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

When Dr. Hans Hartenstein came to see me with Dr. Meyer28 on February 4 [3], we discussed our withdrawal of most-favored-nation treatment of German imports. Dr. Hartenstein had little to suggest in the way of a solution of German-American trade relations that had not been suggested by Dr. Bitter last October.29 He frankly admitted that Germany could not at once give us most-favored-nation treatment on exchange allocation. He said, however, that he was giving continued study to this matter and I suggested that he might care to make some quite informal suggestions which we could study. [Page 222] He said he would do this, sending any plan he had to Dr. Meyer who in turn would give it to me informally.

Dr. Meyer called today and said the German Embassy had received a cable this morning outlining a suggestion for the reestablishment of most-favored-nation treatment by Germany through the plan attached herewith. I discussed this plan with Dr. Meyer, for I at once saw certain objections to it. I stated, however, that it would be given the most careful study and that I would talk to him later. I suspect suggestion of a plan has been influenced by the information which the German Government has regarding countervailing duties on German imports into the United States. Dr. Meyer called my attention to the fact that the German Government was now making payments on the Dawes-Young loans and was showing in other respects a desire to develop good will with the United States. He, of course, made no direct reference to the prospects of countervailing duties on German imports.

While the outline of the attached plan is not entirely clear, it does indicate certain interesting developments in German policy. It seems to indicate a willingness to depart from the established German policy of bilateral balancing.

H[enry] G[rady]

The German Governments Suggestions

(1) Re-establishment of reciprocal unconditional most-favored-nation treatment.

(2) Assurance of allotment of foreign exchange on the principle of a “representative period”, such allotment to be subject to deductions if warranted by the foreign exchange situation.

Insofar as there are import embargoes and monopolies in force in Germany, appropriate quotas and shares in the monopolies will be accorded. Normal year to be 1933 or average of years 1931 to 1933. It is taken for granted that Aski and private compensation transactions will be allowed to continue to the same extent as heretofore. Extent of foreign exchange allotment and of quotas will not be made dependent upon German export volume. Tendency is gradual increase of American imports. Temporary goal to be attained: no restriction of importation of any commodity below the level of 1935, on the contrary, an average increase of at present 10 percentum over 1935 ought to result.

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In selecting commodities the importation of which is to be increased, American wishes will be given every possible consideration.

(3) The ratio 1:3 for private compensation transactions is discontinued as far as foreign exchange is allotted as outlined above.

(4) Provision of an anti-dumping clause as agreed upon in the exchange of notes between the Department of State and Netherlands Director of Trade Agreements.30

(5) Duration of such a provisional agreement to be one year, subject at any time to notice of intention to terminate it, if development of foreign exchange situation renders impossible allotment of foreign exchange, as outlined under (2).

  1. Ernst Wilhelm Meyer, First Secretary of the German Embassy in Washington.
  2. Karl Hitter, Head of the Economic Section of the German Foreign Office. See Foreign Relations, 1935, vol. ii, pp. 438 ff.
  3. Reciprocal trade agreement between the United States and The Netherlands, signed December 20, 1935, Department of State Executive Agreement Series No. 100, or 50 Stat. 1504.