500.C1199/224: Telegram

The Consul at Geneva (Gilbert) to the Secretary of State


331. Rogers and Pasvolsky inform us as follows respecting the meeting of the Economic Committee which closed September 12th.

Committee’s general report is a frank discussion of monetary exchange and quota obstacles to world-wide economic recovery through expansion of international trade. Removal of all such obstacles it [is?] treated as measure for maintaining peace. General economic conference is disapproved but bilateral and other consultations are recommended among states most seriously affected before approaching economically powerful countries.

Following are significant passages from the general report which is provisional and must be considered confidential until released here.10

. . . . . . . . . . . . . .

Report on the most-favored-nation clause is a lengthy but satisfactory document.11 Its metric [sic] substance is summarized in the following conclusions. [Page 457]
“The most-favored-nation clause and the regime of equality of treatment which it is designed to ensure constitute an essential guarantee for the maintenance and development of world trade. In this connection it is important to note that the most-favored-nation clause has in no sense ceased to exist but continues to be the principal rule governing the commercial relations of many countries.
The clause loses a large part of its practical utility when international commerce is subjected to quotas, exchange controls and clearing and compensation agreements. Nevertheless even in such cases it retains its usefulness with respect to customs duties, et cetera. It thus narrows down the field in which it is necessary to create other guarantees of equal or at least equitable treatment, which are essential in order to permit trade to expand as far as possible even under restrictive conditions and to avoid unnatural diversion of trade currents.
But such anomalies as quotas and exchange controls and clearing and compensation agreements are in turn incompatible [with] the existence of dynamic and prosperous trade. What is important therefore is not to discuss the merits or the faults of the regime of the equality of treatment but rather to renouncing as rapidly as possible these capital injuries to the mechanism of international trade.
It is unnecessary to discuss the question whether or not the regime of the most-favored-nation clause will be the regime of the future for the simple reason that as soon as free negotiability of currencies and trade free from quantitative restrictions shall have been reestablished no nation will consent to submit to discriminations directed against it. And wishing to enforce for itself equality of treatment it shall be obliged to accord such equality to others.”
Rogers arriving with complete report on steamship Paris September 24th. Pasvolsky staying in Geneva a few days sailing 24th.
Will cable comments on meeting soon.12
  1. Telegram in two sections.
  2. The full report, including the recommendations concerning the most-favored-nation principle, was released on September 23; for text, see League of Nations, Official Journal, November 1936, p. 1329.
  3. League of Nations Document No. C.379.M.250.1936.II.B, “Equality of Treatment in the present State of International Commercial Relations: The Most-Favored-Nation Clause”.
  4. Not printed.