611.4131/205
Memorandum of Conversation, by Mr. Constant
Southworth of the Division of Trade Agreements
[Washington,] November 16,
1936.
| Present: |
Mr. Chalkley and Major Heyward of the
British Embassy; Messrs. Hawkins, Ryder, Domeratsky,52 Minter and
Southworth. |
Mr. Chalkley and Major Hey ward called at Mr. Hawkins’ office on
November 16, 1936, in conformity with an informal agreement made on
September 29, 1936, that tentative lists of concessions likely to be
requested by the United States and the United Kingdom if
negotiations were undertaken would be exchanged on November 16. Mr.
Chalkley expressed appreciation of our having furnished him
statistical data which had made it possible for the British to
formulate their list by the date set. He submitted the attached
letter and four annexes from the Board of Trade.53 He asked that paragraph 11 (already stricken out
by him) be ignored at least for the present, implying that, in his
understanding, the British colonies were not necessarily in the
[Page 693]
purview of the
contemplated negotiations. Mr. Hawkins said that it was satisfactory
to us to keep this matter in abeyance at present, but indicated that
we on our part also might want later to bring colonial questions
into the discussions. Mr. Chalkley asked that we note the request of
the British in paragraph 7 of their letter for certain additional
statistical material on our imports from Great Britain. He said that
henceforth he would appreciate it if six copies of any statistical
material furnished the British could be supplied.
Mr. Chalkley commented on the annexes. As stated in paragraphs 6 and
7 of their covering letter the British list would include all the
commodities in the Tariff Commission compilation which was furnished
them some weeks ago and, in addition, consideration of items in
their attached annexes A and B.*
Annex A contains a fairly long list of minor dutiable items not in
the Tariff Commission compilation of which the United Kingdom was
the principal supplier to the United States in 1934. Annex B
includes items in the free list which the British would desire to
have bound. Annex C contains four dutiable items of which the United
Kingdom is the principal supplier but on which the duty has already
been reduced by the maximum allowable. The United Kingdom would
desire that the duties on these items remain as at present. In
addition it is pointed out in paragraph 9 of the letter that the
British might also want concessions on a relatively few items not
yet named of which the United Kingdom is not the principal supplier.
Annex D, Mr. Chalkley said, is merely a record for our information
of complaints received and does not necessarily mean either that the
United Kingdom has been the principal supplier of the items referred
to or that the United Kingdom would insist on concessions on
them.
Mr. Hawkins handed Mr. Chalkley the attached American list54 and covering
statement. Major Heyward remarked that he was a little surprised to
see glacé kid on our “must” list† because on a boat
not long ago he ran into an American manufacturer of glacé kid who
said that as long as the duty remained at 10 per cent he was not
handicapped in exporting to the United Kingdom. What this
manufacturer was afraid of, according to Major Heyward, was that the
[Page 694]
duty would be
increased, in which case the manufacturer anticipated very bad
results to his business. Mr. Domeratsky pointed out that this
manufacturer may not have been representative and that other
American manufacturers may have been adversely affected by the 10
percent duty.
Mr. Chalkley said that he feared that if we insisted on our “must”
list for improvement of treatment we would get no trade agreement.
He emphasized that the British had placed no “must” items on their
list, although he remarked that there were certain products without
concessions on which a trade agreement would not be worth while to
the British. Both Mr. Hawkins and Mr. Ryder stated flatly that we
could not recede from our position on the “must” list and that, in
the light of further study and contacts with the trade, additional
products are certain to be added to it.
Mr. Chalkley emphasized that in view of the contrast between the
Hawley-Smoot rates in the United States and the moderation of the
British tariff rates it was generally considered in the United
Kingdom that we could expect little beyond bindings. Only in a few
special cases had Empire preference harmed our trade and therefore
only in a few instances could reduction of preference even be
considered. It was pointed out to him that certain preferences might
hurt our trade in the future even if for the sake of argument it was
granted that they had not been harmful in the past, but he seemed
unwilling to grant this point. In any case, he said, the United
Kingdom would be compelled to obtain the Dominions’ consent to any
reduction in preference. At this juncture he asked, for his own
information, when the United Kingdom’s trade agreements with the
Dominions expired and he was informed that it was in August 1937.
Mr. Domeratsky pointed out that India had already denounced its
trade agreement with the United Kingdom.
Mr. Chalkley spoke especially of tobacco as involving a problem of
revenue. A concession on tobacco would be likely, he said, to reduce
revenue much needed in a year when a budget deficit is
anticipated.
He remarked that to the extent that improvement in quota treatment
should be granted by the United Kingdom it would be at the expense
of other countries. Mr. Hawkins rejoined that we were not seeking
preferential treatment on quotas; that our requests could be met by
increasing global quotas.
Mr. Chalkley asked us to examine the British list, let him know our
reaction and he would then send it back to London, together with our
list. We indicated that we did not intend to pass hasty judgment and
therefore, to save time, would prefer that he send our list on
immediately for consideration in London. This he agreed to do, while
adhering to the belief that London would prefer to receive both at
the same time.
[Page 695]
Mr. Chalkley asked if he might hold our list at any rate until the
latter part of the following day before sending it to London, in
anticipation of a telephone call from Mr. Hawkins to the effect that
we had receded from our position on the “must” list. He indicated
that perhaps in the light of the fact that the British presented us
no “must” list and in the light of what he said about the probable
dampening effect of our “must” list on British willingness to
negotiate an agreement, we might want to shorten our “must” list.
Mr. Hawkins said that this would be unnecessary as we could tell him
our position at once. Others endorsed Mr. Hawkins’ stand. Mr.
Chalkley then said that he would send our list to London
immediately.
We agreed to study the British requests and to present our comments
on them as soon as possible. It was agreed that each side in
preparing its comments on the other’s proposals would proceed on the
assumption that its own proposals in their main substance and
significance will be accepted.
Mr. Chalkley’s only comment on our main list was that it seemed a
long one. As he thumbed it over he evinced no enthusiasm over
it.
It was reiterated by both sides that everything said to date is said
informally and personally and without official commitment of any
kind; also that publicity will be avoided.
The British Board of
Trade to the Commercial Counselor of the British
Embassy (Chalkley)
[London,] 2 November,
1936.
Dear Chalkley: We should be glad if
you would thank the United States authorities most warmly for
the statement which they provided, and without which it would
have been impossible to comply with their request for a general
statement of our desiderata by the 16th November.
- 2.
- We understand that it is agreed on both sides that the
purpose of the present exchanges of view is solely to enable
both Governments to decide whether a basis for negotiation
exists, and that until a joint decision on this point has
been arrived at no announcement will be made either in the
United States or in the United Kingdom. Meanwhile we trust
that every effort will be made to avoid public attention
being drawn to the question.
- 3.
- We note that the United States authorities do not expect
us at the present stage to suggest any actual rates of
reduction of duties or the re-classification of particular
commodities. We find on examination
[Page 696]
of the American statement that it
would be impossible to do so without consulting the trade
interests concerned. In view of the need for secrecy, which
we too feel, all that we can do is to give a general
indication of the concessions for which we should look, on
the understanding that, if negotiations ensue, more precise
requests would be formulated after such consultation. We
have done our best in the time available to give below as
comprehensive a statement of our desiderata as possible, but
there may be omissions which we should have to rectify in
the course of negotiations if they are initiated. To give
only one example, we have, as you will see from paragraph 7,
been forced to confine our attention to statistics for 1934.
Any announcement of negotiations might give rise to requests
for concessions on a number of commodities which are of
importance to our trade, but of which we were not the
principal supplying country in that year. This contingency
is all the more likely because there is reason to think that
a great many exporters have probably come to the conclusion
in the light of past experience that it is useless to press
for reductions in the United States tariff. Their desire to
recover a footing in so important a market would evidently
be stimulated by any prospect of obtaining concessions, and
many would no doubt produce a very strong case. We must
therefore reserve the right to ask for consideration of
items to which, for this or other reasons (not excluding
clerical errors), we are making no reference in this letter,
should it appear necessary at a later stage.
- 4.
- It is of course possible that the announcement of
negotiations may move industrial or other interests to
suggest the inclusion in the discussions of subjects not
contemplated in this correspondence. This may happen in the
United States as well as in the United Kingdom. Doubtless,
therefore, both sides will wish to reserve liberty to
include other subjects for discussion should the case
arise.
- 5.
- Having regard to the terms of the reciprocal trade
agreements already concluded by the United States and to
repeated official pronouncements by their spokesman, we
assume that any agreement with us would provide explicitly
for unconditional most-favoured-nation treatment as between
the United Kingdom and the U. S. A.
- 6.
- As regards the tariff we should in the first place seek
concessions on the items included in the American statement.
As you point out, several of the tariff classifications
which appear in it are subdivided and in some of the
sub-divisions the interest of the United Kingdom appears to
be small. It may be that in a number of such items we should
be able to limit our requests to the sub-divisions in which
the figures indicate that our interests are predominant. It
may also be that there are some items on which we should
not, on further consideration, wish to press for any
concession. But there
[Page 697]
are few, if any, that we could
eliminate without consulting the trades concerned. Similarly
it is impossible without reference to the trades to suggest
what new sub-classifications would be necessary to limit
concessions to United Kingdom goods, or what changes from ad
valorem to specific rates of duty and vice versa might be
desirable.
- 7.
- We notice that the United States statement omits a number
of items of which the United Kingdom was in 1934 the
principal supplying country. A list of the more important
items on which we should wish to ask for concessions will be
found in Annex A. This has necessarily been compiled from
the United States Trade Returns for 1934, which owing to the
slump is perhaps hardly a representative period. There has
not been time to extract comparable figures for earlier
years, since as you are aware, the statistics for the years
prior to 1934 were compiled on a different basis, and
figures for 1935 are not yet available. This being so,
perhaps the American authorities could furnish further
statistical information in the same form as in the statement
already supplied in respect of the items in Annex A, or at
least in respect of those for which they would be ready to
entertain proposals. While the number of items in Annex A is
considerable, the actual amount of trade covered by the
Annex is not very large.
- 8.
- Neither the American statement nor Annex A contains any
items which are at present on the free list. Some of these
are of importance to United Kingdom trade and we should wish
the American authorities to consider certain
conventionalisations of free entry, or, if that has already
been given, re-conventionalisation. The items we have in
mind are given in Annex B, but it might be necessary after
consulting trade interests to add to this list. There are
also certain dutiable items of which the United Kingdom is
the principal supplying country, but on which the maximum
reductions allowed by the Reciprocal Trade Agreements Act
have already been made. In these cases, particulars of which
are given in Annex C, we may wish to ask for
conventionalisation or re-conventionalisation.
- 9.
- Then there are certain commodities of which the United
Kingdom is not the principal supplying country, but which
are of considerable importance to the United Kingdom. We
note that the United States do not wish us to introduce such
items, as it is contrary to their policy to make concessions
on them. But we observe that trade agreements which they
have concluded with other countries have covered a number of
items of which those countries are not the principal sources
of supply, e. g. gin in the Netherlands agreement. We hope,
therefore, that they would not exclude consideration of any
requests that we might wish to put forward under this head
in the
[Page 698]
light of
such representations as we may receive if negotiations are
opened. We do not anticipate that the list would be very
substantial.
- 10.
- We also attach as Annex D particulars of various recent
complaints which have been received from United Kingdom
traders about the United States tariff: some of them are
already covered by the other annexes. You will notice that
these include a number of cases in which traders complain of
appraisals or classifications made by the United States
Customs. Considerable difficulties have also arisen from the
rigid enforcement of Section 304 of the Tariff Act of
193055a (Marking of Imported Articles). We are
uncertain whether any remedy is available under the
Reciprocal Trade Agreements Act. We put forward the Annex
only as illustrating the sort of cases our traders are
likely to bring to our notice if and when trade negotiations
are announced.
- 11.
- Finally we should wish to ask the American authorities to
consider certain requests on behalf of Newfoundland and the
Colonial Empire. Certain items, such as tea, are already
included in the enclosures to this letter, but there are
others, notably oilseeds and nuts and vegetable and marine
animal oils for consideration. We are not yet in a position
to provide a detailed statement, but the possibilities are
being examined. It is not proposed, of course, to cover
every individual item of Colonial and Newfoundland trade,
and it is expected that the Colonial items to be put forward
would be relatively few in comparison with those put forward
on behalf of the United Kingdom. We do not anticipate
therefore that their inclusion would make our desiderata
unmanageable in number.
- 12.
- To summarise, the United States statement covers most of
the ground on which we should seek concessions, but there is
some further ground which we should hope the United States
authorities would also be prepared to cover.
- 13.
- There are, of course, two sides to every trade arrangement
and, in the absence of knowledge as to the United States
desiderata, we cannot form a judgment of the possibilities
of a successful negotiation. We think it only right,
therefore, to draw attention to the fact that there is
probably not much we could contribute in the way of positive
concessions. Generally speaking, our protective tariff is
relatively low and the grant of tariff reductions in this
field would therefore be a matter of great difficulty, As
regards non-protective items, it would be very difficult in
present circumstances to consider concessions which would
involve loss of revenue (and it must be borne in mind that
the whole purpose of the revenue duties would be nullified
if they were pitched at such a level as to restrict unduly
importations of the goods concerned); while as regards the
duties and preferences
[Page 699]
imposed under the Ottawa Agreements,
we are not in a position to make adjustments except with the
consent of the Dominions concerned. We mention these points
only because we do not want to mislead the United States
authorities as to the possibilities of positive concessions.
On the other hand, there is probably a very considerable
field in which we should be able to consider an undertaking
not to increase existing low duties or not to impose duties
on goods at present free of duty, thus preserving important
features of a tariff under which U. S. A. exporters have
been able to maintain so valuable an export trade to the
United Kingdom.
Yours sincerely,
[Annex 2]
American Statement Regarding Concessions
[Washington,] November 16,
1936.
The attached list of products56 includes those on which concessions in the
form of an improvement in, or a binding of, the present
treatment will be requested.
The list is tentative. If it is decided to enter into
negotiations, further studies and contacts with the trade, as
well as the public hearings required by law, will be necessary.
On the basis of such studies and contacts and hearings additions
to and subtractions from the list would undoubtedly prove
necessary.
It is known now, on the basis of present information and in
advance of public hearings, that among the articles included on
the list on which an improvement in the present treatment will
be essential are products included under the following commodity
headings.
- Hog products, including lard
- Barley
- Rice
- Fresh fruits, particularly
- Apples,
- Pears,
- Grapefruit,
- Oranges (seasonal)
- Dried fruits
- Canned fruits
- Tobacco
- Softwood lumber
- Leather, especially patent leather and glacé kid
