The Acting Secretary of State to the Yugoslav Minister (Fotitch)
Sir: I have the honor to refer to recent informal conversations between yourself and officers of the Department concerning those problems of Yugoslav-American trade relations that have grown out of [Page 826] the control measures of the Yugoslav Government affecting imports from the United States, and to submit herewith, for consideration by your Government, alternative proposals looking to the regularization of the trade relations of our two countries.
The first proposal is in the form of a draft modus vivendi which would assure fair and equitable treatment to the commerce of each State in the territory of the other. It is my earnest hope that this proposal will commend itself to your Government as it embodies the liberal principles in support of which the commercial policy of the United States Government, under the Act of Congress of June 12, 1934,13 was formulated.
The commercial policy of the United States Government, which has found expression in trade agreements concluded with fifteen countries during the two and a half years in which the Act of June 12, 1934, has been in force has a twofold objective. On the one hand, it aims to reduce tariff barriers and the many other impediments against which international commerce in recent years has been forced to struggle. On the other, it seeks to reduce and progressively to eliminate the maze of discriminatory and arbitrary practices which now distort and strangle trade and to substitute in their stead an order based upon the principle of equality of treatment.
[Here follows an extensive review of the trade agreements program of the United States and of the restrictive commercial measures adopted by a number of countries.]
It is the most earnest hope of the United States Government that the Government of the Kingdom of Yugoslavia will decide to lend its active support to the commercial program here recommended and that in consequence it will conclude that the modus vivendi submitted herewith affords an acceptable basis for the future of Yugoslav-American trade relations.
The alternate proposal submitted herewith is embodied in a draft agreement to set aside certain Articles of the Treaty of Commerce between the United States of America and Serbia, signed at Belgrade October 2–14, 1881, and in a draft of an exchange of notes setting forth the desire of our two governments to re-establish mutual trade relations on the basis of unconditional most-favored-nation treatment at the earliest possible moment.
This proposal is based upon recognition by the Government of the United States that the preferential and discriminatory practices employed by some governments today have grown out of concrete problems and difficulties, that the trade of the countries which have resorted to them or have been forced by other countries to adopt them may have come to depend to a certain degree upon them and that they [Page 827] are in a number of instances expressed in commitments that cannot immediately be terminated. It is thought, if such considerations are controlling in the case of Yugoslavia, and your Government therefore is unable to accept the proposed modus vivendi, that it is desirable from the standpoint of both the Government of Yugoslavia and the Government of the United States of America that the contractual obligations between the two States be brought in harmony with existing fact. In this connection it should be repeated that the United States Government considers that, having due regard to its international obligations, it should withhold the benefits of equal treatment under its trade agreements program from nations which do not in turn grant equal treatment to it.
I may say in conclusion that the Government of the United States believes that the program which it is pursuing, of negotiating bilateral agreements based upon the principle of non-discriminatory treatment, offers the surest course by which trade barriers can be reduced and the process of abandoning discriminatory practices be initiated and carried forward. The fact that Yugoslavia participated in the Sixteenth Assembly of the League of Nations which adopted a resolution on September 28, 193514 giving full support to this program leads me to believe that your Government will accord sympathetic consideration to the views set forth in this communication and to hope that the trade problems between our two States will be speedily resolved in a manner calculated to foster and improve the trade relations between our two countries.