Memorandum of Conversation, by the Chief of the Division of Trade Agreements (Hawkins)

[Participants:] Mr. Witold Wankowicz, Counselor, Polish Embassy;
Mr. Sayre;1
Mr. Kelley;2
Mr. Hawkins.

Mr. Wankowicz called to discuss the possibility of trade agreement negotiations. Mr. Sayre outlined to him the essential principles upon which the negotiation of trade agreements by the United States must be predicated. He pointed out that it is our policy to negotiate only on bases which would promote the two objectives of the trade agreements program: 1) the reduction of trade barriers, and 2) the removal and prevention of discrimination. He said that Poland’s compensation and quota practices are, from our standpoint, discriminatory, and outlined what the principle of no discrimination means to the United States as applied to such measures and quotas, compensation systems and exchange controls. In regard to reciprocal reductions in trade barriers, Mr. Sayre pointed out that we operate on the basis of granting concessions only on products of which the other country concerned is the chief or major source of imports into the United States; that Poland is the chief source of very few products. This means that the list of duty concessions that the United States could offer Poland in a trade agreement would be rather restricted. However, Poland is a secondary supplier of a considerable number of products and as the United States, in pursuance of its trade agreements program, makes concessions to other countries on such products, Poland would receive the benefit as long as we continue to generalize to them in accordance with the most-favored-nation principle. Mr. Sayre pointed out, however, that we can only continue to generalize [Page 526] to Poland if Poland ceases to discriminate against American commerce.3

Mr. Wankowicz replied that his Government is equally anxious to bring about a reduction in trade barriers. In regard to quotas, he pointed out that Poland has a flexible quota system and cannot agree to grant to the United States a proportionate share of total permitted importations in accordance with the formula which we customarily include in our trade agreements. Poland could, however, deal in fixed quantities, i. e., would specify for each product the minimum quantity which would be permitted to be imported from the United States. He said that the fixed quotas granted by Poland are usually in excess of actual imports, since this helps to keep internal prices down and insures the better quality resulting from competition. In regard to exchange allotments, Mr. Wankowicz said that this was not done on a proportionate basis in accordance with provisions such as we include in our trade agreements; that the amount of imports and the amount of exchange allotted are made dependent on each other. With reference to compensation trade, he said that if we solved the quota and exchange problems, the compensation system would probably take care of itself; that Poland would probably be able to do away with the requirement that importers provide certificates showing equivalent exports to the United States. This would be possible because the agreement could be made to provide for sufficient exports from Poland to pay for imports from the United States and the application of the compensation system, shipment by shipment, would, in his opinion, be unnecessary.

Mr. Sayre pointed out that Poland’s market in the United States cannot be as great as our market in Poland because Poland needs so many of our raw materials. He reminded Mr. Wankowicz in this connection that trade cannot, economically, be made to balance between each pair of countries; that trade is naturally triangular or polyangular. Mr. Wankowicz agreed with this. He said that trade between the United States and Poland could not be promptly and artificially brought into balance, but that Poland expects us to help it increase its exports to this country. He gave the impression that Poland would seek to make the trade balance as far as practicable. However, in response to questions, Mr. Wankowicz stated that, in his view, the chief object of the negotiations would not be to bring the trade between the two countries more nearly into balance.

In response to a further question regarding the compensation system, Mr. Wankowicz said there is reason to believe it might be abandoned [Page 527] for all products when the trade agreement was concluded, not merely for products specifically covered in the agreement.

On the question of quota allotments, the discussion brought out the point that Poland’s main interest is to avoid openly agreeing to allot quotas on a proportionate basis by name. Poland might consider a formula which would provide that, with reference to products on which specific quantities were allocated in the agreement and on which the global quota might be increased, the American quota would be increased correspondingly.

Mr. Wankowicz then stated that his Government is anxious to avoid the application of our countervailing duties. Mr. Sayre replied that we could not change Section 303 of the Tariff Act,4 as this provision of the law is mandatory and allows the Executive no discretion.

Mr. Wankowicz stated that he would call on Mr. Hawkins later to discuss further the bases for negotiations.

  1. Assistant Secretary of State.
  2. Chief of the Division of Eastern European Affairs.
  3. For correspondence concerning Polish discrimination against American trade, see Foreign Relations, 1935, vol. ii, pp. 629 ff.; and post, pp. 543 ff.
  4. Approved June 17, 1930; 46 Stat. 590, 687.