The Secretary of State to the Ambassador in Spain ( Bowers )
2. Your telegram No. 1, January 2, 4 p.m. We are very much concerned at Spain’s exchange commitments to France and your statement that Spain has offered a clearing agreement to Great Britain. As we see the situation here, such action on the part of Spain, even though it may be true that Spain was forced to take it, will in effect restrict exchange for the settlement of American balances to that provided by the purchase of Spanish goods by the United States. As you know, this is directly contrary to the premises upon which our whole program is based and we have not generalized our reduced rates to Germany because of similar practices there. Do you see the situation in the same way or do you know of other resources through the use of which Spain may be able to make payments to us in excess of the amount of Spain’s exports to us? In this connection we should very much appreciate your supplying us with the latest possible figures showing total of Spain’s invisible balance of payments with the world.
We feel that the schedules in the proposed agreement are rather generous to Spain and that, aside from the foreign exchange complication, there is danger that the agreement might be regarded by the American public as one-sided in Spain’s favor. We have been thus far ready to face such criticism in view of the fact that we believe the agreement is a fair one which should provide a sound permanent basis for trade relations, but these new developments place us in an exceedingly awkward position. What answer, for instance, will we have to those American exporters who will contend that Spanish tariff reductions are worth very little if they cannot receive payment for their goods?
We should appreciate receiving your full and frank comments and recommendations.