The Embassy arranged appointments for Mr. Grady with Mr. Felice
Guarneri, Undersecretary for Trade and Foreign Exchange; Senator
Giannini, Head of the Commercial Department of the Foreign Office,
and Mr. Emanuele Grazzi, Chief of the Transoceanic Department of the
Foreign Office. In his conversations with these officials Mr. Grady
discussed informally with them matters of interest bearing upon
trade between Italy and the United States and explained for their
benefit the fundamental principles governing United States foreign
trade policy.
A copy of a memorandum prepared by the Embassy’s Commercial Attaché
of Mr. Grady’s conversation with the Undersecretary for Trade and
Foreign Exchange on September 16 is transmitted herewith at Mr.
Grady’s request. Mr. Grady considers this the most important and
significant of the various conversations in which he engaged here.
Furthermore, it covered fully all the points which were discussed in
his subsequent talks at the Foreign Office.
When calling on Mr. Guarneri, Mr. Grady was accompanied by Mr.
Livengood, the Embassy’s Commercial Attaché, while Mr. Reber, Second
Secretary, was present at his interviews with Messrs. Giannini and
Grazzi.
The Embassy is very decidedly of the opinion that Mr. Grady’s visit
to Rome has been extremely helpful in clearing up any doubts and
misunderstandings which the competent Italian authorities may have
had concerning our foreign trade policy and in reassuring them of
our sincere desire to cooperate to the fullest extent possible in
mutual efforts to improve commercial relations between the two
countries.
[Enclosure]
Memorandum by the Commercial Attaché in
Italy (Livengood)
Rome, September 16, 1937.
At Prof. Guarneri’s invitation, Dr. Grady called at the
Undersecretariat at 6.30 on September 15, and a general
discussion was held with regard to certain basic principles and
procedure followed by the United States in the Trade Agreements
program. At the conference with Prof. Guarneri were Gr. Uff.
Manlio Masi, Director General for Commerce (of the
Undersecretariat) and Ing. Da Gignano Bonaini, who is concerned
with American affairs in the Treaty office of the same
Undersecretariat. The Commercial Attaché accompanied Dr.
Grady.
Dr. Grady referring to special concessions accorded by Italy to
Danubian countries, said that we desired to know the commodities
in which these concessions are granted, their amount and kind,
and the countries concerned. Moreover, we wished to be assured
(1) that these concessions would not be a means by which
American trade in products of proper interest to us could be
injuriously affected, and (2) that we should be kept informed in
case new concessions should be contemplated in the future.
Prof. Guarneri replied that the questions had already been
received, and replies supplying the desired information would be
given the Embassy. The special concessions applied to Austria
and Hungary.
[Page 454]
They were
accorded by Italy in a period of “dramatic need” on the part of
those two countries, when wheat and livestock prices were
excessively low. The concessions were not reciprocal, as Italy
received no countervalue. The conditions which led to the
concessions have now greatly changed, and Italy’s policy is not
to add to them, but is in the opposite direction. “We would
gladly donate these countries to you”, said Prof. Guarneri.
Guarneri declared that he was very desirous that a Trade
Agreement be concluded between Italy and the United States, that
he attached such importance to the realization of this that in
the general clauses of the Treaty now under negotiation, he had
consented to the suppression of various Italian objections to
the American text.
Dr. Grady explained that under the Trade Agreement policy
American tariff concessions on a given product are given to the
country which is a principal, or at least an important supplier
to the United States; that under this principle no product of
which Italy is a leading supplier would be excluded from
consideration for possible tariff reduction—although the result
of the consideration would of course be determined by the
negotiations. For commodities in which Italy has a secondary
interest, the most-favored-nation clause would assure to Italy
any tariff concessions granted to other nations.
In various Trade Agreements, the United States has already
accorded reductions on over 500 tariff items, and as there is
every intention to push the Trade Agreements program vigorously
forward, the benefits which should accrue to Italy by virtue of
the most-favored-nation clause should be important. In this
connection, agreements are envisaged with Great Britain and
various British Dominions, and the concessions which would be
involved should be of material interest to Italy.
Up to the present, the advantages to Italy of American tariff
reductions have been less in evidence than they would have been
had it not been for the suspension of negotiations with
Spain—with which country it had been contemplated that
negotiations would be carried forward simultaneously with the
Italo-American negotiations.
While in granting tariff reductions, the United States expects a
quid pro quo, the spirit guiding the
decisions taken is a generous one. When a Trade Agreement with
Italy was under discussion over two years ago, a preliminary
survey was made of concessions which might be made to Italy, and
the American officials were of the opinion that these
concessions, if granted, would make possible a very substantial
increase in Italian exports to the United States.
At this point Prof. Guarneri remarked: “What was not done then,
can be done now”.
Dr. Grady explained clearly that notwithstanding Italian quota
restrictions, monopoly purchases, exchange control, etc., the
United
[Page 455]
States must
demand for its products as large a proportionate participation
in the Italian market as had been enjoyed before the system of
controls was initiated. This proportionate participation must
apply to all forms of control including the allocation of
foreign exchange.
Prof. Guarneri stated that this principle had been acceded to by
Italy in connection with the treaty now under negotiation. He
also recognized the principle of making tariff reductions to
principal suppliers of the relative articles, a principle which,
he said, Italy also followed.
Ing. Bonaini remarked that a list of tariff concessions desired
by Italy had been submitted, but that no reaction from the
American side had been received. Prof. Guarneri added that it
was desirable for Italy to know what concessions could be had,
since, if the resulting increase in exports should be
sufficiently large, it might enable him to suppress the system
of quotas and controls.
Dr. Grady explained that the question of concessions was one
which it was desirable to take up apart from the treaty. When
the treaty is signed, the way will be cleared for negotiating a
trade agreement, in which matters of the kind referred to would
be involved.
Throughout the conversation, Prof. Guarneri indicated a most
earnest desire that negotiations for a trade agreement be
started as soon as possible. He stated, incidentally, that he
was by training and economic theory against the system of trade
restrictions, but that under present conditions Italy had no
choice but to follow such a policy. “With our small gold
reserve, we can not take the chance of eliminating the control
at present”.
In the course of the conversation, he declared most emphatically
that in case the franc should be further revalued, the lira
would not follow. Regarding a tripartite monetary agreement, he
said that the peculiar circumstances affecting Italy prevented
Italy’s participation at this time. (Possibly his meaning was
that Italy was not prepared to participate in guaranteeing the
franc).
(In a conversation having no connection with the conference
reviewed above, Comm. C. Ruggieri, representative in Italy of
the Chase National Bank, in discussing Italian financial matters
with Dr. Grady, expressed the opinion that there would be no
devaluation of the lira in the near future. Ruggieri seemed to
think that for perhaps five years stability in the exchange
relationship of the lira could be logically expected. On the
other hand, the progressive cumulation of the national debt may
be followed eventually by some form of drastic capital levy by
which a percentage of the value of national bonds would be wiped
out through governmental action. This, in Ruggieri’s opinion,
would be purely of internal application, and the lira would not
be affected in its exchange value).
