865.4061 Motion Pictures/92: Telegram

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

527. Your telegram No. 179, December 14. It is indeed difficult to understand the attitude of the Government here. While the oral assurances given to Mr. Hays and to me settled all the points in our favor the American film interest naturally desired to have something; in writing on which to proceed.

We have been in daily touch with the authorities here and have been pressing for such written assurances. Yesterday I received a note from Count Ciano [in] which, while agreeing to the allocation of 20 million lire for American films 3,000 of which are for the benefit of American films imported by Italian companies and the balance of 17 million for American companies, he declines any relief on points 1 and 3.

I did not report the receipt of this note to you yesterday because I have no intention of letting the matter rest at this point and to say that I am astonished and dismayed by this method of Government dealing on the part of the Italians is putting it mildly.

The only possible explanation is the determination of the Department of Trade and Foreign Exchange, of which Guarneri is the head, not to be overruled in matters coming within their jurisdiction. It [Page 373]is also a fixed policy in all Government circles to build up the new Italian film industry.

The Italians maintain that to grant us point 1 and then permit unlimited importation of American films would be exactly contrary to the fixed policy of the Italian Government which maintains quotas on every article of import. To make an exception therefore for American films would be to upset their entire system. On the other hand I believe that I can secure a proportional increase in the American film quota and I presume that that is desired by the American interests.

I shall also leave no stone unturned to obtain a more favorable attitude with regard to point 3 and secure not only freedom of action for our companies in investing in Italy those funds in excess of the amount permitted for export but also to protect them against a permanent freezing in Italy of such funds.

It may be necessary for me to request an audience with the Duce but until I have exhausted all other efforts I think it would be best for me not to do so since such action on my part might be merely a further irritant injected into a highly charged situation.

Phillips