660P.116/42
The Chargé in Latvia (Cole) to the Secretary of State
[Received October 18.]
Sir: I have the honor to refer to the Department’s instruction of August 16, 1935 (No. 160), concerning American trade in Latvia, instructing me to deliver a note, draft of which was enclosed, to the Latvian Minister for Foreign Affairs. As reported in my telegram No. 55 of September 11, 1935,13 the note has been delivered. The last paragraph of the instruction under reference states that comments by the Legation and memoranda of conversations with Latvian officials will be read with much interest. I therefore enclose three memoranda,13 as follows:
- 1.
- reporting a conversation with Mr. Stegmanis, Chief of the Western Section of the Ministry for Foreign Affairs and member of the Import and Foreign Exchange Commission, dated September 18;
- 2.
- reporting a conversation with Mr. Dinsberg, Chairman of the Import and Foreign Exchange Commission, dated September 21; and
- 3.
- reporting a conversation with Mr. Ludwig Ekis, Minister of Finance, dated September 23.
A report of my conversation with the President of the Council of Ministers and Minister for Foreign Affairs, Dr. Ulmanis, at the time the note was delivered, has already been forwarded to the Department under date of September 13, 1935, in despatch No. 870.
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The interview with Mr. Stegmanis, which was had first both in order to arrange for interviews with the other two gentlemen as well as from considerations of courtesy, gives a brief review of the essential elements in the formation of a decision by the Import and Foreign Exchange Commission as to whether any specific shipment of specific goods from a specific country shall or shall not be permitted.
Mr. Stegmanis also gave an explanation of the Latvian point of view that while its policy toward American trade is frankly “restrictive” it is nevertheless not “discriminatory.”
It is of interest to note his statement that Latvia is ready at any moment to conclude a clearing arrangement with the United States. I took advantage of this occasion to state to him that I felt such an arrangement was impossible as one of the most essential elements in the United States foreign trade policy is opposition, on principle, to all attempts to balance trade bilaterally.
[Page 563]Mr. Stegmanis put the necessity for refusing permits for the importation of American goods solely on the ground of the scarcity of dollars. In this connection it will be interesting to note the discussion had with Mr. Ekis concerning just this point, namely, my suggestion of the normal procedure of obtaining dollars through ordinary banking transactions from a surplus of other currencies, and his citation of British objection to Latvia’s so using its only considerable surplus.
It will also be noted that at the end of the interview Mr. Stegmanis referred to the butter shipments. It is understood that his reference to the customs court in connection with the butter appraisals is erroneous, and it is the matter of the canned sprats which is in the hands of the customs court, whereas the butter appraisal is still awaiting decision in the Treasury Department. On another occasion Mr. Stegmanis again referred to these matters. In regard to butter, he stated he had understood the Treasury Department would act one way or the other late last spring, and he also declared that the Latvian Consul General in New York had expected the court to render a decision in July or August. In regard to Mr. Stegmanis’ reference to Dutch and Danish butter, I may take this occasion to remark that it would be of considerable assistance to the Legation in its discussions with both the Ministry for Foreign Affairs and the Minister of Finance if those matters, as well as that of the appraisal of the Latvian butter and the sprats, could be cleared up at the earliest possible moment.
In his interview, Mr. Dinsberg confirmed all the information given me by Mr. Stegmanis concerning the manner in which the Commission operates and it was therefore not repeated in the memorandum.
The explanations made by Mr. Dinsberg concerning the so-called “export valuta” will presumably interest the Department. Mr. Dinsberg displayed a very evident desire to emphasize the fact that this clause is also used in connection with a number of other countries and is not something exclusively applied to imports from the United States.
The Department will read with interest his description of the manner in which the various clearing arrangements are now working, and that they are generally very unsatisfactory.
The main point which I desired to elucidate in my talk with the Minister of Finance, Mr. Ekis, was exactly how far the Government of Latvia intends to go in the matter of the importation of American cotton. I was careful, however, not to indicate to him any anxiety on the part of the United States that if the Latvian Government intends to attempt to bring about an equal and bilateral balance of trade with all countries with which Latvian statistics show an “unfavorable balance,” it would amount to the practical annihilation of American [Page 564] trade with Latvia. His statements concerning the inability of the Latvian Government to bring about such an equal and bilateral balance with the United States, on account of the necessity of importing cotton, is of interest. He many times repeated that not only was the Latvian attempt to buy less in America wholly conditioned upon its excess of imports from that country, but also upon the sheer necessity under which Latvia finds itself of placating the British. He pointed out that the pressure on Latvia was not only confined to oral and other representations made by the British Government in London and its Legation in Riga, but that England was also simply reducing purchases from Latvia.
Like both Dr. Ulmanis and Mr. Stegmanis, Mr. Ekis did not fail to bring up the butter question. It is to be noted, however, that in the interviews with the two latter gentlemen they have spoken of the connection between Latvian exports of butter to the United States and imports of automobiles from that country as matters of unfortunate cause and effect. In my despatch of September 24, 1935 (No. 880),14 enclosing a memorandum given the Legation by an importer of American automobiles, the connection between the two matters is very evidently spoken of by subordinate Latvian officials in the Import and Foreign Exchange Commission in such a way as to indicate to Latvian importers that the refusal of foreign exchange for the import of American automobiles has been deliberately adopted in reprisal and retaliation. I have the feeling that the higher Latvian authorities, however, while they are not adverse to explaining the difficulties in the way of imports into Latvia from the United States by the existence of comparable hindrances to Latvian exports to the United States, are not, in fact, actuated by a spirit of revenge or retaliation.
It will be noted that in none of the memoranda is there any reference to the American reciprocal trade agreements program recently inaugurated nor to the sentence in paragraph four of the note that
If Latvia does not accord non-discriminatory treatment to trade with the United States, consideration must under the law be given by the American Government to the withdrawal of minimum duties from Latvia, with due regard to obligations under the existing treaty.
This avoidance was based upon the belief of the writer of this despatch, first, that withdrawal from Latvia of the privilege of enjoying such minimum duties would cause Latvia very little injury, if any, and secondly, that under the obligations of the existing treaty such withdrawal could not be put into actual effect for a considerable [Page 565] time in the future. During this time, Latvia, if it so desired, could practically annihilate all American trade, except cotton. The only method, in the opinion of this Legation, under which such withdrawal could have any considerable effect on Latvia would be in case reciprocal trade agreements already negotiated, or to be negotiated, included articles of interest to Latvia.
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Respectfully yours,