The Secretary of State to the Minister in Canada (Armour)
Sir: I refer to your letter of August 8, 1937, to Mr. Hickerson4 enclosing a memorandum of your conversation on the preceding day with the Prime Minister, and enclosing a copy of a letter dated August 7, 1937, from the Prime Minister to you in which he proposes that there be informal and confidential conversations of an exploratory nature between officials of our two Governments regarding the possibility of a reciprocal trade agreement between the United States and Canada.
Unless you wish to suggest changes, in which event you will telephone the Department, you are requested to address a confidential letter to Mr. King along the following lines:
“I acknowledge the receipt of your letter to me of August 7, 1937, in regard to the trade relations between the United States and Canada. [Page 162] I did not fail to bring your letter immediately to the attention of the appropriate authorities of my Government, who have given it careful consideration.
“The United States and Canada share in common the view that the reduction of excessive trade barriers is essential to the restoration of general prosperity and the preservation of world peace. They also share the view that the need for action in this direction is urgent. It is highly important, moreover, that they cooperate closely in promoting these ends, and my Government therefore welcomes your suggestion for consultation between them.
“My Government had hoped that even before the present time the cumulative effect of a world-wide trade agreement program, participated in by most of the leading trading countries of the world, would be such that it would be possible to conclude a more comprehensive trade agreement between the United States and Canada. The inability thus far, however, of the American Government to conclude more agreements in which the preponderance of reductions on the part of the United States would be on industrial products and the majority of reductions obtained for American products from the other country would be on primary products has tended to create unusual difficulties in the way of further negotiations at this time with countries like Canada, where, it is normally to be expected, a preponderance of the concessions expected of the United States would be on primary products. These difficulties have not yet been overcome.
“Since the broad objectives of our Governments are the same, my Government feels that full and free consultation between them cannot help but serve a useful purpose. It, therefore, would welcome informal and confidential discussions between American and Canadian officials, without prior commitment on the part of either Government, and I am authorized to discuss the necessary arrangements for such conversations to take place immediately.”
While normally we would be prepared to have such informal and confidential conversations with the Canadian officials take place either in Washington or Ottawa, it is believed that there would be less likelihood of misleading publicity if the conversations should take place in Washington. It is hoped that Doctor Skelton, the Under Secretary of State for External Affairs, and Mr. Norman Robertson, of the Department of External Affairs, will be designated by the Canadian Government to take part in these conversations, rather than technical experts prepared to discuss individual commodities, because of our view that the conversations must necessarily be of a very general character.
I am somewhat concerned at some of the Prime Minister’s remarks to you in your conversation with him on August 7.5 I feel that he does not understand fully our situation and it is my hope that the proposed informal and confidential conversations between officials of the two Governments will afford an opportunity for a full and frank exchange of views, which should dispel any existing misunderstanding [Page 163] and go a considerable distance towards preventing further ones. I desire again to commend you for the able manner in which you presented our views to the Prime Minister in your conversation with him.
It has occurred to me that it might be helpful to give you some further background information for use orally in your discretion on any suitable occasion in future conversations with Canadian officials, and the following paragraphs have been written with that in view:
The American Government has visualized its trade agreement program as a broad frontal attack upon trade barriers which have stifled world trade and which will plunge the world into another depression unless drastic steps are taken to eliminate them. We have continued to hope that since practically without exception every important nation in the world recognizes the soundness of the systematic reduction of trade barriers, other countries would feel impelled to undertake similar programs, the cumulative effect of which would greatly hasten the restoration of world trade and contribute materially to the all important end of preserving world peace.
It has been our view that such a program, undertaken by a large number of important governments on broad lines, would not only contribute to these ends but would make it possible for the United States to conclude trade agreements with other countries with which it has not been found feasible to negotiate thus far, and to negotiate on a broader front, along more comprehensive lines, with countries with which trade agreements have already been signed. In this spirit, we have regarded the trade agreement of November 15, 1935, between the United States and Canada, important though it is within itself, as a first step toward a more comprehensive agreement between our two countries.
As you know, we have, in pursuance of our program, signed sixteen trade agreements involving reductions in our tariff rates on more than five hundred products. Since the signature of our trade agreement with Canada we have actively pursued our trade agreement program and have signed nine agreements with other countries in which the American import duties were reduced on approximately two hundred twenty-five products, in addition to a large number of commitments to retain products on the free list or to bind the existing rates of duty. All of these tariff benefits have been generalized to all countries which extend equality of treatment to American trade.
Throughout this period our Government has resisted, and sucessfully resisted, the pressure by powerful influences to increase import duties. Our Government has, moreover, sacrificed many opportunities for immediate trade gains through purely bilateral agreements, and has negotiated no trade agreement in which it undertook to take advantage of its surplus of imports from any country in such [Page 164] a manner as to promote the principles of bilateral balancing of trade or payments between nations. We have made these sacrifices for the sake of the broad objectives of our program and because we are convinced that the principle of bilateral balancing is utterly unsound, inimical to a prosperous world trade, and thus dangerous to the cause of world peace. We mention these matters to demonstrate that our Government has, regardless of the action of other governments, used every force at its command not only to promote the continued systematic reduction of trade barriers but has, in fact, assumed a position of world leadership in such a program.
We should be less than frank if we failed to state that in our view the response of the principal trading nations of the world has not been all that had been expected. The failure of other nations to follow similar policies and to assume their share in such a broad attack on trade barriers has not only been the source of great disappointment to us but has resulted in special difficulties for us in the matter of pursuing as rapidly as we would desire our own objectives. We need hardly say that this failure on the part of other important trading nations has greatly intensified our domestic difficulties, whereas their fullest cooperation should of course make it increasingly easy for us in this movement.
We had hoped that even before the present time the cumulative effect of a world-wide trade agreement program, participated in by most of the leading countries of the world, would be such that it would have been possible to conclude a more comprehensive trade agreement with Canada in addition to new agreements with other countries. The inability thus far of our Government to conclude more agreements in which most of the reductions on the part of the United States would be on industrial products and the preponderance of the reductions obtained would be on American primary products has created unusual difficulties in the way of further negotiations at this time with countries like Canada where, it is to be expected, further reductions would be expected of the United States on primary products. These difficulties have not yet been overcome.
Very truly yours,