Memorandum by the Assistant Economic Adviser (Livesey)

Dr. Meyer brought in a formal note37 in which the German Ambassador on instructions from his Government protests against the Treasury decision announced June 4 imposing countervailing duties on certain imports from Germany.

Dr. Meyer said that the Ambassador had at first felt that he should come in and discuss the matter with the Secretary. On further thought, however, he agreed that it was best not to present general considerations too vigorously and repeatedly but rather to try to see what could be done to improve the situation by conversations among experts.

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Dr. Meyer said that he had talked the matter over during a two-hour conversation with Assistant Secretary Gibbons38 and Acting Chief Counsel of the Customs Bureau Johnson last Thursday or Friday. He had said that without conceding that the practices complained of were subsidies, it was still necessary to recognize that the decision on the point had practically the force of law for Americans. However, it was not a decision of the usual type imposing countervailing duties on a single commodity such as Irish whisky or Latvian butter, but a decision of unprecedented scope which was likely almost to destroy trade between the United States and Germany, possibly force Germany, for lack of foreign exchange, to suspend payments on the Dawes and Young Loans, and to fail to discharge its obligations under the Standstill Agreement. In this connection Dr. Meyer pointed out that when Germany loses its market for Christmas tree decorations in the United States, there was no possible chance of placing the goods elsewhere and making up the loss of exchange which has been suffered. With the very small amount of gold held by Germany, he seriously felt that these suspensions of trade and payments might be inevitable and his mention of these possibilities was not intended in the least to be a threat.

What interested him in the circumstances was not to discuss generalities but to endeavor to see whether some means could not be worked out informally in discussion with the Treasury experts—he knew there could be no formal undertaking—to limit as narrowly as possible the harm to be caused by the countervailing duty decision. He made three suggestions:

That the time for application of the decision be extended as long as possible beyond July 11;
That inasmuch as the practices now acted against have existed and been known for three years, the case for the application of countervailing duties has been so doubtful that the interested officials referred it to the Attorney General for decision, and in the meanwhile American importers acting in reliance on the apparent legality of these practices, had entered into contracts providing for imports at dates much later than July 11, would it not be possible to allow the execution of contracts entered into before the Treasury decision was announced, which cannot profitably be executed if the Treasury decision is applied against them?
Would it not be possible for the Treasury to take informal steps to remove the destructive uncertainty created by the decision, by such measures as indicating for the information of assessors and Treasury agents some maximum and minimum limitations on the application of countervailing duties, determining with more exactitude what rates would eventually apply on individual commodities, and other measures of this kind?

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Dr. Meyer said that trade can adjust itself to known obstacles but that it cannot go on when there is uncertainty as to the costs and terms of transactions.

Dr. Meyer said that he had made these suggestions without instructions from his Government, but when instructions were received last Saturday, he was gratified to find that they were not disapproved. He asked whether he might not be again referred to the Treasury to inform them of the note he was delivering to the Department of State, and to continue the search for ameliorative expedients. Perhaps the Department of State would lend some assistance by some high official telephoning Mr. Taylor39 or Mr. Gibbons and expressing the opinion that serious consideration should be given to Dr. Meyer’s suggestions and expressing the hope that something satisfactory might be worked out through them. However, if anything of this kind were done, he hoped care would be taken that no impression be created that he was appealing to the State Department from the Treasury officials. In fact he had the highest opinion of Mr. Gibbons and particularly of Mr. Johnson’s legal skill, he really felt that he could get along very well with them without the intervention of the Department of State, and he did not want to give the impression that he was running around talking with everyone about the execution of Section 303 of the Tariff Act. He could explain to them that he had had to come to the Department of State to deliver the formal note, that he had naturally had an informal discussion of the matter, including a statement of points he had already raised with them. With these precautions as to the Treasury susceptibilities, Dr, Meyer hoped that some high official of the State Department might express to the Treasury its hope that practical expedients might be found to limit the damaging effects of the countervailing duty decision.

I told Dr. Meyer that he already had been referred to Mr. Gibbons, and had entrée there, and desiring to have urgent consideration of the problem, the Department would certainly have no objection to his calling again on Mr. Gibbons and letting him have, as Dr. Meyer had suggested, a copy of the German Government’s formal note.

I asked Dr. Meyer to repeat his three points. In doing so, he again referred to the wide scope of the destructive effects of the decision, and mentioned that if the United States did not in some manner meet Germany half-way, and therefore the full destructive possibilities of the decision became effective, the destruction of trade, employment, payments, et cetera, might react unfavorably on public opinion regarding the Secretary of State’s trade policies. He remarked that unfortunate incidents were constantly happening on both sides of the fence. He referred to Dr. Schacht’s address in Athens reported in [Page 233] the New York Times this morning, June 15, in which Schacht had praised the regime of bilateral balancing of trade. He said the Embassy had already telegraphed Berlin excerpts from this article and had called attention to the effect it would have in the United States. He said he knew that as a matter of fact Schacht does not feel the way he is quoted as speaking. His remarks were evidently intended to cater to the opinion of those before whom he was speaking.

I told Dr. Meyer I would report our conversation to higher officials of the Department, who, he could be assured, appreciate the importance of the matter.

Dr. Meyer said he would be glad to come in and discuss the matter with Mr. Sayre or any other high official at any time that they indicate. He is asking Mr. Gibbons for an interview this afternoon or tomorrow morning—Dr. Meyer will be out of town Wednesday.

As he was leaving, Dr. Meyer said that the Foreign Office had been so closely in harmony with his suggestion that practical expedients for taking care of this tremendously important situation be found, that it had suggested willingness to send two experts from Berlin to discuss such expedients with the Treasury. Dr. Meyer said that this was a very unusual course of action. He said that he hoped that the State Department could support the effort to find practical expedients and perhaps even arrange to have someone from this Department sit in meetings with him and Mr. Gibbons or Mr. Johnson to work out such expedients. He again emphasized that whatever was done along this line would of course have to be informal—there was no possibility for formal agreements as to the interpretation or execution of the law.

  1. Infra.
  2. Stephen B. Gibbons, Assistant Secretary of the Treasury.
  3. Wayne C. Taylor, Fiscal Assistant Secretary of the Treasury.