611.6231/715
Memorandum by the Chief of the Division of Trade Agreements (Grady)
Dr. Ritter and Dr. Davidsen26 called upon me to discuss the matter of German-American trade. Much that they said was a repetition with some elaboration of what they had said to the Secretary and Mr. Sayre. What they seemed to wish to get from me was suggestions as to what they could do in the next few months to induce us to enter into a modus vivendi with them which would insure their securing the generalization of our tariff reductions to other countries. I pointed out the impossibility of our entering into a modus vivendi calling for most-favored-nation treatment on the part of both countries in the light of their statements that they could not give us most-favored-nation treatment on the all-important matter of exchange allocation.
They countered with the statement that our withdrawal of most-favored-nation treatment on October 15 would increase their difficulties of approaching our requirements of 100 percent allocation of exchange. I expressed the opinion, in which they concurred, that for several months at least their exports to this country would not be materially affected by our withdrawal of most-favored-nation treatment on tariff rates and that we were inclined to believe that they could do very much better in the months immediately ahead than they have been doing. I indicated that perhaps they might find it possible in the weeks immediately ahead to come approximately to an allocation of exchange that would meet our requirements of most-favored-nation treatment.
Dr. Ritter said he was certain that not only would this be impossible in the months immediately ahead, but that he did not feel he could promise to do so within seven or eight months. Both Dr. Ritter and Dr. Davidsen expressed fear that our withdrawal of generalization would mean a parting of the ways and that the trade between the two countries will get steadily worse rather than better. Dr. Ritter said he assumed that we realized what the withdrawal of our most-favored-nation treatment would mean—that we would no longer get the German minimum rates. He urged that we reconsider our action withdrawing most-favored-nation treatment on October 15, but I told him that that could not be done.
I am convinced that our policy as outlined to these officials by the Secretary is the sound one to follow, particularly in the light of our unsuccessful efforts in the past to get anything better from Germany than lip-service to the most-favored-nation principle, with pleas of necessity for its violation.
- Hermann Davidsen, of the American Division of the German Foreign Office.↩