Memorandum by Mr. Rudolf E. Schoenfeld of the Division of Western European Affairs

Dr. Brinkmann, Dr. Imhoff and Dr. Baer, the German group sent to discuss the effect on American-German trade relations of the recent countervailing duty decision, accompanied by the German Ambassador, called on the Secretary this morning at 10:15.

The Secretary told them that he was very glad to see them; that he thought that it was an excellent idea for them to come to the United States to discuss matters; and that he hoped the results of their stay here would be satisfactory.

Dr. Brinkmann said that the recent countervailing duty decision was very serious for Germany. It affected about one-seventh of the existing volume of German exports to the United States. The press, moreover, indicated that it was the intention of the Treasury Department to extend its application to articles other than those now affected. The German Government had felt obliged to take some measures to meet the situation created by the 40% devaluation of the dollar. Because of internal political considerations, the German Government did not devalue its own currency.

The various export devices used by the German Government had been worked out to meet this situation. The German Government had every desire to meet the requirements of the American law. They were conscious of the objectives of American policy looking toward the increase of international trade and though they knew that the question of countervailing duties was within the jurisdiction of the [Page 242] Treasury Department, they hoped that the Department of State would help them in working out ways of meeting the situation.

The Secretary explained to Dr. Brinkmann and his associates that we desired to do everything we could to promote trade. We had begun two years ago, perhaps the worst possible moment, to try to liberalize trade practices. The system of bilateral balancing of trade had led to the existing unfortunate situation. The trade during 1935 of the European States which were following this narrow system was less than it had been in the preceding year. Persistence in the narrow policy had progressively lessened export opportunities. We had tried to get other important trading powers to support our program. Many of them agreed that such a program was their ultimate objective but for one reason or another they did not feel that they could act on it at this time. If all countries waited until it was convenient, we should get nowhere. It was essential to make a start and then dozens of ways of improving the situation would open up. If the great trading countries, like Italy and France, and Germany and Great Britain, had started two years ago, we should be much further along than we are. We felt that the only hope of improvement lay in the favored nation principle.

The Secretary said that he had told Dr. Stucki, the Swiss representative, that if the European statesmen would proclaim publicly that they intended to devise and pursue more liberal trade policies, he was sure that such pronouncements would have a beneficial effect. Instead they agreed privately that these liberal policies were their ultimate goal but nobody really knew about it. He wished that the German statesmen might find it possible openly to support our freer trade policy.

He had explained our policy on a number of occasions to Ambassador Luther. He was glad to have the opportunity to outline our views to Dr. Brinkmann and his associates.

We had made considerable progress in educating the people of this country to the need of a liberal trade policy. It had been necessary to fight against opposition here as well as abroad, but at the present time two-thirds of the American press of both political parties supported our trade program. There was, of course, some criticism from a small section of the press and some of the small bore politicians.

The Secretary said that he had no doubt that the Administration would come through in November and we should then go forward with our reciprocal trade treaty negotiations with the great trading powers.

The Secretary said that he understood that Dr. Brinkmann and his associates were to discuss the question of countervailing duties with officials of the Treasury Department this afternoon. He was sure [Page 243] that the officials there would be glad to talk with them and he hoped that these conversations would be helpful.

The Secretary added that all of his associates in the Department of State would at all times be available and that they would be glad to consider sympathetically such matters as Dr. Brinkmann and his associates wished to present.