Memorandum by Mr. Raymond A. Hare of the Division of Near Eastern Affairs

The main points covered in this despatch45 have to do with (1) reasons advanced by the Iranian Foreign Office to explain that the Irano-German clearing agreement does not constitute discrimination against American trade under the terms of the Provisional Agreement of 1928,46 and (2) the reviving of the idea of a reciprocal trade agreement with Iran.

In attempting to show that the clearing agreement with Germany was not discriminatory, the Foreign Office official argued (a) that the agreement embodies certain disadvantages to German goods which counterbalance the advantages, and (b) that, in any event, there would be no discrimination inasmuch as Iran would be prepared to enter into a similar agreement with the United States.

With regard to the first of these arguments, it was the Department’s view, as expressed in its instruction of July 20, 1936,47 which was in turn based on TA’s48 memorandum49 on the subject, that the Irano-German agreement appears to place German goods in a more favored position than those of the United States and it is believed that a case could doubtless be worked up in support of this contention. On the other hand, viewing the matter in connection with our trade relations in general, it seems more than likely that our commercial interests would best be served by not pressing the matter at this time. In any event, we would probably wish to defer further action until a formal reply is received.50

Coming to the second Iranian argument regarding their willingness to negotiate a similar agreement with us, it would appear that this explanation might be acceptable if we had a conditional m[ost]-f[avored]-n[ation] agreement with Iran. It would not appear, however, to constitute a valid argument in the light of the fact that our agreement with the Iranians is of the unconditional type.

As regards the action of the Chargé d’Affaires in reminding the Foreign Office official that our proposal to negotiate a reciprocal trade agreement still remains unanswered, it might appear at first glance that the gesture was rather pointless in view of the fact that all of the important bases for concessions by the Iranians which were originally [Page 766] stipulated by us have been removed by various intervening acts of the Iranian Government. This does not necessarily mean, however, that satisfactory bases for an agreement might not be worked out under the existing situation, and in that event it would surely be highly desirable to have the Iranians take the initiative. If the action of the Chargé d’Affaires should have this effect, it might turn out to be a very helpful gesture.

The views of the Foreign Office official in question with regard to the unsound nature of clearing agreements are of particular interest in view of the fact that he was Chief of the Division of Economics of the Foreign Office for four years prior to being made Chief of the Geographic Division handling American Affairs.

  1. Supra.
  2. Agreement effected by exchange of notes, May 14, 1928, Foreign Relations, 1928, vol. iii, pp. 724728.
  3. Ibid., 1936, vol. iii, p. 398.
  4. Division of Trade Agreements.
  5. Not printed.
  6. No record of a subsequent Iranian reply has been found in Department files.