Foreign Relations of the United States Diplomatic Papers, 1937, The British Commonwealth, Europe, Near East and Africa, Volume II

611.47H31/98

Memorandum by the Assistant Chief of the Division of Trade Agreements (Deimel) of Conversations With New Zealand Government Officials, July 12, 13, and 14, 1937

July 12, 13, and 14, 1937

In fulfillment of the desire expressed by Mr. Walter Nash, Minister of Finance and Customs of New Zealand, that he and the New Zealand officials accompanying him be given opportunity to discuss trade relations between New Zealand and the United States on the occasion of their visit to Washington on the way back to Wellington, following the Imperial Conference at London, a series of meetings were held in the State Department.

These meetings took place on the afternoon of July 12, the morning and afternoon of July 13, and the morning and afternoon of July 14. Mr. Nash himself attended during a part of four of the five sessions. Other New Zealand officials who attended were:

• Mr. J. P. D. Johnsen, of the Department of Commerce of New Zealand (an official of the New Zealand customs organization);
• Dr. Sutch, Economic Adviser to Mr. Nash;
• Mr. J. W. Collins, Trade Commissioner of New Zealand for Eastern United States and Canada;
• Mr. W. J. Stevenson, Customs Expert for New Zealand in the United States.

By previous arrangement members of the Country Committee on the British Dominions of the trade-agreements organization were invited to attend these discussions. The attendance for the United States accordingly included:

(1) For the State Department:

• Mr. Minter, of Eu;²
• Mr. Deimel and Mr. Southworth, of TA;³
• Consul General Bucklin.

(2) For the Tariff Commission:

• Commissioner Durand;
• Mr. Mark Smith and Mr. Burns, of the Economics Division.

(3) For the Department of Agriculture:

• Mr. John Stewart.

(4) For the Department of Commerce:

• Mr. Hungerford.

At the initial meeting, Mr. Deimel opened the discussion by stating that we were glad to take advantage of this opportunity for a strictly informal exchange of ideas regarding the possibility of improving our mutual trade relations; that of course no commitments of any sort could result from informal discussions of this nature but, within the limitations of such informal discussions, we would be glad to point out the nature of our situation and policy and the possibilities that seem to be implicit therein. He continued with a brief outline of the salient aspects of the trade-agreements program, pointing out that it involved a new delegation of executive authority in tariff adjustment which enabled closer account to be taken of our international commercial relations in the adjustment of our tariff rates but required extreme care and deliberation in its exercise in order to convince the American public that the authority is being exercised with full responsibility and discretion; that this procedure was absolutely essential in order to develop the public confidence which would permit in increasing measure the taking of action which, however justified it might appear on economic grounds, would entail such political difficulties as otherwise would make it practically impossible. Mr. Deimel then reviewed briefly the nature of the trade-agreements authority and of the agreements which had been concluded under it and emphasized the following two considerations:

(a) That the unconditional most-favored-nation policy is an essential part of the program and that this policy, when coupled with a bargaining tariff policy as is the case in the trade-agreements program, makes requisite a selection of commodities for tariff negotiation restricted by the principal supplier rule, but that other countries may expect to benefit, with respect to commodities in which they are interested but are not sufficiently a leading supplier to warrant concessions being accorded directly to them, by the extension to their trade under the reciprocal most-favored-nation principle of concessions granted to third countries in trade agreements with the latter.

(b) That in the present status of the program no extensive new concessions could be granted on competitive agricultural products in trade agreements with countries whose main interest would lie in the export of such products to the United States; it was essential that there first be negotiated trade agreements with countries supplying industrial products to the United States, by means of which it would be possible to provide for restored foreign markets for American agricultural export products. Applying this consideration to the commercial relations between the United States and the British Empire, it was quite clear that the negotiation of a satisfactory trade agreement with the United Kingdom⁴ would necessarily be “the first next step” in the development of the program prior to the negotiation of trade agreements with the British Dominions, but that the negotiation of such an agreement with the United Kingdom would remove a decisive obstacle from the road toward the negotiation of trade agreements with the Dominions.

Mr. Deimel stated that he understood the New Zealand officials had learned in London the details of the relationship between the Ottawa preferences and the necessary requisites for the conclusion of a trade agreement between the United States and the United Kingdom, and that there was accordingly no occasion to go into those details here; he pointed out, however, that our position was not to be construed as an attempt to bring about the collapse of the British preferential system but rather that we were pointing out the extent of the moderation in the preferentials, as established under the Ottawa system, which would be necessary to the conclusion of a trade agreement between the United Kingdom and ourselves.

In answer to a question as to why, if the conclusion of a trade agreement with the United Kingdom was a prerequisite to the conclusion of a trade agreement with the Dominions, a trade agreement had already been concluded with Canada,⁵ it was pointed out that the trade agreement with Canada was negotiated at an entirely different, much earlier stage of the program, and that the early negotiation of such an agreement was readily to be explained by the particularly close commercial relations between the United States and its northern neighbor.

Mr. Johnsen noted that the most-favored-nation principle was considered essential to any trade agreement of the United States and said that this would create difficulties so far as New Zealand was concerned, not merely in that New Zealand had been seeking to balance its trade with individual foreign countries but because of revenue difficulties; that a concession which might be granted to one country alone without causing much disturbance as to customs revenues, would become much more difficult if it had to be applied to the trade of all other countries. In the resulting discussion it was pointed out that these and other apparent objections to the unconditional most-favored-nation policy had received most detailed and thorough consideration in the extensive public and private discussion which had been connected with our adoption of a tariff bargaining policy connected with the unconditional most-favored-nation policy, and that thorough consideration invariably led to the conclusion that the advantages of the unconditional most-favored-nation policy, the policy of equality of treatment, outweighed any apparent difficulties or disadvantages which might seem to accompany it. While Mr. Johnsen did not express concurrence, he did not raise the point again during the remainder of the discussions.

At this point, Mr. Nash joined the meeting and Dr. Sutch explained to him what had gone before, pointing out that in particular the unconditional most-favored-nation policy was considered a necessary part of the trade-agreements policy and that a trade agreement with the United Kingdom was considered “the first next step” in the program, as a prerequisite to the negotiation of trade agreements with the Dominions. Mr. Nash indicated that the matter had been brought to his attention at London and that his position was essentially that he could not agree to changes which would deprive New Zealand of trade which she now enjoyed, and that also, although bilateral balancing of trade with other countries had been one of the principal aims of New Zealand’s commercial policy, he would not be willing to approve measures which would involve a restriction of actual trade required to meet human needs, and further that aside from these considerations he would be favorable to anything which would lead to improved trade and commercial relations between the United States and the British Empire and contribute to the maintenance of peace. Mr. Nash also stated that New Zealand being a debtor country and finding it desirable to reduce the total of its foreign indebtedness, it was essential that New Zealand’s commercial policy should be such as to promote an export balance which would enable the service and reduction of its debts to be carried. He added that he and the officials with him would like to take advantage of their stay in Washington to get as close an idea as practicable of the nature of such agreement between the United States and New Zealand as might ultimately result if the way to such an agreement were cleared. He said Mr. Johnsen had brought with him a list of commodities in which New Zealand was particularly interested and pertinent statistics and would like to discuss each of these commodities individually. It was pointed out to him that the present discussions could lead to no specific commitments whatsoever; but, with this in mind, it was agreed that the respective experts might, in the continued discussions arranged for the next day, go over the commodities in question and the statistics with a view to developing what might be the general nature of the consideration that might be given to them, in the event trade agreement negotiations should be initiated.

July 13

In the morning and afternoon meetings of the second day’s discussions, Mr. Johnsen read out, item by item, a list of products with regard to which New Zealand would be interested in obtaining concessions from the United States in the event of the initiation of trade agreement negotiations between the two countries. The officials of both Governments present were supplied with a statistical compilation prepared by the Tariff Commission of the products of which New Zealand has been a principal supplier to the United States; and other statistical data were available so that, as each item was read out, the statistics were examined and, on the basis thereof, Commissioner Durand indicated what might be expected to be our attitude, under existing policies, with respect to the possible consideration of those items for concessions, on the basis of the information at present available. In this connection, it was emphasized, however, that these expressions could in no wise be considered as specific commitments but merely as indications as to how our policy would apply in the light of the information at present available; it was also pointed out that any comment made at the present time would be tentative, since the prerequisite to any specific commitments, in addition to the general prerequisites previously mentioned, would have to be the most thorough expert study by the trade-agreements organization of all available facts, including those obtained from the trade following announcement of intention to negotiate.

It was emphasized that the legal necessity for these procedural steps in itself made it impossible for the current remarks to be in the nature of commitments on our part.

The commodities mentioned by Mr. Johnsen are indicated below, together with a summary of the comment made to him on each.

[Here follows a list of twenty-four commodities with comments on each. The items most extensively discussed were butter and meat.]

July 14

At the close of the discussions on July 13, the New Zealand delegation asked whether we would care to make similar inquiries of them with regard to the commodities which would be of interest to us in the event trade agreement negotiations should be initiated. They were informed that we could not indicate specifically what our requests for concessions on individual commodities might be, since our procedure required public announcement and an opportunity for the trade to present its views before we could make any determining decision as to the products on which concessions would be requested. With this proviso, however, it was agreed that we would give them some indication of the general nature of the requests which we thought might be expected from us in the event of trade agreement negotiations. For this purpose they were provided with a compilation prepared in the Department of Commerce showing the trade in the products of which the United States has been a principal supplier to New Zealand. It was pointed out that this compilation, just as was the case in regard to the Tariff Commission’s compilation of imports from New Zealand previously handed to them, was the result of a purely mechanical procedure.

On the basis of this compilation, Mr. Hungerford and Mr. Stewart commented by way of example upon some of the more important industrial and agricultural commodities in the trade. Mr. Hungerford pointed out that the preferences to British countries which appear in the customs duties are increased somewhat through surtaxes. Mr. Johnsen pointed out that the additional surtax was bound only to certain British countries as a preferential duty, and furthermore that representations from the United States for removal of the surtax would doubtless receive favorable consideration from the New Zealand Government. Mr. Hungerford commented on certain commodities of particular interest to us in our export trade to New Zealand, such as motor cars and parts, lubricating oil, radios, vacuum cleaners, typewriters and lumber. Mr. Stewart commented on certain agricultural items of particular interest, such as canned fruit, pork products, tobacco and flour, pointing out that in any trade agreement we should expect to obtain such concessions as would enable us to maintain our present share in the New Zealand trade.

Mr. Deimel then outlined the procedure followed by the United States in negotiation of a trade agreement with any country, pointing out the legal requirements which resulted in the necessity for public hearing and receipt of suggestions and views from the trade, and also the necessity for study and recommendation by the interdepartmental trade-agreements organization before specific commitments or requests could be formulated.

The necessity of a satisfactory agreement with the United Kingdom, as a prerequisite to the negotiation of agreements with the British Dominions was again emphasized; no precise formula was expressed as to when or at what stage it would be possible to enter into preliminary discussions with the Dominions’ Governments; it was stated that while the initiation of such discussions would not necessarily have to await the conclusion and signature of an agreement with the United Kingdom, a satisfactory agreement with the United Kingdom would have to be definitely in prospect before serious trade agreement discussions could, in the existing state of affairs, be initiated with the Dominions’ Governments.

In a brief final session on the afternoon of July 14, the outcome of the discussions was summarized. Mr. Johnsen in his summary to Mr. Nash of the proceedings indicated an impression that New Zealand would obtain “compensation” for such concessions as it might grant with respect to Ottawa preferences for the purpose of making a United States-United Kingdom trade agreement possible, in the subsequent negotiation of a trade agreement between New Zealand and the United State’s that, while, of course, we would remember such action as New Zealand would take to facilitate the conclusion of a satisfactory agreement between the United States and the United Kingdom, New Zealand’s compensation would essentially be the result of opening the way to the negotiation of a mutually satisfactory agreement between New Zealand and the United States, but that under our law the latter agreement would necessarily be reciprocal and have to stand on its own.

Mr. Nash indicated briefly the nature of the comments which he intended to make to the British Ambassador, before his own departure that afternoon, as to the results of these discussions; he reiterated what he had said at the opening of the discussions, namely, that he could not agree to provisions which would cause the loss to New Zealand of trade which she already had and that he could not agree to provisions for the curtailment of production; but that aside from this he would do everything he could for the promotion of improved trade relations and would not stand in the way of trade agreement negotiations between the United States and the United Kingdom.

. . . . . . . . . . . . . .

[In a telegram to the Consul at Wellington, dated January 28, 1939 (611.47H31/109), the Secretary of State gave the following reasons for not accepting an invitation of December 31, 1938, from the New Zealand Government, to send a representative to New Zealand to resume conversations:

• “1. We wish to see how the licensing system will be administered and to appraise its effect on American trade.…
• “2. We are not in a position to proceed with trade agreement negotiations with New Zealand at this time even if exploratory conversations should reveal an adequate basis. We, therefore, consider that any conversations in the near future would be premature.”]

2. Division of European Affairs.
3. Division of Trade Agreements.
4. See pp. 1 ff.
5. For text of agreement signed November 15, 1935, see Department of State Executive Agreement Series No. 91 or 49 Stat. 3960; for correspondence, see Foreign Relations, 1935, vol. ii, pp. 18 ff.