Foreign Relations of the United States Diplomatic Papers, 1936, General, British Commonwealth, Volume I

611.4131/182a: Telegram

The Secretary of State to the Ambassador in the United Kingdom (Bingham)

Washington, September 3, 1936—6 p.m.

324. Despite Mr. Runciman’s last statement in the House of Commons, there would appear to be no signs that the British Government is planning any action or pronouncement in the trade field that would be of use in creating an enlarged trade moving on lines of economic calculation beyond the confines of bilateral arrangements. Instead the British Government seems to be pressing more vigorously than ever for special advantages in other markets through trade agreements which result in placing third countries at a disadvantage and consequently increase both their sense of justification and the necessity for likewise striving for such immediate special advantages as they can obtain. The Department remains convinced that the continued application of this policy means, first, that the volume of trade between countries cannot grow substantially; second, that in the absence of such growth the chances of successfully working out the pressing internal economic problems of many countries are receding and, third, that the attitude, natural to these circumstances, that each country must to the very utmost prepare for war, and risk war rather than be completely bested in the struggle for national advantage, is becoming more firmly implanted than ever before.

The Department wishes to continue its effort to awaken the British Government to the full ultimate consequences of these developments, and to again make clear to the British Government its sense that the influence and interests of the British Empire create a clear responsibility for sharing in the leadership, in word and action, to change the present trends. Up to now the conversations which have taken place with various representatives of the British Government have been kept for the most part on a general plane and have been regarded as informal and confidential. In this instance the Department wishes to connect its general statements with the negotiations now taking place for a new agreement between Argentina and Great Britain.⁴²

Will you seek appointments with Eden and Runciman and inform them that you have been instructed by your Government once again to raise the question of general trade policy with them, and to express its disappointment that the British Government has not up to the present either by word or action lent any support to the endeavor to bring about a lowering of trade barriers and a restoration of the practice of equality of trade which this Government has been seeking to advance both through continued advocacy and through its trade agreements. Please continue to the effect that this disquietude is augmented by information received concerning certain features of the prospective Anglo-Argentine commercial agreement. It is believed advisable that your presentation should cover the following points which should be embodied in a memorandum to be left with the British Government:

(1) Throughout the time during which the English and American Governments have been engaged in informal discussion of the international trade situation and of trade policies, the general outlook both as regards international trade and international relations appears to have grown worse and more threatening. The quantity of international trade, especially on the continent of Europe, is growing only very slightly if at all, although employment and production within the individual countries have increased, largely under the stimulus of the vast expenditure for armament purposes. The size of armies, navies, and air forces and the killing power of these forces are being increased steadily; the continued operation of the economic life of many countries is growing more and more intimately connected with the conduct of the military establishments. The hope and vision of creating a steady and improving standard of life by the peaceful application of improving means of production and by interchange between nations is weakening. The drama and expectation of the world seem to be centering increasingly around the dictators that head governments and the vast forces they command.

(2) In the face of these tendencies it is not believed that governments of countries like the United States and the British Empire can merely resign themselves, in grim despair adding to their own armaments, but unable to suggest or effect measures which will change the obvious trend of human affairs. Direct action within the sphere of European political relations seems, for the time being, to face great difficulties. The direct attack on the size of armament similarly for the moment appears to have failed. But in the judgment of the Government of the United States, the possibility of acting on economic matters is genuine and the duty of trying to do so seems clear. It is believed that the peoples of different countries may be brought to support their governments in any revision of their international trade relations which promises to improve the chances of maintaining peace by increasing trade; on the other hand, the absence of any effort to achieve this result will mark the decay of the determination to master events rather than be mastered by them.

(3) The Government of the United States is endeavoring both by continuing advocacy and by the trade agreements into which it has been entering to bring about a lessening in the actual restrictions imposed upon trade and to secure the acceptance of trade policies that will permit the people of different countries to deal with each other on conditions of equality in accordance with mutual economic benefit. This policy is calculated to permit international trade to resume its dynamic growth. It is plain that this effort cannot in the end succeed in its ultimate purposes unless the governments of other important trading countries seek simultaneously to achieve the same result.

(4) This Government realizes that the markets of the United Kingdom have been kept open in a very fruitful measure to the products of other countries and that this has been a most important factor in preventing international trade from declining much further than it has. However, during the past few years the acts of the British Government in the field of commercial policy have almost without exception increased restrictions on trade and more recently in some of the bilateral agreements which the British Government has negotiated preferences have been sought and established which create disadvantages for other countries and thereby increase both the justification and the necessity for them either to restrict trade or to seek in turn special advantages. The American Government has in mind such agreements as that negotiated with the Spanish Government shortly before the outbreak of the revolution, and the agreement which this Government understands to be under negotiation with Argentina.

(5) Both because of the possible importance upon the whole trend of world events of the terms and principles that may be embodied in these agreements and because of the particular American interest in conserving liberal trade relations throughout these regions, this Government is distinctly disquieted by reports of the terms of various agreements now under discussion. Articles 2 and 6⁴³ of the Roca-Runciman Agreement are an expression of the bilateral principle of trade and the bilateral basis of trade agreement and in their Application by Argentina have resulted in preferential advantages for the trade and investment of Great Britain and have interfered with and handicapped the trade and investments of other countries. The continuation of these provisions in the agreement with Argentina now under negotiation would be a definite reinforcement of the bilateral principle and would give the support of important example to such practices by other countries. The American Government believes these conclusions to be justified even though the agreement should not contain some of the features which according to some current reports have been put forward for inclusion in it, such as a provision under which the Argentine Government might be obligated to maintain the discriminatory exchange surcharge it is now imposing on goods from many countries, and an arrangement whereunder the treatment accorded British investments of all kinds in Argentina would be elevated over the investments of all other countries.

(6) In again bringing these questions before the British Government, the American Government is not forgetful of the extent to which British trade has suffered from the rigid controls and nationalistic policies of other countries, of the importance of the British foreign investments affected by the narrowing of British and other markets, or of the pressure to salvage each particular interest where a foreign government can be induced to give it preferential treatment at the expense of some non-British interest. Its presentation is not conceived merely or mainly as a protest on behalf of American interests directly affected by discriminatory agreements between other countries. Bather it calls attention to the importance of the general results offsetting any limited immediate gains for British interests from the creation by act of the British Government, without intention but as natural consequence, of new discriminations against American and other interests. The strengthening of the impression that the British Government is taking no responsibility for leadership for the improvement of international economic relations but is devoting itself to the protection of particular British interests even through practices which adversely affect general relations, will not increase the hope remaining in the world that the present dangers which menace it will be overcome by courageous foresight, by farsighted cooperation and by the recovered mutual advantages of peaceful trading.

After careful study of this memorandum, please advise the Department if you have any suggestions for change, either in substance or tone. Also please fully report the course of your conversations.

We are also discussing the matter of the Anglo-Argentine Agreement with the Argentine Government in the hope that they either will completely free their exchanges or end discrimination under the exchange control from which the American interests are substantially suffering.⁴⁴

Hull

42. British Cmd. 5324, Argentina No. 1 (1936): Agreement Between His Majesty’s Government in the United Kingdom and the Argentine Government Relating to Trade and Commerce [With Protocol, Protocol of Signature and Letters], London, December 1, 1936.
43. Corrected by telegram No. 345, September 23, 2 p.m., which reads: “Reference should have been solely to article II, especially numbered paragraphs (1) and (6) of article II. Please inform Foreign Office.” (611.4131/184).
44. See vol. v, pp. 200 ff.