Memorandum by the Assistant Secretary of State (Sayre)

Immediately after dinner at Mr. Dunn’s11 house, Mr. Runciman12 and I withdrew to the study to go over the prospective trade agreement between the United Kingdom and the United States. I opened the conversation by trying to make clear to Mr. Runciman the heart of the program upon which the United States is engaged. I sought to point out the two contrasting alternative commercial policies which might dominate the world,—the policy of dealing in preferences leading to clearing agreements and to bilateral balancing, with all that these entail, on the one hand, and the policy of equality of treatment embodied in most-favored-nation dealing on the other. I suggested that these two policies were continually warring with each other in different parts of the world and that the world is not big enough to hold them both,—that one or the other must ultimately prevail. I cited Germany as an instance of a country following the former policy and pointed out how in Latin America the consequences of her policy come into square conflict with our own, injuring our trade in Latin America as a result. I went on to say that I felt it of the most vital importance that England and the United States should stand together and that if England agreed with us it would go far toward insuring the ultimate triumph of the policy of equality of treatment.

Mr. Runciman seemed to have but a foggy and hazy notion of what I was driving at and I felt that I was making no real progress. He said that the United Kingdom had made only three clearing agreements, namely with Turkey,13 with Italy,14 and with Spain;15 and that these clearing agreements, much as one might criticize them, were the only way Britain had of insuring the payment of British creditors. I pointed out that any nation which promised preferential treatment to Britain or any other country was unable thereafter to promise equality of treatment or to enter into a trade agreement based [Page 7] upon that principle. Mr. Runciman’s attitude, however, was that he had been fighting for British liberal commercial policies and, as evidence of this, he pulled out of his pocket and read to me excerpts from his speech of last year declaring for lower trade barriers. He also read excerpts from the stabilization agreement between the United States, Great Britain and France,16 declaring that the language used in connection with that agreement had been written by the Chancellor of the Exchequer and that he felt gratified that the Chancellor had been led to adopt such liberal language. Mr. Runciman said that he had been fighting valiantly for liberal trade policies in the face of severe opposition not only among various elements of the British population but among his own colleagues.…

I then turned the conversation to our prospective trade agreement and Mr. Runciman said he definitely wanted to go forward and suggested that we get our experts together tomorrow and make all the progress possible before his departure. I spoke again of the political conditions which we face here, saying that in order to support an agreement we must obtain concessions on hog products, barley, rice, fruits, tobacco, lumber and leather. I said that unless we could obtain concessions on these seven commodities, it would be most difficult to obtain political support in this country for the agreement. I also told him that before his arrival we had discussed these matters with Mr. Chalkley17 and that the obstacle to further progress seemed to be the Ottawa Agreements18 which gave binding preferences on these commodities to the Dominions and which prevented Great Britain from giving us real concessions on these commodities. Mr. Runciman repeated what he had said to Secretary Hull and myself earlier in the afternoon—that we would be pleased that in the new Ottawa Agreement between the United Kingdom and Canada there was a provision allowing adjustments to be made in even those commodities covered by the Ottawa Agreement. I asked him whether this covered all commodities or only specified ones. He said that he did not know. I said that I was delighted to hear of this provision for it seemed to me to unlock the door which was blocking further progress on a trade agreement between the United Kingdom and the United States. (Note: In a later conversation with Mr. Helmore,19 I learned that Mr. Runciman is apparently mistaken about the provision in the new Ottawa Agreement and that Great Britain is not free to make adjustments without the consent of Canada.)

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Mr. Runciman said that he definitely wanted to go forward with a trade agreement and again suggested that our experts meet tomorrow and make all progress possible. He added that in view of the rising tide running toward protectionism in England it would be far better to have a trade agreement even if it went no further than conventionalizing rates than to have none at all.

Mr. Runciman then said that he was tired and wanted to return to the British Embassy. He therefore withdrew and I joined our experts who were waiting downstairs, namely Messrs. Hawkins,20 Pasvolsky,21 Hickerson22 and Dunn on our side, and Messrs. Chalkley and Helmore on the British side. We talked over possibilities until after midnight.

In view of Mr. Chalkley’s and Mr. Helmore’s telling us, however, that the provision in the new agreement to be signed between the United Kingdom and Canada required the consent of both sides before any adjustments in preferences could be made, further progress seemed most difficult. It was suggested that we, on our side, give further particulars with regard to the commodities upon which we feel we must have concessions as the basis of a trade agreement and that the British then approach the Canadian Government asking for Canadian consent with regard to these commodities.

F. B. Sayre
  1. James C. Dunn, Special Assistant to the Secretary of State and Chief of the Division of Western European Affairs.
  2. President of the British Board of Trade.
  3. Signed September 2, 1936, League of Nations Treaty Series, vol. clxxii, p. 289.
  4. Signed November 6, 1936, ibid., vol. clxxvii, p. 183.
  5. Signed January 6, 1936, ibid., vol. clxvi, p. 283.
  6. See statement of the Secretary of the Treasury, September 25, 1936, Foreign Relations, 1936, vol. i, p. 560.
  7. H. O. Chalkley, Commercial Counselor of the British Embassy at Washington.
  8. British and Foreign State Papers, 1932, vol. cxxxv, pp. 161 ff.
  9. J. R. C. Helmore, private secretary of Mr. Runciman.
  10. Harry Hawkins, Chief of the Division of Trade Agreements.
  11. Leo Pasvolsky, Special Assistant to the Secretary of State.
  12. John Dewey Hickerson, Assistant Chief of the Division of Western European Affairs.