Memorandum by the Assistant Chief of the Division of Near Eastern Affairs (Barnes)

The Yugoslav Minister called at the Division this morning to leave his Government’s reply to our latest note on Yugoslavia’s war-time indebtedness to the United States10 The opportunity was taken to read to the Minister the attached memorandum outlining our position with respect to the trade proposals communicated by his note of April 6, 1937. The Minister had previously been advised orally that neither of his Government’s two proposals was sufficiently in harmony with our trade policy as to make it likely that we could give a favorable reply with respect to either.

The discussion which followed the reading of the memorandum indicated that the Minister would comment favorably to his Government upon its contents. It was clear to the Minister that the memorandum contained a counter proposal to those of his Government. He was supplied with a copy of the document and said that he would send it to Belgrade by mail with his comment on June 9.

It was explained orally to the Minister that if the year 1935 as a base year seemed disadvantageous from the Yugoslav point of view the Department would probably have no objection to the choice of a more representative period for the application of the formula suggested in paragraph one of the memorandum.


Memorandum Concerning Yugoslav Trade Proposals

(1) This Government cannot accept any restrictions on Yugoslav imports of American goods which do not conform broadly to the principles of equality of treatment outlined in the note which was handed to the Yugoslav Minister on December 17, 1936.10a This Government [Page 591] is therefore able to accept a limitation of imports of any article produced in the United States to a given percentage of the imports from the United States of such article in a given period only if the global amount of such imports from all countries is similarly restricted, and the percentage applying to imports from the United States is not less than that applying to the global amount of imports of the article in question.

The principle described above is illustrated by the following figures, which are purely hypothetical:

Imports into Yugoslavia in base period Proposed imports into Yugoslavia in 1938
From all countries 100 80
From the United States 25 20

Assuming that imports of any restricted article from all countries are reduced to 80 percent of the amount imported in the base period, then the Yugoslav Government would be required by the above formula to be prepared to grant permits for the importation from the United States of an amount of the restricted article equal to not less than 80 percent of the amount imported from the United States in the base period.

It should be observed that the United States would not under this formula, require that the percentage applied to imports from the United States be as favorable as that applied to any individual country, but only that it be as favorable as that applied to all countries in the aggregate.

(2) In general, this Government holds that quantitative restrictions applied in accordance with the formula indicated above should be applied separately to each article and in terms of the physical quantity of imports of each article. In view, however, of the peculiar difficulties faced by Yugoslavia at the present time, this Government would be prepared to accept temporarily the application of the formula to the total value of imports of each of the controlled articles, should the Yugoslav Government consider this preferable.

(3) This Government will be prepared to give careful consideration to any proposals which the Yugoslav Government may make with a view to giving exceptional treatment to any particular controlled article or articles. If examination of the economic circumstances affecting trade in such an article should make it appear that in the absence of quantitative restrictions Yugoslav imports of such an article from the United States would in all probability bear a smaller ratio to imports in any previous period than would total imports of that article, then this Government would be prepared to accept an appropriate modification of the formula indicated above, with respect to the article in question.

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(4) In view of the close economic relations which exist between Yugoslavia and those other countries of which a large and substantial part was formerly included in the Austro-Hungarian Empire, this Government would be ready to give sympathetic consideration to any proposals which the Yugoslav Government may make concerning special favors it may desire to accord to the trade of these countries in derogation of the formula indicated in paragraph (1) above.

(5) However, this Government is ready to give sympathetic consideration to any further proposals which the Yugoslav Government may wish to make, bearing in mind the essentials of this Government’s commercial policy as set forth above, and in the note which was delivered to the Yugoslav Minister in Washington on December 17, 1936.

  1. Department of State. Press Releases, June 12, 1937, p. 407.
  2. Foreign Relations, 1936, vol. ii, p. 825.