611.5231/994: Telegram
The Ambassador in Spain (Bowers) to the Secretary of State
[Received 2:52 p.m.]
48. My No. 47, July 12, 2 a.m.; your No. 45, July 16, 6 a.m. I cannot too strongly urge that every effort be made to bring negotiations to successful conclusion. With reference to your first paragraph I doubt the possibility of justifying a refusal on our part to accept 300% increase in exportation to Spain of automobiles thereby increasing our exports by from one to two million dollars. Spanish offer by virtue of application most-favored-nation clause also reduces duty on American automobiles by practically 50%.
Constantly increasing opposition to quota in business circles and the fact that the quota may be more or less transitory gives rise to the assumption that the automobile and other quotas may eventually be abolished. In that event American cars if accorded most-favored-nation treatment would automatically recover former position in Spanish market. It seems infinitely preferable to accept compromise rather than run the very serious risk of losing out entirely on our trade here. In 1934 we furnished 5,247 trucks of the 8,091 imported into Spain.
[Page 716]Recently established precedent in case of France indicates breakdown of negotiations may be absolutely destructive of our $38,000,000 trade. Granting fallacy of bilateral trade balancing policy we dare not close our eyes to Spain’s exceedingly unfavorable trade balance with us. We cannot ignore the extreme economic pressure to which Spain is being subjected by its leading European customers with whom she has a favorable trade balance. Negotiations with England, Italy, Germany and probably later France make all the more imperative a greater flexibility in our demands.
If the treaty fails it is the opinion of the entire Embassy that we will probably sacrifice a $38,000,000 trade since our products will almost certainly go to the first column as in the case of France with supplementary tariff increases. If we compromise we increase our $38,000,000 trade. Can we justify a failure to our people?
Our automobile demands are utterly impossible here. I must as a matter of duty most solemnly warn of the very grave danger of losing the greater part if not all of our trade with Spain if demands persisted in. In view of the situation as we know it here I do not hesitate to advise the acceptance of the Spanish automobile compromise. We would be the gainer. Do not make the mistake of assuming that we can break negotiations and maintain the status quo. Emphatically we cannot. We have a choice between ruining American export trade with Spain and increasing it.