country, the total volume of payments to Germany over which the procedure would give us control is less than the volume of payments currently falling due from Germany. Apart from the circumstances of particular cases, it is equally clear that the practice of direct balancing of payments between pairs of countries, which is implicit in such proposals, is open to grave objections of general policy.
It is, moreover, to be observed that even in those countries which normally import German goods in larger amounts than their sales to Germany, and which have sought to derive advantage therefrom by effecting bi-lateral clearing or payment arrangements with Germany with a view to causing the balance of their payments for imports of German goods over the payments owing to them for exports to Germany to be applied to the payment of German financial obligations owing to their nationals, the system has not worked satisfactorily but has, on the contrary, led to the necessity of restricting exports to Germany in order to preserve the excess of imports from over exports to Germany upon which the system of bi-lateral exchange clearing rests.
You will, I am sure, agree that a policy of restricting international commercial and financial transactions is not a satisfactory means of remedying a situation in which international trade and commerce are depressed under an existing excess of restrictions.
The bearing of the German foreign exchange control regulations upon such individual transactions as you may be concerned with would, of course, appear to be a question of German law upon which, if necessary, you may wish to consult German attorneys.
Very truly yours,
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