The Minister in Estonia (Lane)11 to the Secretary of State

No. 3 (Diplomatic)

Sir: I have the honor to inform the Department that Mr. Ed. Wirgo, the Director of the Bureau of Foreign Trade of the Estonian Foreign Office today requested the Legation to ascertain the attitude which the Government of the United States might be expected to take on the proposals which were made by the Estonian Government in December, 1935, concerning a reciprocal trade agreement between the United States and Estonia, and specifically with respect to potato spirits, referred to at greater length on page 3 of this despatch.

In the above-mentioned conversation, I brought up the question of the pending commercial treaty negotiations. I stated to Mr. Wirgo that, while I had no information to convey on this subject other than that which was contained in the notes which had been exchanged between the Estonian Foreign Office and the American Legation at Tallinn, I might, in view of my experience in the negotiation of a treaty of the above-mentioned kind with Nicaragua,12 be in a position to answer questions which he might wish to ask concerning the reciprocal commercial treaties which the United States was now concluding with countries in various parts of the world.

Pursuant to my suggestion, Mr. Wirgo proceeded to explain Estonia’s point of view in relation to a new commercial agreement with the United States. He pointed out that the Estonian-U.S.A. trade balance had always been unfavorable to Estonia. Estonia had, nevertheless, not introduced any special measures in an effort to correct this situation. The Estonian Government had always felt that, in view of the fact that Estonia had defaulted its debt payments to the [Page 70] United States, it did not wish to bring any pressure to bear upon the latter in respect the removal of the unfavorable balance in the Estonian-U.S.A. commodity exchanges. Mr. Wirgo went on to say that despite the foregoing policy on the part of the Estonian Government, the latter was now being practically forced to look for a means to bring its trade with the United States into a more nearly balanced state.

Mr. Wirgo then stated that it was with this situation in mind that the Estonian proposals for a reciprocal trade agreement with the United States had been submitted in December, 1935. In these proposals Estonia had requested customs duty reductions for twenty-two Estonian commodities upon their importation into the United States.

It was realized by the Estonian authorities that it might not be possible for the Government of the United States to grant to Estonia all of the requested customs duty reductions. There was, however, one commodity in the above-mentioned list of Estonian products, in the exportation of which to the United States, the Estonian authorities were greatly interested. This commodity was potato spirits for use as a raw product in the manufacture of liquors with a high alcoholic content.

Mr. Wirgo then explained that prior to the World War large quantities of potato spirits had been produced in that part of Russia which now constitutes the Republic of Estonia. This production had since been reduced very much, but the production equipment was still available. It was Estonia’s wish to re-enliven this branch of activity; in order, however, to make this possible it would be necessary for Estonia to find new markets for potato spirits. It was hoped that through the new commercial treaty with the United States a new market of this kind might be developed.

He then proceeded to outline in detail his ideas on this subject. He said that it was his suggestion that the United States Government grant to Estonia a 50% customs duty reduction on potato spirits the latter to be defined in the new treaty as follows: “spirits produced from Topaz potatoes.” Since the variety of potato known under the name of Topaz was now only being grown in Estonia, the effect of most favored nation treatment upon the importation into the United States of potato spirits would be reduced to a minimum. It was Mr. Wirgo’s further suggestion that an arrangement might thus be brought about under which Estonian potato spirits would be exchanged for the American cotton now being imported into Estonia.

Mr. Wirgo expressed the opinion that, as far as the proposed U. S. A.-Estonian commercial treaty is concerned, practically everything [Page 71] depended upon the customs duty reductions which the United States Government would be disposed to grant to Estonia. He said that he was very much interested in securing at as early a date as possible an indication as to what the attitude of the Government of the United States was likely to be.

In response to these observations on the part of Mr. Wirgo, I pointed out that the reciprocal trade agreements now being concluded by the United States were ordinarily accompanied by two schedules: in the first of these information was set forth covering the custom duty reductions which the United States agreed to grant: in the second schedule the corresponding facilities granted to American products by the other party to the treaty were listed. I thereupon asked Mr. Wirgo what, in his opinion, the United States might expect to receive from Estonia in the way of custom duty decreases.

To this Mr. Wirgo replied by mentioning representations which had already been made to him by a certain American automobile manufacturer to the end of securing lower Estonian duties on automobile parts. He indicated that Estonia might be disposed to grant this request provided that Estonia’s request for duty reductions was given favorable consideration by the United States, in part at least. He likewise intimated that other American goods might possibly be found for which reductions in the Estonian customs duty tariff might be made. Mr. Wirgo again said that Estonia’s concessions along this line depended entirely upon the corresponding action which the United States would take.

In taking my departure from Mr. Wirgo, I told him that his request for information on the above-mentioned subject would be referred by me to the Department.

. . . . . . . . . . . . . .

I have the honor, accordingly, to submit the foregoing to the Department with the suggestion that the Estonian inquiry regarding possible reduction of duty on “spirits produced from Topaz potatoes” be given very careful consideration. From the conversations with Messrs. Selter13 and Wirgo and from previous information obtained by Mr. Carlson, it seems evident that the principal desideratum of the Estonian Government in the negotiation of a new treaty is a concession with respect to that commodity. Consequently, the success or failure of the negotiations may from the outset be determined by our attitude.

Respectfully yours,

Arthur Bliss Lane
  1. The Minister was accredited to Estonia, Latvia, and Lithuania, with residence at Riga.
  2. See vol. v, pp. 782 ff. For text of the agreement signed on March 11, 1936, see Executive Agreement Series No. 95 or 50 Stat. 1413.
  3. Estonian Minister for Economic Affairs.