An analysis of this note and of the statistics annexed thereto is being
prepared and will be forwarded in the next pouch.3
[Enclosure]
The Latvian Secretary General of the Ministry
for Foreign Affairs (Munters) to
the American Chargé (Cole)
R. 610.63/35. 9902
Riga, March 30, 1936.
I have the honour to acknowledge receipt of your Note No. 168 of
September 11th last, explaining to me the general foreign trade
policy of the Government of the United States and especially their
principles regarding the application of most-favoured-nation
treatment, in accordance with the Trade Agreement Act of June 12th,
1934,4 and the
instructions issued by the President of the United States to the
Treasury Department.
In reply, I have much satisfaction in stating that, in principle, the
Latvian Government fully concur with the American Government in [Page 380] esteeming that an
unrestricted application of most-favoured-nation treatment would
contribute considerably to the revival of world trade and
prosperity. Nearly all countries having, however, introduced various
restrictions seriously affecting imports and the free circulation of
foreign currency, the Latvian Government have, unfortunately, been
compelled to adopt a similar policy.
I note with satisfaction that, according to the statement you were
good enough to make in the above-mentioned Note, the United States
Government do not refuse generalization of minimum duties and
equality of treatment to a foreign country, irrespective of the
degree to which that country is restricting trade, as long as
American commerce is offered equality of opportunity and accorded
its fair and equitable share of the permitted importations and the
means of payment therefor. I cannot, however, agree to the views you
go on to express in your Note, namely that such “equality of
opportunity” and “equitable share of the permitted importations”
have been withheld from American commerce, and that there has been
occasion to speak of the “intervention of the Latvian authorities
into the field of American-Latvian trade, resulting in the
restriction of imports from the United States and the direction to
other countries of the importation of commodities formerly obtained
from the United States”. That this is by no means the case can be
seen clearly from the enclosed statistical data regarding the trade
returns between our two countries (see Annex 1).5 Although since 1928, when
the Treaty of Friendship, Commerce, and Consular Rights was
concluded,6 the balance of trade has
been adverse to Latvia, the total volume of American imports has,
after the decline which it suffered in consequence of the
catastrophic shrinkage of world trade during the acute crisis of
1931, steadily been increasing. Indeed, since 1932, when various
import restrictions were introduced in Latvia, the value of American
imports has even, according to the annexed table, reached double the
amount recorded for that year, instead of shrinking still further
like the imports from other countries during that period, so that
the administrative measures of the Latvian Government in this
respect, far from being a deterrent, have proved beneficial to
American goods in the Latvian market.
I should also like to draw your attention to Annex 2,5 where the chief United
States imports have been arranged in groups. From these figures, it
is self-evident that there can be no question of a compulsory
diversion of exports from the United States to other countries on
the part of the Latvian authorities. A close study of the different
[Page 381] groups of commodities
imported from the United States during the last years will, on the
contrary, show you that, according to our statistics, articles
formerly imported from the United States continue to be purchased
there. The importation of American fruit, cotton, cars and their
spare parts, etc. has even increased in the current year, and only a
very few commodities can be said to have been subject to seasonal
and other fluctuations. These can in no way alter the main
characteristics of the exchange of goods between our two
countries.
It follows from the above that no discriminatory measures are or have
been applied to the importation of American goods. This is finally
proved likewise by the figures regarding supplies of foreign
currency in payment for such goods. The sums allotted by the
Currency Commission for payment in cash for American goods have
remained practically unchanged, 5, 3% of the total allocations
having been set aside for this purpose in 1934, and 4, 0% during
1935.
Further, you state in your Note that “a policy of effecting a balance
of the merchandise trade between the United States and Latvia
through a system of compensation trade, the administration of
foreign exchange controls or other administrative devices is, in the
opinion of the American Government, in conflict with the
most-favoured-nation treatment specified in the Treaty of
Friendship, Commerce, and Consular Eights between the United States
and Latvia”.
As I had the honour to point out to you in the beginning of the
present Note, the Latvian Government agree in principle with the
United States Government in regarding most-favoured-nation treatment
as the most effective means of giving elasticity to trade
arrangements and of increasing international trade throughout the
world, but they find it impossible to carry this policy into effect
while the majority of those countries with whom Latvia maintains
trade relations follow a policy of a different character. The fact
that the very countries, trade relations with whom are particularly
developed, insist on the trade balance being redressed in their
favour, compels the Latvian Government to attach the greatest
importance to the state of their commercial balance with other
countries, since, in order to pay for imported and consumed goods,
they must obviously have an opportunity for exporting Latvian goods
of about the same value.
You will recollect that the State Department, in its Statement of
April 1st, 1935, (“Policy of the United States concerning the
Generalisation of Tariff Concessions under Trade Agreements”)7 on the
generalisation or withholding of concessions, states, among other
considerations, [Page 382] that “to
such (foreign) countries, a standing offer is extended to accord to
them the benefit of our minimum rates … if they agree not to
discriminate or, in fact, cease to discriminate against American
trade in respect of all forms of trade-control measures, including
exchange control and other measures not specifically dealt with in
existing treaties or agreements in force with such countries”.
This declaration would seem to me to imply that, on principle,
the-State Department has no objections against “all forms of
trade-control measures, including exchange control and other
measures not specifically dealt with in existing treaties,” so long
as the respective countries agree not to discriminate against
American trade. As already stated in a preceding paragraph of the
present Note, no such discrimination against American trade is
practised in Latvia. In the opinion of the Latvian Government there
would, therefore, be no apparent reason for the United States
Government for considering the withdrawal from Latvia of the minimum
duties she has enjoyed until now.
As regards, in particular, the system of compensation, of which the
so-called export clause—i. e. the stipulation that imports from a
certain country should be paid for by the proceeds from exports,
preferably to that same country,—may be said to form part, I can
only assure you once more that it is the commercial policy of
numerous other countries which is compelling Latvia to make use of
this expedient in her dealings with all the countries with whom her
trade balance is unfavourable. I may add at the same time that, far
from discriminating against American imports, Latvia has on the
contrary accorded them special advantages. Notwithstanding the
existence-of a continually passive balance with the United States,
the system of compensation is applied to American goods in so
restricted a form that very few of such goods only are affected by
its stipulations. It would, therefore, appear to the Latvian
Government that their policy in this respect gives evidence of a
certain favouring of American imports rather than the reverse.
My above explanations would seem to prove sufficiently clearly that
most-favoured-nation treatment continues to be applied by Latvia to
goods of American origin, and there can, to my mind, be no question
of any infringement, on the part of the Latvian Government, of the
Treaty of Friendship, Commerce and Consular Eights concluded between
Latvia and the United States.
With reference, lastly to the desire of the United States Government
to be informed regarding the general Latvian restrictions on foreign
imports from all countries and the special measures regarding United
States products as well as the sale of means of payment for the
latter, I have the honour to inform you that the Latvian law [Page 383] on foreign exchange and
foreign trade (Valdibas Vestnesis No. 60,
1935), and the supplementary instructions to this law (Valdibas Vestnesis No. 109, 1935) contain all
the provisions governing this side of the economic life of the
country. These provisions, as pointed out to you before, are applied
without distinction to all imported products irrespective of their
origin, and also to payments for imported goods or transfers of
foreign exchange. I must, therefore, stress the fact once more that
no separate provisions exist in Latvia concerning American trade or
payments for imports from America, these being subject to the
above-mentioned general regulations on the subject.
Taking into account that the condition that Latvia treat American
commerce no less favourably than she treats the commerce of third
countries is faithfully being complied with,—concerning which
circumstance the Latvian Government are willing to give assurances
also regarding the future—there would seem to be no reason why the
United States Government should in any way modify the treatment at
present extended to Latvian products imported into the United
States, and I feel confident that your Government will continue to
accord to such Latvian imports the minimum duties specified in their
agreements with other foreign countries, as well as unconditional
most-favoured-nation treatment.
It must, however, be mentioned in this connection that the measures
recently applied by the United States authorities to Latvian butter
and tinned sprats do not appear to the Latvian authorities to be
illustrative of the principle of equality of opportunity and
treatment, to which you were kind enough to draw to my attention in
your Note. The duties applied to such Latvian imports have, on the
contrary, created the unfortunate impression that discriminative
measures are enforced solely where goods of Latvian origin are
concerned. In referring to the Notes transmitted to the United
States authorities by the Latvian Consulate General in New York and
to the Finance Minister’s9 conversation on the subject with Mr. Kelley of the
State Department,10 I take
this opportunity to express the earnest hope that the United States
authorities will see their way to remove the obstacles that are at
present impeding the export of Latvian goods to the United States,
an export which had assumed regrettably insignificant proportions
even apart from those obstacles.
I avail myself [etc.]
