663.113 Auto/49
The Minister in Austria (Messersmith) to the Secretary of State
[Received February 6.]
Sir: I have the honor to inform the Department that during recent months the Legation, in close cooperation with the Commercial Attaché and the Consulate General, has been giving special attention to the present status of the Austrian market for American automobiles. In former years there was a relatively good market in Austria for American cars, and before restrictions of various kinds were imposed, American automobile manufacturers led all other foreign manufacturers in sales in this market. Within the last few years, however, there has been a complete change in the automotive policy of the Austrian Government, with the result that foreign manufacturers are now practically shut off from the Austrian market by formidable barriers consisting of high duties, low import quotas, and a system of taxation, which imposes heavier burdens on foreign than on domestic cars. The object of the Government was to protect and foster the Austrian automobile industry, which, in effect, means the Steyr-Werke, which now accounts for about 90 per cent of the total Austrian automobile and motorcycle production. The Steyr-Werke has been a losing proposition for years and is heavily indebted to the Credit Anstalt, which in turn is practically a Government institution. The Government, therefore, was compelled indirectly to make good the losses of the Steyr-Werke. It was, therefore, decided to put the Steyr-Werke into the automobile production business on a larger scale, protect it from the competition of foreign cars, and in this way try to put it on a paying basis.
[Page 96]In carrying out its policy, the Government first changed the method of assessing the duty on foreign cars. Instead of paying duty on the basis of fixed valuations, the importers were required to pay on the basis of weight. This change resulted in greatly increased duties on foreign cars. About the same time the annual quota, per country, was progressively lowered from 340 to 80 cars. The Government next revised the sliding scale of automobile taxation, based on cylinder content. The tax was lowered on cars with small cylinder content and raised on those with high cylinder content. This, of course, was designed to favor the small cylinder content cars of the Steyr make.
. . . . . . . . . . . . . .
The Legation has gone into the matter of the alleged preference granted by the Austrian Government to Italian and French automobile manufacturers. The trade asserts that Austrian foreign trade policy is now orientated toward preferences for certain countries, especially Italy and France, and that in line with this policy arrangements have been made whereby French and Italian cars can be imported outside of the quota of 80 cars per year. It is also said to be a matter of common knowledge in the trade that duty rebates are granted on Italian and French cars.
The foregoing has, of course, a political aspect, which it is not necessary to discuss here. It is a fact that a clause was inserted in law No. 225 of April 18, 1934, providing that any foreign country could get an extra quota of 20 cars per year, if it purchased Austrian steel worth six times the value of the 20 additional cars. France, in particular, was already a purchaser of Austrian steel, and, therefore, derived immediate benefit from the clause. The United States was and is not a purchaser of Austrian steel, and efforts of the local dealers to arrange for the sale of Austrian steel in the United States, in order to qualify for the extra quota of 20 cars, are reported to have failed. The so-called steel clause, therefore, does affect American interests adversely, but it does not constitute legal discrimination against the United States. No concrete evidence of the other preferences (duty rebates, additional import permits above 80 cars, per year) mentioned by the dealers has been presented.
. . . . . . . . . . . . . .
As has already been mentioned, the Government is giving serious consideration to a change in its automobile policy, and the Legation will continue to watch the developments closely. It is quite clear, however, that if and when negotiations are begun with Austria looking toward the conclusion of a commercial agreement, the question of the exportation of American automobiles to this country will be one of the most important which the United States will have to consider, [Page 97] because there is a real worth while market here if the Austrian Government would decide or could be induced to remove the existing restrictions.
Respectfully yours,