660M.116/25
The Chargé in Lithuania (Kuykendall) to the Secretary of State
[Received August 11.]
Sir: I have the honor to refer to the Department’s instruction No. 66, dated February 8, 1937, and to the Department’s telegram No. 19 of April 3, 1 p.m., 1937, both addressed to the American Legation at Riga,8 and in compliance therewith to submit a Memorandum on the Basic Legislation Underlying the System of Foreign Trade Control in Lithuania and the Application in Practice of This Control to Imports From the United States, prepared by Vice Consul Basil F. Macgowan.7
The attached study would seem to indicate that the import and foreign exchange restrictions have not been openly invoked against the United States, with minor exceptions notably in connection with the refusal of licenses in 1935 for the importation of kerosene, gasoline and gasoil by the former (now liquidated) local branch organization of the Standard Oil Company of New Jersey. However, there would seem to be no doubt but that the United States has been adversely affected as a result of the imposition of import restrictions and the Government’s policy instituted in 1933, of conducting its foreign trade on the basis of bilateral balances of trade and compensatory trade agreements. In order to fulfil its commitments under these agreements, the Lithuanian Government has resorted to the allotment of secret quotas and contingents, which, although allegedly not fixed on American commodities, necessarily confines within certain limits the total quantity that may be imported from the [Page 512] United States and from other countries with which a compensatory agreement has not been concluded. In order to assure that a quota on a specific commodity will be completed the authorities have on occasion not hesitated to change the intended country of origin indicated in the license application or to inform the importer verbally of the Government’s desires.
It is believed that if no restrictions had been imposed the importation of phosphate rock, for instance, which in 1932 comprised 16 percent of the total imports from the United States, would have shown a marked increase in 1936 since the demand for superphosphate has risen considerably during the past eighteen months. Instead, imports of phosphate rock from the United States ceased entirely. The United States supplied 44 percent of the total imports of this commodity in 1932 and 63 percent in 1935. The absence of imports in 1936 may of course be due to other factors of which the Legation has no knowledge.
It is also believed that if no restrictions had been imposed the United States would have participated to a much larger extent in the supply of raw cotton into Lithuania, as at the time the spinning mill was established in Klaipeda10 in 1934, the local agent informed the Legation that the factory intended to use American long staple cotton almost exclusively. The statistics show, however, that the imports of American cotton, although on the increase, have declined from 35 percent of the total imports of raw cotton into Lithuania in 1934 to 19 percent of the total in 1936. British India supplied 60 percent of the total imports in 1936 and Great Britain (representing it is believed imports from the Sudan) 19 percent. Whether or not pressure was brought to bear on the Klaipeda spinning mill to purchase British cotton in preference to American can only be surmised, but since the Lithuanian authorities have made strenuous attempts to equalize the trade balance with Great Britain, it is believed unlikely that such an important commodity would have been left to take its normal course. The mere fact that an import license has been required for the importation of this commodity since February 6, 1935 would seem to indicate as much. A member of the staff of this office questioned the owner of the Klaipeda spinning mill in this respect in the summer of 1936 but beyond eliciting the fact that no license had been refused in writing for the importation of American cotton, no information was forthcoming.
In conclusion it may be stated that the Lithuanian Government has indeed been reluctant in refusing licenses in writing for the importation of American commodities, in view of the very favorable balance of trade and payments accruing to Lithuania, but it would seem that the Government has not hesitated in the past in employing, to attain [Page 513] its objectives, extra-legal methods, the exact extent of which can of course not be gauged, and will not hesitate in the future in resorting to similar methods should the necessity arise.
Respectfully yours,