Memorandum by the Secretary of State

Dr. Leitner, Counselor of the German Embassy, called to say goodbye prior to leaving for Berlin where he stated he would be located and given charge of the political side of the work of the Foreign Office and charge of the division known as “American Nations”.

After expressing personal friendliness and many sincere regrets at his departure, and strongly commenting on the very fine official record of service Dr. Leitner had made here in Washington, I remarked that I was especially gratified on the other hand to learn that he would be in the Foreign Office, as a result of which our two Governments [Page 226] could, I hoped, deal much more understandingly and hence mutually beneficially with each other. I then stated that, of course, I had all along understood the viewpoint of his Government and his people with respect to some of the political questions, especially those relating to the Versailles Treaty; that now that his Government was getting those phases behind it, the question of permanent economic policies, in my judgment, would become all-important alike to his country and mine, as well as to other important countries. I then undertook to elaborate by saying that of course our countries could proceed further in support of the narrow, bilateral trading method, surrounding it with every sort of clearing arrangement and an increasing number of other arbitrary and artificial and short-sighted devices, but it would be with the certain knowledge that fundamentally such narrow course would only make things gradually worse; that if all the important countries like Germany and the United States should continue for an indefinite time to adhere to narrow commercial policy, upon the theory that sooner or later they would gradually embrace a broad and liberal policy such as the United States is pursuing at present, it would be questionable whether the nations would ever consider themselves prepared to halt and embark upon the broader course; that an inevitable result, as experience already had demonstrated, would be more chaotic economic conditions both internally and externally, more unemployment, lower living standards, less production and distribution, more tendencies in military directions, more attempts at huge armaments by most countries or all countries, and resultant grave danger politically, economically and socially, and in every other important respect.

I then, without mentioning names, pointed out to him my recent experience with another important trading nation, which, while agreeing that the reciprocity program of the United States was the only wise policy for suitable trade and economic recovery, persists in going steadily forward with all of the narrow and arbitrary practices and methods and devices that constitute a part of the exclusive bilateral trading policy, with the result that that country was not really getting anywhere temporarily with its foreign trade, but, far worse and more important, that such narrow course was seriously obstructing the United States Government in its efforts to carry forward its program of liberal commercial policy for the normal restoration of international finance and trade; that the United States Government was continuing, at some real sacrifice, to wage a fight for economic liberalism, the benefits of which went alike to other important trading nations, and that no one of such nations should overlook this phase; that if each country pursuing narrow commercial policy should cling to the idea of following this course for an indefinite time in the future, upon the theory that it might get some temporary advantages [Page 227] or benefits, or in any event until the time and conditions would be more propitious for it to halt and move in the direction of liberal commercial policy,—such fatuous plan would inevitably prove disastrous, for the reason that the time would never be deemed just exactly propitious for such basic change of economic policy.

I then made special reference to Germany and to her ability, under her present narrow and arbitrary and artificial trade and financial policies, which I enumerated, to displace a substantial portion of the United States markets in Latin America, adding that Germany was not increasing her international trade by this narrow policy; that she was exporting considerable capital; that she could and would to an important extent, by arbitrarily and artificially displacing our Latin American trade for example, handicap the United States Government in its efforts to carry forward its present program for trade restoration. I stated that this Government itself could, of course, pursue the same narrow course, but it would be like taking opium, it would leave this Government worse off in the long run, just as it was leaving all the important nations of Europe worse off. I called his attention to our refusal to sell German agencies 800,000 bales of cotton for the reason that it would discredit and break down the central point in our liberalized trade agreements program. I concluded with the suggestion that I felt encouraged to know that Dr. Leitner would be in the Foreign Office in the capacity already defined, and that, no doubt, he would exercise himself in the direction of broad commercial policy such as this Government is pursuing and that he would persuade his Government to do likewise.

Dr. Leitner very emphatically expressed his appreciation of the fight this Government is making for broad trade restoration, his approval of this course, and he concluded by saying that he would strive to induce his Government to join in its support, and finally added that it would do so.

C[ordell] H[ull]