The Department of State to the Yugoslav Legation
The Government of the United States has given consideration to the proposal presented by the Yugoslav Government on November 12, 1937, and is gratified to find that this proposal would involve substantially more favorable treatment to American trade in the controlled articles than is now accorded by Yugoslavia. Should the Yugoslav Government be prepared to accord to American trade in all controlled articles the treatment indicated in its proposal with some such modifications as are suggested below, the United States Government would be prepared to continue the Treaty of Commerce and Friendship [Navigation] between the two countries in effect until further notice, and hence, among other things, to continue to grant most-favored-nation treatment to the trade of Yugoslavia.
The United States would consider this arrangement to be of a temporary and transitory character for the reason that the imposition on imports from the United States of restrictions which are not imposed on imports from certain other countries, albeit the products involved form only a small proportion of the total trade, cannot be considered as being in harmony with the principle of most-favored-nation treatment. The United States is ready to accept it only because it believes that by such an arrangement the treatment accorded to American trade can be made to approximate the treatment which would be accorded under a more formal adherence to the most-favored-nation principle. It hopes, however, that ultimately it may be possible for the Governments [Page 594] of Yugoslavia and the United States to arrive at a broad settlement and one more strictly in accordance with the unconditional most-favored-nation principle in respect of all forms of trade-control measures.
The following modifications are suggested:
- With respect to most of the controlled articles, quotas equal to the amounts imported in 1935 would in general be satisfactory for the proposed temporary arrangement. Since, however, a large number of minor items is involved, the imposition of a fixed quota on each separate item would appear to be unduly inflexible. In some cases the imports from the United States during the year 1935 are likely to have been unusually large or unusually small as a result of conditions of a purely temporary nature. The proposed system of quotas could be made more flexible if it were provided that any unused amount of the quota on any of the controlled articles in one quarter could be used for imports of any of the controlled articles in the following quarter.
- The list of quotas attached to the memorandum which was presented by the Yugoslav Government does not indicate the amounts of the quotas for certain minor items of which very small amounts were imported from the United States in the year 1935, including: single strand cotton yarn (tariff No. 274), cotton velvet, plush and similar articles (tariff No. 278), cork products (tariff No. 439), thick silk textiles (tariff No. 331–1), aluminum, wrought or rolled, (tariff No. 590). It is the understanding of this Government that these articles, and some others, are included among the controlled articles. If this understanding is correct, a single quota for all of the controlled articles for which separate quotas have not been listed in the Yugoslav memorandum would be acceptable.
- The United States Government feels that, with respect to all of the controlled articles except automobiles, the modifications suggested above would be sufficient. In the event that there should be a demand in Yugoslavia for a larger amount of imports from the United States of any of the controlled articles (other than automobiles) than was imported in 1935, the carry-over of unused quotas of other articles, as provided for in the first modification, might be sufficient to satisfy at least a part of such additional demand.
With respect to automobiles, however, the case is different. Total imports of automobiles, including trucks, into Yugoslavia, have greatly increased since 1935. In view of this large increase, and also in view of the fact that automobiles account for more than half of the imports of controlled articles from the United States, the proposal of the Yugoslav Government, even if modified as suggested in numbered paragraph 1 above, cannot be considered as fully acceptable [Page 595] since a limitation of imports from the United States to the amount imported in 1935, although it would involve a considerable improvement over the present unsatisfactory treatment, would nevertheless fall considerably short of restoring to the United States the relative share in the trade which it enjoyed in 1935. Hence it is felt that the quota on automobiles should be increased substantially in such manner that the United States may enjoy more nearly the same relative share of the trade as it enjoyed in 1935.
The Government of the United States would appreciate sympathetic consideration of these suggestions by the Yugoslav Government.
In connection with these proposals the Government of the United States invites attention to the fact that under the arrangement suggested by the Government of Yugoslavia American exports of controlled articles would be rigidly limited. Yugoslavia on the other hand now enjoys full opportunity to participate in the expanding market of the United States, an expansion which is likely to be increasingly great as the comprehensive trade-agreements program on which this Government has embarked continues to develop.