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

No. 156

Sir: The Department encloses a note (date left open) which it desires you to transmit to the Czechoslovak Minister of Foreign Affairs. Two copies of the note for your files are also enclosed.

As you will observe, the position taken by the Department with reference to American trade with Czechoslovakia is that (1) the Czechoslovak Government must unilaterally take steps to insure to our commerce the equality of treatment provided by the modus vivendi of March 29, 1935, and the confidential note of the same date;21 and that (2) this government will not bargain in order to remove discriminations which exist in contravention of the terms of the agreement.

The Department takes this opportunity to congratulate you and your staff for the able execution of your instructions in discussing trade problems with the Czechoslovak officials. It is not satisfied, however, that the Czechoslovak Government’s assurances or proposals, as reported in your despatches, do in fact guarantee at all adequately most-favored-nation treatment to our trade. Accordingly, it will be necessary for you, at the time of presenting the enclosed note, to re-emphasize the Department’s opinion on this subject, and to reiterate that this Government, while asking no specific trade concession, must insist that its trade with Czechoslovakia receive, without exception, no less favorable treatment than the trade of any non-Danubian country, as provided for in the modus vivendi and the confidential note of March 29, 1935.

You should convey the impression that your Government views with deep concern the constant disabilities that are being put in the way of American trade in Czechoslovakia; that your Government’s concern [Page 49] relates not only to the discriminations involving individual items such as you have already called to the attention of the Czechoslovak Government, but also to the general discrimination which the Czechoslovak Government is practicing against American commerce by the inequitable allocation of foreign exchange; and that this latter consideration is of the greater importance in view of the Czechoslovak Prime Minister’s recent declarations respecting the new policy of diverting trade to those countries with which Czechoslovakia has clearing agreements. You may make it clear that unless the Czechoslovak Government finds it possible to correct these disabilities within the very near future, the Government of the United States does not propose to continue extending trade benefits to Czechoslovakia, and that early consideration will be given to the abrogation of the existing commercial arrangement.

With respect to the individual items of trade discussed by you with the Czechoslovak authorities, the Department encloses résumés22 of the views of the interested Departments of this Government on the results of your representations. Each product is treated separately. These ten memoranda are for your information and guidance, and are not for communication to the Czechoslovak Government. They indicate approximately what the Department would consider as acceptable treatment. In the event the Czechoslovak authorities approach you with a concrete suggestion concerning the proposed treatment to be accorded a specific commodity, you are authorized to state, if the proposal falls short of the treatment indicated in the memoranda, that in your opinion, it would not be acceptable. On the other hand, if the proposal seems to be acceptable, you should not commit this Government in any way by agreeing to it; rather, you should suggest that the proposed treatment be put into practice and that your Government will determine its acceptability by actual results. In your conversations you should always fall back on the position that you are not asking for specific concessions, quotas, duty reductions or favors of any kind; your Government merely asks that the treatment provided for in the modus vivendi be accorded to our trade.

For your information and background purposes there are enclosed two memoranda prepared by the Tariff Commission23 showing the Czechoslovak imports into the United States affected by existing trade agreements; a memorandum prepared in the Department, dated September 22, 1936,23 covering (1) the application of the modus vivendi to quantitative restrictions; (2) the relation of most-favored-nation treatment to the Czechoslovak-French automobile cartel; and (3) the proposed Czechoslovak reservations regarding foreign exchange; [Page 50] and a copy of a note received from the Czechoslovak Chargé d’Affaires ad interim in Washington, dated October 8, 1936.24

Kindly telegraph on what date you present the enclosed note to the Czechoslovak authorities, as I plan to hand a copy thereof to the Czechoslovak Chargé d’Affaires in Washington on the same day.

Very truly yours,

R. Walton Moore

The Department of State to the Czechoslovak Ministry for Foreign Affairs

Upon instructions from his Government, the American Minister in Prague delivered to the Czechoslovak Foreign Office a note from the Secretary of State of the United States dated April 7, 1936, which drew to the Czechoslovak Government’s attention the provisions of the modus vivendi of March 29, 1935, and requested that Government to grant to products of United States origin the equality of treatment provided for in that modus vivendi.

Supplementing this note, the American Minister entered into a series of discussions with the appropriate Czechoslovak authorities with regard to certain specific trade problems and their relation to the modus vivendi. The result of these conversations has been in effect that the Czechoslovak Government has given various assurances and has made several proposals with respect to a portion of the difficulties discussed.

The Government of the United States appreciates the spirit which animated these assurances and these proposals. It regrets to observe, however, that the Czechoslovak Government has apparently overlooked the essential point and purpose of the Secretary of State’s note of April 7, 1936. It can only reiterate that the modus vivendi of March 29, 1935, provides for unconditional most-favored-nation treatment, including fair and equitable treatment with respect to quotas and the allocation of foreign exchange. Exception to this principle is provided only in respect of the treatment which Czechoslovakia accords or may accord to the commerce of certain Danubian countries. In full compliance with its obligations under the modus vivendi the Government of the United States extended to Czechoslovak commerce, immediately and without request, the numerous benefits ensuing from the American trade agreements program. The Government of the United States had hoped that once the existing discriminations against [Page 51] products of the United States had been drawn to the attention of the Czechoslovak Government by the American Minister at Prague, the Czechoslovak Government would of its own initiative and at once proceed to correct the situation. This Government feels that it should not be obliged to call to the attention of the Czechoslovak Government each case of discrimination against American commerce, but that it should rely upon the Czechoslovak Government to see that discrimination is not practiced against that commerce. Nor should the Government of the United States be expected to negotiate for the removal of the existing discriminatory handicaps under which American trade is now obliged to operate. In this connection it wishes to emphasize that it does not consider the representations made by its Minister in Prague as a negotiation or as the preliminaries of a negotiation, and it cannot accept the invitation implied in the Czechoslovak Government’s replies to the Minister to enter into negotiations concerning these discriminations.

In view of the Note of October 8, 1936, handed to the Secretary of State by the Czechoslovak Chargé d’Affaires ad interim, in which the Czechoslovak Government expressed its desire to exert every effort in contributing towards a relaxation of international trade barriers and exchange control, the Government of the United States expects the more confidently that the Czechoslovak Government will immediately take steps to correct those discriminations which operate against the commerce of the United States.

As pointed out in the Aide-Mémoire which was handed to the Czechoslovak Minister at Washington on November 27, 1935, the Government of the United States does not regard the modus vivendi of March 29, 1935, as constituting a satisfactory permanent basis for its commercial relations with Czechoslovakia. Nevertheless, so long as the temporary agreement remains in effect the United States will continue to grant to Czechoslovak commerce the favorable treatment guaranteed by that agreement. The Government of the United States, however, must emphasize the reciprocal character of its policy whereby it extends most-favored-nation treatment to the commerce of other countries, provided that they do not discriminate against American commerce. Unless, therefore, the discriminations which are being practiced in Czechoslovakia against American commerce are corrected, the Government of the United States will find it necessary to consider giving notice at an early date of the abrogation of the existing commercial arrangement and to consider the withdrawal of the benefits now being accorded by it to the commerce of Czechoslovakia.

Washington, . . . . .

  1. For text of confidential note, see Foreign Relations, 1935, vol. ii, p. 147.
  2. Not printed.
  3. Not found in Department files.
  4. Not found in Department files.
  5. Ante, p. 46.