Accordingly, there is enclosed the text of a note which it is desired
that you address to the Greek Minister for Foreign Affairs at an
early date. As you will perceive, the note explains the salient
features of the commercial policy of this Government under the Trade
Agreements Act of June 12, 1934,3 and proposes that the exchange of notes of
December 9, 1924, be replaced by a modus
vivendi embodying the liberal principles of this
policy.
Your attention is drawn to the provision on exchange control which is
contained in the paragraph numbered 5 of the modus
vivendi and which differs from the provisions on exchange
control contained in other agreements relating to trade which this
Government has recently made with foreign countries. The new
provision is intended to prevent exchange control from being used in
such a way as to render the most-favored-nation and quota provisions
in our agreements and treaties ineffective. It has recently been
decided to include in our trade agreements and commercial treaties,
wherever possible, an article which provides, in effect, that the
country which establishes or maintains exchange control shall (1)
satisfy promptly all applications for exchange to pay for imports
admitted into the country and originating in the other country and
(2) accord unconditional most-favored-nation treatment in respect of
exchange rates and fiscal charges affecting payments for imports
from the other country. It has been decided, however, to use a less
stringent provision in the proposed modus
vivendi. It is believed that the latter provision would be
sufficient to use as a basis for protest in case Greece should grant
less favorable treatment, with respect to exchange, to payment for
importation of any American product than is granted to payment for a
similar product of any third country.
It is believed that, apart from the provision on exchange control,
both the note and the modus vivendi are
self-explanatory and therefore require no comment by the Department
at this time. If either document contains passages that are obscure
to you, or statements or provisions which in your opinion should be
altered, you should withhold action and consult with the Department
by telegraph.
Immediately upon presenting the note to the Minister for Foreign
Affairs you should inform the Department of your action by telegraph
so that it may transmit a copy of the communication and of its
enclosures to the Greek Minister at Washington.
There is also enclosed, for your strictly confidential information, a
copy of a preliminary survey4 with respect to the possibility of a reciprocal
trade agreement with Greece, in connection with which your attention
is called to the implication in the first sentence of the final
paragraph of the note that Greece may have proposals of its own to
make on this subject. While it is not anticipated that this
Government will in the near future take the initiative in the matter
of such an agreement, it was recently decided to carry out the
recommendation to create a country committee for Greece and Turkey,
and such a committee, composed of experts representing the
Departments of State, Treasury, Agriculture and Commerce, and the
Tariff Commission, has been constituted. This committee will
function as a subcommittee of the interdepartmental committee on
trade agreements and is charged with the responsibility of doing the
technical work in preparation for eventual trade agreement
negotiations.
[Enclosure 1]
Note To Be Addressed to the Cheek Minister
for Foreign Affairs
Excellency: I have not failed to inform my Government of the
contents of the Royal Ministry’s Note
Verbale No. A/22175, of November 18, 1936,4 relative to the trade
relations between Greece and the United States.
My Government has noted the statement that the Royal Hellenic
Government is disposed to accord every facility of a nature to
contribute to the development of trade between the two countries
to the extent that the financial situation of Greece, from the
viewpoint of foreign exchange, will permit. I have been
instructed to assure you in reply that it is the earnest desire
of the Government of the United States to foster and to extend
the mutual trade interests of our two countries.
My Government has, at the same time, instructed me to explain to
Your Excellency the salient features of the commercial policy of
the Government of the United States and to lay before you a
proposal which is in harmony with this policy and with the
mutual desire of our two Governments to protect and to extend
the trade relations [Page 410]
which have helped to unite Greece and the United States in
friendship for so many years.
On June 12, 1934, the Congress of the United States enacted
legislation authorizing the President to enter into reciprocal
trade agreements with other countries. During the intervening
period agreements have been made with sixteen countries. Only
recently, this legislation was renewed by the Congress.
The commercial policy of the United States Government, which is
expressed in the sixteen agreements concluded under the Trade
Agreements Act of June 12, 1934, 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 hand, 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.
It is now more than seven years since the onset of the world
crisis. During this period Governments have piled one trade
obstruction on another and have created one discrimination after
another until commerce between nations has been reduced to only
an insignificant fraction of what man’s productive ability on
the one side and his wants on the other would make possible
under a different order.
The United States Government has engaged itself in a determined
effort to reverse this trend. It is convinced that the
commercial policies pursued by nations in recent years can never
lead to a workable international system, but only to permanently
large unemployment and to a lowered standard of living. It is
convinced that in the critical situation in which the world is
today enmeshed, peace and the spiritual and material welfare of
the nations depend more than on any other development upon a
lowering of trade barriers and a return to liberal commercial
policies.
The method which the United States Government has adopted in its
attack on the restrictions and discriminations choking trade
consists in the conclusion of commercial agreements; with
individual countries. In each of these agreements the United
States grants to the other country reductions in its rates of
duty on a selected list of products in which that country is
particularly interested in return for a liberalization by that
country of its tariff and other restrictions bearing upon a
selected list of products of primary interest to the United
States. That the reductions which the United States is making in
its tariff schedules in connection with these reciprocal trade
agreements are by no means merely nominal is evidenced by the
fact that many [Page 411] have
amounted to 50 percent of the existing rates, the maximum
reduction authorized by the Trade Agreements Act.
Moreover, these reductions are not confined to a few products.
The products on which the United States has reduced its duties
in connection with the sixteen agreements already signed amount
to 30 percent of its total dutiable imports. Thus, it should now
be evident that the United States, by means of its trade
agreements program, is making a contribution to the
liberalization of world trade which is really substantial, and
is engaged in a sincere attempt to provide leadership in the
course which it is advocating not through exhortation alone but
through the force of its own example.
A list of the changes in the import duties of the United States
since the passage of the Tariff Act of 1930, most of which have
come into being by virtue of trade agreements concluded under
the act of Congress of June 12, 1934, is enclosed for the
information of the Royal Hellenic Government.
In conformity with this policy, reductions in duties proclaimed
under trade agreements with foreign countries are extended
immediately to the like articles of all countries in return for
nondiscriminatory treatment of American commerce. Such
proclaimed duties are withheld only from countries which
discriminate substantially against American trade. To such
countries a standing offer is extended to accord to them the
benefits of the duties proclaimed under the trade agreements if
they agree not to discriminate or in fact cease to discriminate
against American trade in respect of all forms of trade control
measures.
The reduction of trade barriers, however, cannot be expected of
itself to re-establish conditions in which world trade can again
prosper. Of equal importance in the eyes of the United States
Government is that the trading nations of the world should cease
from the many discriminatory practices which have brought
international trade and payments to their present disordered
state.
The United States considers that the experience of recent years
has demonstrated unmistakably that the granting and seeking of
exclusive preferences and the employment of devices to curtail
or divert imports or to force exports, whether by agreements or
by unilateral, arbitrary action, can never be made into a
satisfactory system for the conduct of international trade.
Through the discrimination which is their inevitable
counterpart, these methods always invite and often compel
retaliatory or defensive action, with the result that the
expansion of trade which they may serve to obtain in one quarter
is frequently offset by the losses which they entail in other
quarters. Moreover, even the immediate advantages which they
have appeared to hold out in practice have often proven
illusory. Thus when the balance [Page 412] is cast, these methods are found to have
conferred upon the trade of the nation or nations employing them
no benefit whatever, or at best advantages which are meager and
transitory, to compensate for the serious disadvantages and
dangers which they comport.
In the opinion of the United States Government, the gravity of
the dangers inherent in these narrow policies can hardly be
exaggerated. Exclusive preferences and special advantages,
whether obtained through agreement or by unilateral action, tend
to force international commerce in the direction of bilaterally
balanced exchanges. Thereby so-called “multiangular” trade,
which is a natural result of diversities in the economic
resources and structures, the stages of development and the
consuming tastes of individual nations, is not only prevented
from expanding in response to improved conditions within
different countries but is forcibly reduced. An increasing share
of the world’s commerce is thus forced to flow in uneconomic
channels under the influence of artificial restrictions on the
one hand and of artificial stimuli on the other. Uneconomic
sources of supply are developed at the expense of sources from
which like goods could be obtained more cheaply, the cost of
imports is raised, standards of living are lowered and not only
is the total volume of world trade diminished but the
far-reaching dislocations effected in production and demand make
its restoration increasingly difficult.
A striking example of how certain of these policies disturb the
established channels of trade is to be found in the recent
purchase, at the port of Bremen, of Greek tobacco in the amount
of 500,000 pounds by an American firm that has long maintained a
purchasing agency in Greece.
Grave as are the economic results of the anarchic conditions now
prevailing in international commerce, the effect of current
commercial policies on international relations generally is a
cause for even greater alarm. Exclusive preferences, special
advantages and the host of current discriminatory practices,
through the irritating and often ruinous disadvantages at which
they place the producers and traders of the nations
discriminated against and through the adverse effect which they
have upon employment, wage levels and standards of living,
constitute one of the most important sources of international
resentment and ill-will, progressively undermining the structure
of peace.
The commercial policy of the United States Government is founded
on the unshakeable conviction that for world trade to be
restored, discriminatory practices must give way to equality of
opportunity and treatment. The advantages to trade of the right
to compete in all markets under conditions of equality were
recognized in the formulation of the most-favored-nation clause
which for three-quarters of a century has been incorporated in
the commercial treaties of almost [Page 413] every nation. Even today, notwithstanding
the anarchy into which international trade has fallen, the
nations of the world are to be found still clinging to the
principle of equality in their international treaties, a fact
evidenced by the great number of most-favored-nation treaties
now in existence and by the frequency with which the
most-favored-nation clause is inserted in new treaties.
Yet the recognition which this great and abiding principle today
receives is largely nominal and too often fails to reflect
itself in practice. During the course of the depression there
have come into use many new devices for restricting and
diverting trade, either directly or through the control of the
means of payment therefor, with the result that in many
countries which formerly based their commercial policy on the
most-favored-nation principle and which still employ the
most-favored-nation clause, equality of commercial opportunity
and treatment does not, in fact, exist. The claim has been
advanced by some that since the most-favored-nation clause was
developed and many of the existing most-favored-nation
obligations were assumed in a time when tariffs were practically
the only restriction placed upon trade, it can be considered as
applicable in the main only to tariffs. Without seeking here to
discuss the historical or legal bases for this view, the
Government of the United States cannot help but feel that such a
construction, by in fact denying equality of treatment, denies
the fundamental purpose for which the most-favored-nation clause
was formulated.
While the United States is fully aware of the difficulty of
attempting under present conditions to establish for universal
acceptance rigid definitions of the treatment which, under the
various types of trade control other than customs duties, may
properly be considered as constituting equal, or
most-favored-nation, treatment, the United States is prepared,
as a matter of policy, to accept the following arrangements as a
substantial equivalent of non-discriminatory treatment in the
application of the more important types of non-duty trade
controls:
Quotas. With respect to
quantitative restrictions on imports, an allotment to
United States trade of a share of the total quantity of
any article permitted to be imported equivalent to the
proportion of the total importation of the article which
the United States supplied during a previous
representative period. By the term “representative
period” is meant a series of years during which trade in
the particular article under consideration was free from
quantitative restrictions and discriminations and was
not affected by unusual circumstances.
Exchange control. The United
States Government believes that any form of control of
foreign exchange in connection with commercial
transactions should be administered in such a way as not
to impair the operation of the principles of
most-favored-nation treatment and quota allocation set
forth above.
[Page 414]
Payments, Clearing and Compensation
Arrangements. The Government of the United
States feels that arrangements of this nature are
essentially inimical to the principle of equality of
treatment and to the spirit of the most-favored-nation
clause, and it hopes that nations, being agreed upon the
adverse effects of such arrangements upon world trade as
a whole, will make every effort to eliminate them as
quickly as possible when the compelling motives which
may have caused resort to them shall have disappeared.
In the meantime, the United States believes that the
nations participating in these arrangements should apply
their provisions in such a manner that they will disturb
as little as possible the natural flow of international
commerce.
Monopolies. If a government
establishes or maintains a monopoly for the importation
or sale of a particular commodity or grants exclusive
privileges to an agency to import or sell a particular
commodity, the United States believes that this monopoly
or agency should not discriminate against the commerce
of any nation but that it should accord to every nation
a fair and equitable share of the market, as nearly as
may be determined by consideration of price, quality, et
cetera.
The application of this policy to existing conditions of trade
between Greece and the United States suggests the desirability
of a new agreement between the two States which would replace
the exchange of notes of December 9, 1924. My Government
therefore has the honor to propose the conclusion at this time
of a modus vivendi embodying the liberal
principles in support of which the commercial policy of the
United States under the Act of Congress of June 12, 1934, was
formulated.
Such an agreement, a draft of which is submitted herewith for
consideration by the Royal Hellenic Government, would assure
equitable treatment to the commerce of each State in the
territory of the other, and thus would facilitate the
presentation of any further proposals looking to the expansion
of the trade between our two countries that either State might
wish to suggest. For these reasons, and also because of
considerations of broader import, which have been outlined
above, it is the earnest hope of the Government of the United
States that this proposal will prove acceptable to your
Government and that it may be possible for our two countries to
enter into a new commercial accord at an early date.
Accept [etc.]
