The Secretary of State to Representative Harry B. Coffee

My Dear Mr. Coffee: I refer again to your letter of March 30, 1936,3 asking my views with reference to a proposal to provide a ten percent ad valorem tariff on all imports from all countries now in default on their indebtedness to the United States, and to my acknowledgment of April 3 [4].3

Action such as you suggest is open to several objections of a general character which I have stated in a letter of February 1, 1935,4 to the Committee on Ways and Means on H. R. 2051. I am enclosing a copy of this letter as a convenient way of presenting some of these general considerations.

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A ten percent ad valorem rate would be much less destructive of trade and revenue than the punitive rates suggested in H. R. 2051. However, even small discriminations might have a considerable effect in impairing the volume of imports from particular countries and the volume of revenues collected thereon. On some products of a specialized nature which could not readily be imported from alternative sources of supply, the effect would be to increase the cost to the American consumer and raise new revenues. The total effect on the revenues might be a small increase or decrease and the entry of the amount of the specially collected ten percent duty as a credit against the debts of foreign governments.

I am sure that you will find the arguments sketched in my letter of February 1, 1935, convincing. It would clearly be a mistake to take any action which might be taken to relieve our debtors from their responsibility to pay the United States from all their resources rather than from such funds as might be made available from their trading relations with the United States. However, in view of your interest in the question but without making the slightest concession to the fallacy that debt paying capacity is measured by the direct trade between debtor and creditor, I may cite the following statistics for the calendar year 1935, in regard to the five countries whose obligations make up $10,844,000,000 of the $11, 156,000,000 of such obligations held by the Treasury June 30,1935:

Country Imports into
United States
Exports from
United States
Debt payments
falling due in 1935
Great Britain $155,322,776 $433,384,884 $203,341,530.10
France 58,332,861 116,920,014 86,675,449.85
Italy 38,671,829 72,450,043 17,283,186.76
Belgium 39,759,908 58,207,891 12,051,907.76
Poland 9,811,312 24,485,703 9,563,079.42

Our export statistics to some of the smaller countries are misleading because many of our exports to interior and remote markets are reshipped from intermediate points. However, I am enclosing a complete tabulation of the statistics for 1935 for all the debtor countries.5

The tabulation is of interest in connection with any consideration of intergovernmental debts or of any form of retaliation. However, it should not obscure the other points I developed in my letter to Mr. Doughton.

Sincerely yours,

Cordell Hull
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  3. Supra.
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