611.5431/194

Memorandum by the Assistant Secretary of State (Sayre)

The Swiss Minister brought in M. Stucki to pay his respects to the Secretary and to have a preliminary discussion before getting down to intensive work on the Swiss trade agreement. After a few pleasant welcoming words, the Secretary asked Mr. Stucki what hope he saw for the solution of the present economic difficulties in Europe and along what line any constructive efforts are being made for economic salvation. M. Stucki replied that the present aspect of the situation looked very dark indeed and that if the present drift continues he could not see any hope. He added that agreement on vital economic questions seemed quite impossible at the present moment and recounted one or two recent experiences to prove his point. The Secretary then proceeded to lay before M. Stucki our own program for economic recovery. The Secretary said that in the years immediately preceding 1914 the statesmen of the world were following a policy of armament and military preparation which ended in utter failure and bankruptcy. During the post-war period the statesmen of the world pursued a similar policy based upon extreme economic nationalism, leading to the effort by each nation to serve its own selfish purposes without any regard for the welfare of other nations or of humanity as a whole, and that this policy is leading to the same utter futility and bankruptcy as the pre-war policy. The United States, perceiving the utter futility of such policies, has been advocating in their place a policy based upon greater international cooperation both along economic and other lines. The Secretary went on to say that the peace of the world ultimately was foundationed upon an economic recovery and that unless some constructive program furthering economic recovery could be pushed no one could prophesy what disaster the future might bring. For this reason, the Secretary continued, the United States was engaged in promoting a program based upon the liberalization of trade and the reduction of the barriers and hindrances which at present are standing in the way of economic recovery among the nations of the world.

M. Stucki replied that he thoroughly agreed with the Secretary so far as theory is concerned. He added, however, that his own country was forced into its present policy by the play of economic circumstances over which it had no control. He then entered into a discussion of the history of the economic position in which Switzerland [Page 749] has been placed since the war, showing that Switzerland is vitally dependent upon the export of its agricultural and manufacturing products; that it has maintained a high standard of living and kept and maintained a gold standard because it would be politically impossible to go off the gold standard and reduce the standard of living among its citizens. Switzerland, with its high standard of living and its gold basis, is like a magnet attracting goods from other countries of the world with lower standards. He went on to show that as long as the tourist trade continued and as long as other nations continued to pay interest on obligations due Switzerland in foreign countries, Switzerland could afford to allow her imports materially to exceed her exports. But, when the tourist trade fell off in such substantial proportions, and the income from foreign countries was similarly reduced, Switzerland found it impossible to continue to import goods in such substantial excess of her exports, with the result that she was forced to take measures to limit imports. The Swiss Government gave consideration to the possibility of limiting imports by tariff increases; but effectively to accomplish this it would have been necessary to raise the tariff to a level of 500% or 600% and this would have meant economic injury to her friends and those with whom she was anxious to maintain close economic relations.

As a result of this and other considerations, Switzerland found it absolutely necessary, M. Stucki said, to institute and maintain quota limitations on its imports; quotas seem necessary to the continuance of its economic life. For this reason, M. Stucki concluded, although he agreed in theory with all that the Secretary had said, yet, as a practical matter, Switzerland to continue its economic existence must have protection against a quantity of imports for which she could not afford to pay.

After a further exchange of views along these general lines, M. Stucki and the Swiss Minister withdrew to Mr. Sayre’s office to enter into a more intensive discussion concerning the negotiation of the trade agreement.

F[rancis] B. S[ayre]