865.4061 Motion Pictures/64b: Telegram

The Secretary of State to the Ambassador in Italy ( Phillips )

133. Department’s mail instruction 736, August 31. Motion Picture interests now inform the Department that the regulations in question are in operation and that unless relief can be obtained it will be necessary for those interests to close out their business in Italy. I wish you would again take up this matter both orally and in writing with the appropriate authorities.

The objections to a trade practice of this sort are obvious. The principles underlying it could be extended to any line of trade where foreign goods are competitive with domestic, and there is a desire on the part of a Government or its domestic interests to build up home industry. It is infinitely more than a protective tariff, which already exists in Italy, as well as burdensome dubbing fees and taxes. Regulations or laws designed to oblige foreign industry to subsidize domestic industry are contrary to all principles of international trade.

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If the Italian regulations in question are maintained there would seem to be no alternative except for this great American interest to close out its offices in Italy and withdraw. It is indicated that the industry could not possibly continue its operations in Italy on a basis whereunder only 20 to 25 percent of its return is permitted to be withdrawn from Italy. Any restriction of this character would probably prove to be too burdensome to the industry in question.

Objectionable as they may be at any time, these regulations come at an extremely inopportune time, insofar as trade relations between the two countries are concerned. Coming at a time when there is renewed hope that the trade relations between the two countries may be established on a new and mutually satisfactory basis, the Department has no other alternative but to view this move on the part of the Italian Government with deep apprehension. It also comes at a time when as a result of the realignment of the Italian currency, the sale of American products in Italy may become increasingly difficult, and the sale of Italian products in the United States is facilitated. As a result of currency devaluation in certain European countries, including Italy, there has developed a strong sentiment in certain quarters of the United States to establish corrective trade barriers against the influx of goods from those countries. In order to withstand and defeat this growing sentiment, the Department must have in its hands evidence of a desire on the part of foreign countries to facilitate American exports to those countries. This recent move on the part, of the Italian Government is directly opposed to this idea.