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

611.41D31/44

Memorandum by the Chief of the Division of Trade Agreements (Hawkins)

[Washington,] August 5, 1936.

Conversation:	Mr. Robert Brennan, Secretary of the Irish Free State Legation,
	Mr. Harry Hawkins,
	Mr. Samuel Reber.3

At various times since the enactment of the Trade Agreements Act,⁴ the Government of the Irish Free State has indicated a very strong interest in negotiating a trade agreement with the United States. This interest arises from the fact that American exports to the Irish Free State exceed by a very wide margin our imports from that country. On the occasion of Mr. Sayre’s conversation with Mr. De Valera in Dublin on August 29, 1935,⁵ Mr. De Valera spoke of the large excess of imports into Ireland from the United States and indicated that the negotiation of a trade agreement was essential in order to correct this situation. When asked by Mr. Sayre regarding the concessions which the Irish Free State would seek in the American tariff, Mr. De Valera mentioned beer (stout), whiskey, horses and cattle as being of primary interest. The interest of the Irish Free State in negotiating a trade agreement was followed up on subsequent occasions but these overtures met with the response that this Government was fully occupied with numerous other negotiations. The experience of Germany in negotiating with the Irish Free State indicates clearly that we should avoid any such negotiations, the sole purpose of which from the standpoint of the Irish Free State would be to modify the present favorable balance of trade between the United States and that country.

The purpose of Mr. Brennan’s call was to remind us again of his Government’s desire to negotiate a trade agreement with us. He again stated that such negotiations were imperative in view of the fact that the trade balance between the two countries is so heavily adverse to the Irish Free State. He submitted the following statement showing the trade between the two countries since 1931:

“Balance of Trade Between Saorstat Eireann and United States of America

“According to Irish Free State published statistics the balance of trade has for many years been heavily in favor of the United States of America.

	Imports from U. S. A. to Irish Free State	Exports from Irish Free State to U. S. A.
	£	£
1931	2,044,359	393,437
1932	1,320,211	103,282
1933	1,054,404	153,219
1934	1,863,826	122,073
1935	2,353,000	177,000
1936 (5 months)	1,365,000	90,000

“Up to the 31st March, 1935, the above figures are compiled on the basis of country of consignment. Subsequently to the 31st March, 1935, they are compiled on the basis of country of origin.”

After some inconclusive discussion as to the accuracy of these figures, particularly in view of the substantial proportion of our trade with the Irish Free State which passes through the United Kingdom and is credited in the statistics to the latter country, it was pointed out to Mr. Brennan that whatever the situation may be as regards the balance of trade in merchandise, a very misleading picture of the situation is obtained if only the visible items in the balance of payments are taken into account. In 1935 our statistics show on our credit side merchandise exports of $7,260,000. On the debit side two items account for nearly twice that amount, namely, expenditures of American tourists in the Irish Free State, $2,000,000, and immigrant remittances to that country, $11,000,000. These figures are taken from the United States Department of Commerce Publication, “The Balance of International Payments of the United States in 1935”, a copy of which was sent to Mr. Brennan. He indicated that he was not familiar with the above facts and seemed to realize that they give the situation a rather different complexion than that which he presented.

We pointed out to Mr. Brennan, however, that from the standpoint of American commercial policy the balance of payments situation is not significant; that it is not our policy to seek to bring about a balance with each country; that the state of the merchandise balance results from natural factors; that artificial adjustments tend to be effected merely by scaling down the excess exports with a consequent reduction in the total trade; and that our policy is designed to promote multi-angular trade as the only means of bringing about an expansion of world trade.

We reminded Mr. Brennan that in negotiating trade agreements the established policy of this country is to grant concessions only on products of which the country concerned is the chief source of importations into the United States. It is necessary to follow this policy because the granting of concessions to countries which are secondary sources would impair the basis for bargaining with the countries which are the principal suppliers. We pointed out that there are very few if any products of which the Irish Free State is the chief source. Consequently the concessions which could be granted would be very limited indeed. However, countries which are secondary suppliers of the American market (such as the Irish Free State) nevertheless stand to gain substantially from our trade agreements program in consequence of our policy of extending to such countries which do not discriminate against our commerce the benefit of the concessions which we make to the principal suppliers. We pointed out that the Irish Free State has already received substantial benefits from this policy. It has obtained concessions on all four of the items which Mr. De Valera had indicated to Mr. Sayre as being of prime importance to the Irish Free State. Subsequent to the discussion referred to the duty on whiskey was reduced by fifty per cent in the Canadian agreement⁶ and extended to the Irish Free State. The duties on cattle, including dairy cows, and horses were also reduced in the Canadian agreement and extended to the Irish Free State. The duty on beer (stout) had been reduced by fifty per cent under the flexible provision of the Tariff Act⁷ not long before Mr. Sayre’s visit to Dublin. In addition to these benefits which the Irish Free State is receiving under the operation of the most-favored-nation principle, concessions of some interest to that country which have been made in trade agreements with other countries include pickled herrings, certain kinds of cheese and certain textiles. It was pointed out to Mr. Brennan that these benefits and all concessions made under future trade agreements, which in all probability will include a number of interest to the Irish Free State, will continue to be extended to that country as long as it grants nondiscriminatory treatment to American commerce.

We stated that the above considerations seem to indicate that the best procedure would be for each country simply to continue to give most-favored-nation treatment to the other, rather than to attempt to negotiate a trade agreement. In this way the Irish Free State would continue to enjoy the concessions which it has already obtained and would benefit from all concessions made by the United States in trade agreements with other countries on other products in which the Irish Free State is interested.

Mr. Brennan admitted that there was a good deal to be said for the views above set forth. He indicated that he would consider the matter and would call again if there were any further aspects which he thought should be discussed.

3. Second Secretary of the Embassy at Rome, temporarily in the Department of State.
4. Act of June 12, 1934, 48 Stat. 943.
5. See memorandum by Assistant Secretary of State Sayre, September 25, 1935, Foreign Relations, 1935, vol. ii, p. 61.
6. Signed November 15, 1935, Department of State Executive Agreement Series No. 91, or 49 Stat. 3960.
7. Tariff Act of 1930, 46 Stat. 590.