865.4061 Motion Pictures/96: Telegram

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

539. My telegram No. 535, December 17, 7 p.m. I have today received the following note from Count Ciano concerning the film negotiations.

“In reply to your letter of December 17 while confirming that the sum of 20 million transferable lire continues to be allotted for 1936–37 for the importation of American films into Italy, I inform you with regard to the other two points to which you called my attention as follows:

1. In 1934, a year when there were no import restrictions, the number of American films imported into Italy amounted to 168. For 1936–37 film import applications made by American companies related only to 160 films. The increase of importable films for 1936–37 to 250 is therefore considerable even with respect to the applications already made by the parties concerned. Nevertheless, in view of Your Excellency’s solicitude and despite the difficulties which this will cause, the Royal Government agrees that the number of American films which may be imported into Italy in 1936–37 shall be fixed at 250.

2. Sums in excess of the 20 millions which may eventually accrue to the benefit of American films imported into Italy remain, as I have [Page 375]already mentioned to you, at the free disposal of the American exporters for any permanent investment of mobile or immobile character which they might desire to make in Italy under the control of the National Institute for Foreign Exchange and naturally in conformity with the regulations of general character which are applicable also to nationals. Such control has nothing to do with the merits of such investments which remain entirely at the discretion of the parties concerned, but aims solely at ascertaining that these sums are really employed in Italy and are not exported even in a disguised form.

I trust that I have replied exhaustively to the questions you set forth in a manner conforming to your wishes.”

With reference to the requirement that sums in excess of the 20 million lire be invested in Italy, I had stressed to Count Ciano the importance of giving some assurance to the film companies that in the event that restrictions governing the export of currency should be relaxed their excess profits would be benefited thereby. Ciano was very positive that his Government could not commit itself at this time to any such future undertaking and in view of the positive assurances that the American companies would be completely free to make whatever disposal of their funds in Italy that they desired subject only to the supervision of the National Institute of Foreign Exchange, insofar as it was intended to prevent a concealed exportation of funds from Italy, I felt it would be unwise to pursue the subject further. Moreover, this seems to be a matter more, perhaps, for discussion in connection with any eventual trade agreement negotiations since these would give an opportunity to work out provisions for equal treatment of all American firms in respect to their frozen accounts in Italy.

The Department will also note that no reference is made in Ciano’s note to the request of the film producers that the industry be permitted to make the allocation of films in the United States. This is a new demand put forward by the American companies which was not previously listed among their desiderata and is contrary to Italian basic procedure. Moreover, Ciano in an earlier note had pointed out that the distribution of this contingent is entrusted to the competent federation for the category as for all foreign importations into Italy. I, therefore, did not raise this issue in my last discussion with him but have in mind suggesting the possibility of reaching an informal arrangement whereby before the definite allocation is made, the representative of the Motion Picture Producers [and] Distributors in Paris will be given an opportunity, informally, to discuss this allocation with the Theatre Federation. This method while not questioning the right of the local authorities to control importations into Italy would nevertheless give the American industry an opportunity to express its views before the final decision with regard to allocation of the funds is made.