611.5431/194½
Memorandum by the Assistant Chief of the Division of Western European Affairs (Culbertson)
Memorandum or First Meeting With Swiss Negotiators
- Those present:
After a brief preliminary exchange of generalities, Mr. Stucki undertook the presentation of the general views of his Government, particularly in relation to Swiss-American trade, but in which he also brought out some of his ideas of international trade in general. He first compared the Swiss tariff and the American tariff, the former being one of the lowest tariffs in the world, the latter being one of the highest tariffs in the world. He then touched on the devaluation of the dollar, the effect of devaluation on Swiss trade, and the relation between the devalued American dollar and the gold Swiss franc. He discussed Swiss balance of trade, bringing out that some years back the deficit in their balance of trade was offset by tourist expenditures, payment on Swiss investments abroad, and other items. These invisible items more than offset the deficit in the balance of trade. At the present time, however, the trade deficit has increased, and income from tourist trade and other invisible items has decreased, so that Switzerland has a “passive” balance of payments. The development of such a condition required Switzerland to take active measures to protect her position in so far as her balance of payments to the rest of [Page 751] the world was concerned. He brought out that some countries adopt a policy of seeking a bilateral balance of payments. Mr. Stucki thinks that this conception is impossible. He believes in increasing exportation rather than increasing importation. Up until 1932 the Swiss Government had followed a policy of unconditional most-favored-nation treatment. That policy was changed in 1932. Swiss tariffs were then, and are now, low; Switzerland being a gold standard country with high purchasing power served as a mecca for foreign companies from countries with devaluated currencies. To increase tariffs, even to prohibitive levels, would not have met their problem. Quantitative restrictions were necessary. He recognized our position and policy in respect of quantitative restrictions, but said that he felt they were not as bad as they are painted to be.
Mr. Stucki brought out specifically that the two Governments had different policies in respect of quotas. He frankly admitted that the Swiss quotas discriminated against American commerce. He stated that Switzerland does not accept the most-favored-nation principle in respect of quotas. There are two doctrines in respect of quotas: (1) equal quotas (German theory), and (2) proportional quotas. The Swiss believe in the latter type of quota, and admitted discriminations against various countries including the United States. He said that the allocation of larger quotas to third countries had been necessary in order to compensate those countries which are good friends of and buy from Switzerland. It had been necessary for Switzerland to grant large quotas to Danubian countries on grains and other Danubian products, in order that Switzerland might receive payment for her exports to those countries. Recognizing the diametrically opposed systems between the two Governments, he nevertheless was willing to enter upon discussions in the hopes that a satisfactory agreement might be reached.
He then stated that he wished to discuss the spirit in which the Swiss Government had prepared its requests of this Government. He stated that he had received some 400 requests from various Swiss interests for concessions from the United States; that he had thrown out many of these requests, and that he had limited himself to the items of principal interest to Switzerland. He stated that the 50 percent limitation, as provided for in the American legislation, offered him great difficulties, the assumption being that he would like to have sought greater than 50 percent reductions.
He then referred to our policy of generalization and seemed to regret that there was no possibility of granting special concessions to Switzerland, the benefits of which would not arise to competing countries.
[Page 752]Turning then to the consideration of the American requests of Switzerland, he stated categorically that his Government cannot suppress quotas as requested by the American Government, since the quota system is the basis of the present Swiss economic system. He said that he could give facilities within the quota system. In respect of our requests for tariff reductions, he pointed out that he had taken up this question with several Swiss organizations, which had said that no reductions could be made. Mr. Stucki himself might want to do something in the way of tariff reductions, but he feels that quotas are much more important to us.
In establishing quotas, Switzerland had taken as a basis the 1931 trade figures. He admitted that the United States was not accorded a proportionate share of these quotas. He brought out that he understood that we sought representative periods in the establishment of quotas. He, however, felt that by choosing one year such as 1931 it was easier for importers to collect and present to customs their invoice certificates by which they show their right to import under quota licenses. A longer period would require greater effort in collecting these invoice certificates. Mr. Stucki said that if we can give a satisfactory quid pro quo, he is prepared to stop discrimination against us, and to go along with a non-discriminatory formula, and he can give us satisfaction presumably in other fields on quotas.
Mr. Grady then gave a summary of our general position in respect of quotas and our attitude in respect of Swiss-American trade. Mr. Grady called on Mr. Hansen and Mr. Pasvolsky for any views which they might wish to present. They both briefly touched on problems relating to quotas. In his discussion Mr. Grady brought out the political difficulties which confront us, and that by reason of these political difficulties it was necessary for us to go along slowly with our program, rather than to run the danger of precipitating such active opposition as to perhaps destroy our whole program.
Mr. Stucki replied in so far as the political aspects were concerned he too had his political problems; that in respect of watches a large part of the population depended upon their manufacture and export. The same was true with regard to embroideries, cheese and other items. Mr. Stucki apparently felt that he too had serious political problems.
In answer to Mr. Grady’s point in regard to the principal supplier policy, he indicated that there were certain items on the Swiss requests where they knew they were not the principal suppliers, but that these items were of vital importance in the export economy of Switzerland, and he would be obliged to press for concessions on these items because some of them were not only import[ant] economically but also politically. In respect of quotas, he said that in exchange for a quid pro quo he was prepared to guarantee a percentage of quotas and fixed quantities.
[Page 753]There was at the end a bit of general back and forth discussion. In bringing the meeting to a close it was decided that a meeting would be held this morning (Saturday).
- Alvin H. Hansen, Chief Economic Analyst, Division of Trade Agreements.↩
- Leo Pasvolsky, Economist, Bureau of Foreign and Domestic Commerce.↩
- Howard F. Barker, United States Tariff Commission.↩
- Leigh Hunt, of the Bureau of Foreign and Domestic Commerce.↩
- David Williamson, of the Division of Western European Aifairs.↩
- Louis H. Micheli, Counselor of the Swiss Legation.↩