The Secretary of State to the Minister in Czechoslovakia (Wright)

No. 113

Sir: Reference is made to your despatches No. 367 of January 10, 1936, No. 382 of January 31, 1936, and No. 388 of February 8, 19366 reporting prospective difficulties in the importation of American coal tar dyes and walnuts into Czechoslovakia, and to the various other reports relating to discrimination by Czechoslovakia against American merchandise, notably despatch No. 288 of October 4, 1935,7 entitled “Report on Temporary Trade Agreement”.

I am of the opinion that the exchange of notes of March 29, 1935, has not by any means resulted in the elimination of all Czechoslovak discrimination against American products, nor has it promoted the most desirable trade relations between the United States and Czechoslovakia. I therefore propose, through your Legation, to bring this matter once more forcibly to the attention of the Czechoslovak Government. There is accordingly enclosed a note which you are requested to present at the earliest possible moment. You will observe that the method of presenting the facts in connection with each case of discrimination is left to your discretion, which procedure will presumably enable you to protect your sources of information, should you judge it expedient to do so.

[Page 29]

In making your representations it will be well to keep in mind the two-fold aspect of this Government’s dissatisfaction with the operation of the present agreement:

(a) In the first place the United States has not been accorded most-favored-nation treatment within the limits specified by the modus vivendi. During the period of the agreement there has been actual or threatened discrimination against the trade in products of United States origin in favor of the trade in products of other nations, exclusive of Austria, Hungary, Rumania and Yugoslavia. American products subject to discriminatory treatment include automobiles, apples, lard and raisins; discrimination is threatened in the case of walnuts, dyes, oranges and grapefruit. Such instances of preferential tariffs, duty refunding, preferential import permit allocations, seasonal or other embargoes applied so as to discriminate against the United States are all obviously in violation of the modus vivendi. Although you may not be able to adduce incontrovertible evidence proving each instance of discrimination, it is apparent that, in fact, American goods are not receiving that fair and equitable treatment which was to be expected as a result of the modus vivendi of March 29, 1935, and it is this aspect of the case I wish you to stress.

You are authorized to amplify this protest by including representations concerning exchange allocation, in the light of the undertakings expressed in the Czechoslovak Minister’s unpublished note of March 29, 1935, a copy of which is enclosed.8 Furthermore, you may mention the series of petty annoyances to which American trade is subject in such manner and detail as you may decide. It is suggested that you request an early reply to these representations.

(b) Secondly, not only am I convinced that Czechoslovakia has in fact violated the agreement, but I also feel that the terms of the agreement, by granting temporary reservations regarding Danubian preferences, are too broad and indefinite. In this respect reference may be made to the aide-mémoire given the Czechoslovak Minister in Washington on November 27, 1935, to which no reply has been received. A copy is enclosed of this memorandum,9 which indicates that the terms of the existing agreement, particularly with respect to Danubian preferences, have not been found satisfactory in practice. You are, therefore, authorized to express the dissatisfaction of this Government with the manner in which the exceptions to the modus vivendi relating to preferences in favor of Austria, Hungary, Rumania and Yugoslavia have been applied, as well as with the indefinite character of those exceptions.

[Page 30]

Neither the aide-mémoire of November 27, 1935, nor the present note is intended to initiate negotiations for a possible trade agreement. The former was given in response to a request of the Czechoslovak Minister, and was intended to clarify and define the scope of Danubian preferential arrangements and to give notice to the Czechoslovak Government that the United States was not convinced that it was receiving equitable treatment under the modus vivendi. The present note is intended, if possible, to bring about the removal of discriminatory practices and to notify the Czechoslovak Government that the United States cannot indefinitely grant most-favored-nation treatment and the consequent benefit of reduced duties resulting from the trade agreements program to Czechoslovakia if it continues to countenance discriminatory practices in violation of the exchange of notes of March 29, 1935.

Should the Czechoslovak officials attempt to complicate the issue by raising the question of Danubian preferences, which it may have extended to the commodities involved, it is believed that you can show evidence of discrimination against the United States by the extension of more favorable treatment to countries other than Danubian in every case. Furthermore, you may reply that the United States is not disposed to discuss Danubian preferences further until such time as it receives a reply to the aide-mémoire of November 27, 1935, and on the basis outlined therein.

It is recognized that under the Czechoslovak system of control of foreign trade it will be most difficult to insure the complete elimination of discrimination. I prefer of course not to abrogate the modus vivendi, but I am of the opinion that unless Czechoslovakia is prepared to assure to American merchandise more equitable treatment than it now enjoys, it may become necessary to withdraw most-favored-nation treatment from Czechoslovak goods entering the United States, following abrogation of the modus vivendi.

It has been planned to allow you considerable freedom in the method you may employ in discussing the commodities concerned with the Czechoslovak authorities since your familiarity with the details of discriminations will enable you to present the attitude of this Government in the most forceful and effective manner. You will presumably wish to have the Commercial Attaché accompany you when the time comes to take up in detail the individual commodities which are being discriminated against.

I desire, of course, to be kept fully informed of developments, and will welcome any suggestions or comment which you may care to make.

Very truly yours,

Cordell Hull
[Page 31]

The Department of State to the Czechoslovak Ministry for Foreign Affairs

The American Government desires to bring to the attention of the Czechoslovak Government a matter to which it attaches considerable importance.

It will be recalled that by an exchange of notes between the Secretary of State and the Czechoslovak Minister in Washington on March 29, 1935, a temporary agreement was arranged which regulated the commercial relations between Czechoslovakia and the United States. The principle underlying the agreement is that of the most-favored-nation treatment with respect to customs duties, exchange permits and quotas.

The American Government has not departed from that principle and no discrimination against Czechoslovak goods has been operative either at the time of importation into the United States, or with respect to the sale or use of such imported goods. On the contrary, all reductions in the customs duties of the United States are automatically and immediately applied to merchandise imported from Czechoslovakia.

It must be observed, with regret, that the converse has not been true. American goods imported into Czechoslovakia have not uniformly enjoyed treatment as favorable as that accorded to similar commodities from other countries. The repeated protests of the representatives of the United States in Prague to the appropriate officials of the Czechoslovak Government bear witness to the many instances of discrimination against goods of American origin. These protests have failed to correct this unfortunate state of affairs, with the result that while all Czechoslovak merchandise enjoys unconditional most-favored-nation treatment when imported into the United States, not all American products imported into Czechoslovakia are accorded such treatment.

The Czechoslovak Government will appreciate the fact that this inequality of treatment cannot fail to be regarded with concern by the Government of the United States. It is a matter of common knowledge that the American Government’s policy is to foster and to stimulate the commerce between the United States and other nations, but the basic condition upon which it insists is that most-favored-nation treatment be accorded, reciprocally, to its commerce.

The American Government regrets to state that it is convinced that it is not receiving most-favored-nation treatment in a number of important cases, the details of which will be communicated by the American Minister in Prague for the consideration of the Czechoslovak Government. The Government of the United States confidently hopes that the Czechoslovak Government will take prompt and effective [Page 32] action to remove the disabilities under which American trade with Czechoslovakia is laboring at the present time, in order that the Government of the United States will not be compelled to envisage the possibility of denouncing the temporary agreement of March 29, 1935, and of taking such other action as may be provided by its laws.