611.6231/684
Memorandum by Mr. R. E. Schoenfeld of the Division of Western European Affairs to the Secretary of State
Mr. Secretary: The German effort to induce us to postpone withdrawal of tariff concessions for thirty days beyond October 14, 1935, when the existing most-favored-nation commitment expires, would seem to be the first effort in a campaign to strike from our hands the one defense against German discriminations.
The arguments which the Germans cite in favor of postponement seem to boil down to (a) non-disturbance of plans on foot for adequately servicing American holdings of the Dawes and Young loans; (b) non-discouragement of the proposal for the liquidation during the next six months of the 1930 Grain Credit; and (c) non-dissipation of the growing favorable disposition in Germany for a satisfactory adjustment of commercial relations between the two countries.
On the other hand, postponement seems calculated to have (a) a dangerous effect on German psychology; (b) a harmful influence on the whole trade agreements program; and (c) would create a necessity for recalling a specific commitment regarding dye concessions to the Swiss.
By compliance, the Germans would be encouraged to believe that by partial restoration of rights they had arbitrarily curtailed, they [Page 459] might enjoy full commercial advantages here. They would moreover see in such action a real, if unadmitted, connection between the treatment of loans and our willingness to negotiate a trade agreement.
Since the present case is in reality a test case, failure to invoke the withdrawal feature would invite sharp attack from many quarters and the charge that the withdrawal feature was a deadletter. It would create the impression abroad that American trade could really be attacked with impunity.
Moreover, postponement for thirty days would expose the Government to pressure for further postponement. It is probable that the German Government will accept the basis for negotiation of a reciprocal trade treaty outlined in our recent note. In that case it will desire to enter upon negotiations immediately. If we state that because of the pressure of negotiations already in progress, we are unable to enter upon negotiations in the near future with Germany, the German Government may then urge that it should not be penalized during that period, since the postponement of negotiations would be due to no fault of its own. It might also point out that tariff concessions have been extended to other countries which were classed as discriminating against American products for a period of six months after the announcement had been made that reciprocal treaty negotiations were to be undertaken.
We have moreover agreed with the Swiss to extend to them concessions on dyes effective upon the expiration of our obligations to Germany which we told the Swiss would be October 14.
The factors in the case seem to make out an unanswerable case in favor of applying the withdrawal feature to Germany promptly upon the expiration of the existing most-favored-nation clause.