The Department of State to the British Embassy 28
1. In accordance with the understanding reached in the course of recent conversations concerning a possible basis of negotiations with a view to the conclusion of a trade agreement between the United States and the United Kingdom, there is transmitted herewith a revised list of products subject to the Ottawa Agreements (list 1)29 on which an improvement in the treatment now accorded by the [Page 17] United Kingdom to the United States is deemed essential, the extent of such improvement being indicated in connection with each article. Attached to the list is a statement of the reasons for each request.30
2. It should be emphasized that the list includes only products with respect to which the preferential duties or margins of preference may not be altered by the United Kingdom without the consent of the Dominions. All products not subject to such commitments, including the products which were specifically mentioned in the list submitted on November 16, 1936,31 have been omitted from the present list in view of the understanding that the problem of finding a basis for negotiations arises largely, if not entirely, from the commitments of the United Kingdom to the Empire countries. Those products in respect of which no such contractual obligations exist and which have, in consequence, been omitted from the present list, as well as certain other matters of importance not affected by those commitments, would be included in the comprehensive requests which would be submitted by the American Government in the event that a satisfactory basis for negotiation can be found.
In this connection attention is called to list 1A30 which contains three items on which improved treatment to the extent indicated in the list will be requested. It is not clear whether the requests on these products would affect the United Kingdom’s commitments under the Ottawa agreements. If so these requests are submitted for consideration at the present time. If not they will be included in the comprehensive list of requests to be submitted later.
3. It will also be noted that the list includes only products with respect to which an improvement in, as distinguished from a binding of, existing treatment is requested. The reason for thus limiting the scope of the list is the understanding that, in general, the Government of the United Kingdom would find no difficulty in binding existing customs treatment and that for the present purpose of finding a basis for negotiations it is unnecessary to formulate requests of this kind. However, in preparing list 1, consideration was necessarily given to all products of interest to the United States with respect to which the Government of the United Kingdom has contractual obligations to the Dominions and, as a result of these studies, it is possible at this time to present for the information of the Government of the United Kingdom a list of such products (list 2)30 on which a binding of present treatment would be deemed essential.[Page 18]
4. In general, the reason underlying the requests for improved treatment of products in lists 1 and 1A is not only the effect which the existing preferences to Empire countries have already had in diverting trade from the United States. Of equal or greater importance is the probability that in the course of time the Empire producers will, to an increasing extent, take advantage of their preferential position and that the share of the United States in the trade will continue to decline.
5. The requests presented herewith have been prepared largely on the basis of information from Government sources without consultation with the trade. If negotiations should be undertaken, these requests would be subject to such revision as may seem indispensable in the light of information and views obtained from consultation with the trade and from public hearings.