The Secretary of State to the Ambassador in Italy ( Phillips )
Sir: Reference is made to the Italian draft of the proposed new Treaty of Friendship, Commerce and Navigation enclosed with your despatch No. 126 of December 18, 1936, and to your despatch No. 129 of December 21, 1936,9 enclosing a draft of proposed trade agreement.
We concur with your view that apparently one of Italy’s principal interests in treaty negotiations is in laying the foundation for a trade agreement to which it attaches more immediate importance than to the commercial treaty; and we are pleased to note that, nevertheless, the Italian delegation has agreed to the principle that commercial treaty negotiations shall precede trade agreement negotiations and be conducted apart therefrom. In view of this and the fact that the fundamental principles upon which we hope to base our commercial relations with Italy are those expressed in Article VIII of the proposed commercial treaty, we deem it of first importance, as indicated in my telegram No. 16 of February 17, 1937, to reach a satisfactory agreement in respect of that article. Accordingly, a redraft of Article VIII, with the exception of the paragraph relating to exchange which will be forwarded to you as soon as possible, has been prepared and is enclosed herewith for presentation to the Italian Government.
In presenting the draft you may say that study is being given to the other articles of the Italian proposal, but that because of the importance [Page 438] of Article VIII to future trade relations we are hopeful that it may have first consideration.
There is also enclosed a memorandum which analyzes in detail the differences between our original draft and the Italian draft of Article VIII and explains the treatment accorded those differences in our counter proposal. In several instances, specific suggestions are made in the memorandum with respect to action to be taken by the Embassy. You are requested to consider such suggestions as if they were part of this instruction. Otherwise, the Embassy may make such use of the memorandum as it may deem appropriate and expedient.
Our proposal in respect of Article VIII is the result of diligent effort to find a way whereby the foreign trade policies of the two countries can be reconciled and we are hopeful that it may be acceptable to Italy.
Very truly yours,