Memorandum by the Assistant Chief of the Division of Near Eastern Affairs (Barnes)

The Yugoslav Minister called at the Division this morning to receive the Department’s note of today’s date12 with respect to Yugoslav-American trade relations.

While at the Division the Minister read the note and its enclosures with considerable care, discussing various points in the documents as he went along. From the nature of his comments it would seem fair to conclude that he will present our proposals, and particularly the suggested modus vivendi, in a favorable light to his Government.

The Minister said that if the decision rested with him he would find no difficulty in accepting the modus vivendi. He said that he was convinced that the benefits to his Government of controlled trade are more apparent than real, that, in fact, this policy is forcing Yugoslavia to purchase goods that it doesn’t want, and at exorbitant prices, while at the same time Yugoslav products are being sold to third countries by Germany for free exchange which is greatly needed by his country.

The Minister pointed out, however, that his Government is so steeped in thoughts of clearing and compensation agreements that it is difficult if not impossible for officials at Belgrade to comprehend that a country like the United States actually has no machinery for controlled trade. He asked if he might assure his Government that such was the case and he was told that he could. At the close of the discussion the Minister expressed the view that if his Government is unable to accept the modus vivendi, it certainly could not reasonably contend that the United States should allow the existing situation to continue without protest. It was therefore reasonable for the United States to propose either the modus vivendi or the suspension of certain of the articles of the Treaty of 1881.

  1. Infra.