865.4061 Motion Pictures/74
The Ambassador in Italy (Phillips) to the Secretary of State
[Received October 28.]
Sir: I have the honor to inform the Department that the substance of its instruction No. 133 of October 9, 3  p.m., regarding the prejudicial regulations governing the importation of films into Italy, was brought to the attention of Prof. Felice Guarneri, Undersecretary of State for Trade and Exchange, by the Commercial Attaché both orally and in writing, and to submit herewith the following report of the conversation on the matter between the Undersecretary and the Commercial Attaché:
Professor Guarneri said that he was glad that the Commercial Attaché had called as pressure of work had delayed his sending us a written communication after the Department’s Memorandum of August 31st was presented to him, but he promised to write when [Page 366]certain details were decided upon in new regulations which he would issue shortly. This might be by the latter part of next week.
He said that after receiving the Department’s Memorandum of August 31st, he had told the Ministry of Press and Propaganda that the proposed requirement must be abandoned which required that earnings in Italy of foreign film companies in excess of the quotas allocated for exportation must be invested in Italian film production. He insisted to the said Ministry that Italy’s commercial relations with the United States could not be allowed to be perturbed by such a requirement. He remarked that he was not one of those who believed that a motion picture industry could be created by compulsion.
As a result of his insistence, in the new regulations which will soon be issued, this objectionable point is excluded. “I realize that you would ask,” he said, “for the abolition of all quotas on the importation of films, but this is impossible in view of the state of our international balance of payments.” What would be done, however, would be to allot a quota of 15 million lire or so of funds which can be exported by the representatives of the foreign film companies, the greater part of which sum will go to American companies. Within the global sum, allocations will be made by the Theater Federation to the individual companies. A company will be free to transfer abroad earnings up to its allocated quota. Beyond that quota limitation it will be free to introduce or not films extra quota, but with the realization that the earnings in excess of the quota can not be exported. The excess funds may be used in Italy in any way the company may select. Specifically, it will not be required that the money be invested in Italian film production—or invested at all for that matter; it may be left in the banks, if the companies so choose. That is the companies’ affair; the Government simply absolves itself in advance from any obligation relating to the transfer of such extra-quota funds.
Professor Guarneri’s explanation of the forthcoming regulations was substantially consistent with the information given to the distributors in the meeting of the Theater Federation on October 8th, as outlined in the Embassy’s cable to the Department of the same date.32 The distributors were told that exportable funds would be limited to 16 million lire; Guarneri spoke of approximately 15 millions. The distributors understood that while extra-quota earnings did not necessarily have to be invested in the Italian film industry, they could not be left idle but must be invested in some form or other. Guarneri indicated that they could be invested in any manner or left in the banks as the owners might choose.[Page 367]
As to the disposition of past earnings which have not yet been transferred, Professor Guarneri was not explicit, but he indicated that those would not constitute a problem.
The attitude of the discussion was exceedingly cordial, and he said that apart from the regulations about to be issued it was possible that in the general framework of a hoped-for new basis of trade relations with the United States more liberal dispositions might eventually be possible.
I have the honor to add that Mr. Charles C. Pettijohn, General Counsel of the Motion Picture Producers and Distributors of America, called at the Embassy and discussed with me the general subject of the importation of films into Italy and submitted a Memorandum, of which a copy is enclosed,33 containing observations on the matter from the point of view of the Paramount interests.
I shall not fail to communicate to the Department any further developments in connection with this matter.