Memorandum by the Secretary of State

The Minister of Switzerland came in, having just returned from his vacation at home, and proceeded to inquire whether the so-called escape clause in the trade agreement between this government and the Swiss government, authorizing either government to call for readjustment of rates in case of unsatisfactory price development due to devaluation or other currency manipulation, would or might be invoked by this government in view of the recent devaluation by Switzerland, which, he said, would be around 30%.

I replied that the matter has not been taken up and considered either pro or con; that it is deemed too early thus to take it up with a view to intelligent, practical consideration and action, if any, decided upon. I then referred to the action of the Belgian Government, with whom we have a similar trade agreement,3 when it had devalued some months ago, to the effect that it had notified this and other governments that it would not permit undue exportations of commodities at unduly low prices on account of the devaluation results. This was construed to mean that Belgium would not permit exportations at prices reduced enough to violate the letter or the spirit of the trade agreement and particularly the escape clause in it. In other words, any subnormal prices, or prices bordering on dumping, or which might materially affect our domestic economic situation by reason of the effects of devaluation in Belgium, were considered by us as coming within the inhibition of the trade agreement and the announcement of the Belgian Government as just stated. I then suggested that probably the Swiss Government might deem it timely and justifiable to make a similar announcement to this and other countries, in order to remove the fear of haphazard trading which might more or less upset trade relations, provoke controversy, and finally result in steps for relief under the escape clause.

The Minister replied that he thought the Swiss Government was taking some steps in this direction and that he would communicate the idea of this further step to his government. He expressed the hope that this government would not be called upon to invoke the [Page 799] escape clause. He added finally that there is high internal pressure in his country, as in France, and that since his country must import its raw materials at higher prices on account of the devaluation it will be correspondingly at a disadvantage in reexporting them in manufactured form.

C[ordell] H[ull]