Foreign Relations of the United States Diplomatic Papers, 1935, The British Commonwealth; Europe, Volume II

600.628/15

Memorandum by Mr. R. E. Schoenfeld, of the Division of Western European Affairs, of a Conversation With the First Secretary of the German Embassy (Meyer) and the Assistant Economic Adviser (Livesey)

[Washington,] December 4, 1935.

Dr. Meyer called at three this afternoon, pursuant to the suggestion made by Ambassador Luther in his conversation with Mr. Sayre on Wednesday last (November 27) regarding German export promotion practices.

Dr. Meyer prefaced his remarks by saying that when England left the gold standard in 1931, Germany was confronted with the problem of deciding whether it would follow England and let its currency seek its level, thus in effect joining the Sterling bloc, or whether it would decide to maintain the exchange value of its currency and thus technically remain a part of the gold bloc. Because of internal political considerations, he said, Germany had decided not to follow the English example.

But the action of various governments in devaluing their currencies had made it necessary for Germany to seek ways and means of maintaining its foreign trade in competition with goods of countries with devalued currencies and of obtaining the necessary foreign exchange to enable it to continue its purchases of essential raw material.

As a result, Germany had evolved various devices to meet the situation, and these fell under four principal headings, namely:

1. The use of registered marks;

2. The use of ASKI accounts;

3. The bond purchase procedure; and

4. The export levy on industry.

The registered mark system, Dr. Meyer said, enabled German exporters to be paid in part in registered marks which were derived from mark deposits made in payment of foreign short-term banking credits under the Standstill Agreements. In order to realize in dollars on their holdings of these marks, American bankers were willing to dispose of them at a discount. In consequence, German exporters receiving registered marks in part payment of their foreign shipments could sell at proportionately cheaper cost in dollars. Their prices in marks, however, were the same in the foreign market as in the domestic market. Dr. Meyer expressed the opinion that this constituted neither dumping nor a subsidy.

The ASKI system was a barter arrangement. The foreign exporter was permitted to sell goods in Germany against marks. These marks were paid into a bank in a so-called ASKI account (foreign account for domestic payments), and might only be used to purchase German goods for export. The German importer generally paid a higher price in marks for such imports than the prevailing market price, and the German goods purchased with these marks might be sold at a higher price than the prevailing price within Germany. The additional cost was in the last analysis borne by the German consumer. There was, however, no payment of any kind by the German Government. Dr. Meyer said that he did not see how this system could possibly come within the meaning of Section 303 of the Tariff Act or American anti-dumping legislation.

The bond purchase procedure, he said, was similar to the registered mark system. German bonds held abroad were quoted at a heavy discount from par. Within Germany they sold at a higher price in marks. Thus, the German exporter in accepting such bonds in part payment of shipments received the full value in marks for his goods.

The assessment on industry to provide a fund to promote exports was a recent private arrangement. The Government made no contribution or payment whatever. Dr. Meyer said that in his opinion, this device did not fall afoul of the countervailing duty provision of the Tariff Act or of our anti-dumping laws. German officials in Berlin, he said, were thoroughly familiar with our laws on these points, and had been most careful to permit no practice which would contravene them. Moreover, American short-term banking credits in Germany were relatively heavy, and in consequence a considerable volume of registered marks was available. It was his opinion that the registered mark procedure plus the ASKI system would easily take care of any needs in connection with American trade, in view of the small volume of German exports to the United States. Off the record, he said, he could tell us that the Embassy, since the Ambassador’s recent call, had sent a telegram to the Foreign Office, suggesting that the Embassy be authorized to make a formal statement that none of the funds from the levy on industry were used in promoting exports to the United States.

Dr. Meyer said that this was a very informal sketch of the situation, but that he had been glad to give us the foregoing information for the benefit of the interested American agencies.

I thereupon explained to Dr. Meyer that, as Mr. Sayre had indicated to Dr. Luther, a decision in these matters was the exclusive responsibility of the Secretary of the Treasury, and that in his recent conversation with Dr. Luther, Mr. Sayre had suggested that he would be glad to convey to the Secretary of the Treasury the facts that Dr. Luther had presented should Dr. Luther care to embody them in a memorandum. Dr. Meyer indicated that he had understood from Dr. Luther that he was to explain matters to us orally, as he had done. I told Dr. Meyer that we were glad to have his explanations, but that Dr. Luther had spontaneously approached this Department in connection with the article in a recent issue of the Journal of Commerce. Dr. Meyer said that he had brought the press article to the Ambassador’s attention. I went on to say that in any case, the Ambassador had taken the initiative in presenting certain facts; that Mr. Sayre had naturally wished to cooperate by conveying the Ambassador’s views to the competent American authorities, but that in such matters the question of phrasing and the manner of presentation were of vital importance. It was with this in mind that Mr. Sayre had made the suggestion that Dr. Luther embody his statements in a memorandum.

Dr. Meyer indicated that it was difficult to draw up a memorandum which covered all points, and said that he would therefore appreciate receiving indications of any points that we might desire to have covered. I reiterated that the initiative in this matter had emanated from the Ambassador, and said that Mr. Sayre had not sought any particular facts at this time. He had indicated that he would willingly convey to the competent American authorities the Ambassador’s views if submitted in the form of a memorandum. The Embassy would of course not be precluded from presenting additional information in the future, if it so desired, but would be free to revert to the matter whenever this seemed desirable.

Dr. Meyer then said that he would be glad to present a memorandum, perhaps not in as great detail as the present conversation, and perhaps with a certain delay, as he wished to have an answer to the Embassy’s inquiry of its Government. This, he thought, should be received within the next few days. He imagined, he said, that we would prefer to have something authentic from his Government rather than informal statements of the Ambassador or himself. The Embassy, he said, had never received any instructions whatever on the recent export levy system. I assured Dr. Meyer that we should be glad to present to the proper authorities such material as the Embassy eventually desired to submit.

In summarizing, Dr. Meyer said that he would like to make four points:

1. He would send a memorandum within the next ten days or so;

2. He would like to request that the Treasury meanwhile take no action;

3. He hoped that the State Department would use its good offices to the end that no hasty action might be taken; and

4. Officials of the German Embassy would always be ready, with the consent of the Department of State, to present directly to the interested officials of the Treasury Department any pertinent information or explanations on these matters.

I assured him that we should “note” these four points.