The Minister in Switzerland (Wilson) to the Acting Secretary of State

No. 4708

Sir: I have the honor to refer to my telegram No. 91 of December 2, 4 p.m., regarding the Swiss-American Trade Agreement, with particular respect to the increased exports from Switzerland of watches and watch movements.

In that telegram I stated that I would endeavor to prepare a despatch in this connection. In the preparation of this report, I have been governed more by political considerations than by economic ones. The status of the affair from the purely economic point of view is fully before you. You are able to judge better than I as to the effect of the Swiss devaluation, even though accompanied by a rise in prices in Switzerland, upon the market for Swiss watches in the United States. You are able better than I to judge what proportion of this increase in Swiss exports is due to increased prosperity and purchasing activity in the United States, and what proportion is due to the stoppage accomplished by the Trade Agreement of smuggling of Swiss watch movements into the United States.

But it is, I think, difficult for anyone residing in the United States to appreciate the full measure of confidence in President Roosevelt and in Secretary Hull, which is felt in this Continent especially by the people who enjoy liberal forms of government. In the stress and strain under which they are living, the endorsement that the American people gave to the Administration is a proof to them that a mighty force intent on liberal institutions still exists in the world. I have seen nothing that approximates this sentiment since the reverence for President Wilson during the late months of 1918.

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The only gleam of hope in the whole situation during the last League Assembly came from the economic phase of the discussion. The action of the United States and Great Britain in helping France through the thorny period of devaluation was a factor of high importance, but of even greater importance, I think, was the hope fostered by our liberal international trade policy. This policy meets with the liveliest sympathy on the part of all economic thinkers, even though they may be driven into other policies by what they consider overwhelming necessity. They hope and pray that the gradual extension of this liberal trade policy may reach, firstly, the great nations of the world and, secondly, by repercussion, the more dependent smaller nations. They were specifically impressed by the fact that the American Government aided the French devaluation at a moment in which we had just signed a commercial agreement with France, and that there was no reserve expressed on our part in respect to this commercial agreement and no threat issued by the American Government that French devaluation would bring about a dislocation of that agreement.

The Swiss public, as much as any other, shares this affectionate confidence in the American Administration and in the persons of President Roosevelt and Secretary Hull. This represents a complete change of attitude from that which existed since 1931 when our tariff began to bring disastrous effects upon one of the basic Swiss industries. The watch industry is the element of well-being to wide sections of Swiss territory, and hence its favorable or unfavorable condition has an immediate effect on the whole population. Were we to invoke the escape clause of the commercial agreement, although legally and technically we have, of course, every right to do so, we would at once change the temper of this people, and complete disillusionment would follow as to the genuineness of our belief in real liberalization of trade. We would be accused of opportunism and of repudiating our own economic faith the first minute the shoe pinches.

This might not be so serious if it were confined to Switzerland only. Swiss business, however, has wide and powerful ramifications in every country in Europe, and the hostility roused by such a denunciation would not be confined to Switzerland alone. These people are vociferous as no other when they believe that their rights have been infringed and when they believe they have been treated by a big country in a way in which they would not be treated were they of equal size and importance. I could well conceive that the denunciation of this one small item might cause a reversal of opinion throughout Europe which would reach unwholesome dimensions. The element of hope for economic recovery lies largely in the faith that these people have in the sincerity of our motive, in its lack of opportunism, and in its real conviction that by general liberalization of trade, recovery may be brought about and peace may be assured.

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Thus, I feel that it is of real importance politically that we should avoid use of the “escape clause”, if it is in any way possible. To this end, and if the present situation becomes untenable to you, I hope I may be authorized to attempt an arrangement with Dr. Stucki by which the Swiss will set a voluntary limit to their exports in this category of merchandise.

Respectfully yours,

Hugh R. Wilson