The Minister in Estonia (Lane) to the Secretary of State

No. 112 (Diplomatic)

Sir: I have the honor to refer to the Department’s cablegram of May 21, 1936, 11:00 a.m. [noon]9 concerning the withdrawal of the Estonian Government’s notice of May 21, 1935 to terminate as of May 22, 1936, the Treaty of Friendship, Commerce and Consular Rights between the United States and Estonia, and the prolongation of this Treaty in its present form until May 22, 1937. The Department will have in mind that a period of but three months remains before the date of expiration of such prolongation.

While there still exists the basis of the Estonian Government’s desire to terminate the Treaty, namely the consistently unfavorable trade [Page 263] balance which that country has encountered in its commercial interchange with the United States, a trend toward a more equalized trade occurred in 1936 when Estonian shipments to the United States were exceeded in value by American imports by $1,050,000 as contrasted with $1,310,000 in 1935. This condition was due to a combination of circumstances: an appreciable increase in American purchases of Estonian products (40.3% in relation with those for 1935), and a perceptible tightening of exchange and import license restrictions for goods of United States origin, total Estonian imports from all countries in 1936 having increased by 26.3% in comparison with those for the previous year whereas United States exports to Estonia rose but 1.7%.

Considering that Estonia has been fairly successful in keeping down imports from the United States while her exports’ to it have augmented appreciably; that the Estonian Government realizes the “most favored nation” clause would no longer be applicable to merchandise of Estonian origin after the termination of the present Treaty and as a consequence [the] United States might raise the import duties on Estonian products by 50%; and that the Legation has been informally approached relative to Estonia’s desire to effect a substantial decrease in the war debt services owing in the United States now in default,10 it is possible that the Estonian Government may not be as anxious, as was the case during 1935 and 1936, to terminate the Treaty with the United States, and that it may therefore be possible to bring about some adjustment of this matter before May 22, 1937.

The Department’s instructions are respectfully requested.

Respectfully yours,

Arthur Bliss Lane