The British Embassy to the Department of State

The Government of the United Kingdom concur fully in the view expressed in the first paragraph of Mr. Cordell Hull’s oral communication of January 17th, 1937, that economic recovery and conditions of peace cannot be achieved unless something more effective is done to reduce excessive barriers to international trade and to arrest and limit the increase of armaments.

As regards the second paragraph they feel that their own efforts for the restoration of international trade have made a notable contribution to this end. They are ready and anxious to continue those efforts and they feel that any suggestion that they have abandoned them is disproved by the facts that United Kingdom tariff rates have [Page 9] been maintained at a lower level than those of almost any other country, and, particularly, that the balance of visible trade of the United Kingdom shows the following great and growing excess of imports over exports:—

1934 £284,000,000
1935 275,000,000
1936 348,000,000

The United Kingdom Government have already given proof of their desire to cooperate with the United States Government in endeavouring to eliminate restrictions on world trade. They earnestly desire to continue that cooperation, more especially in any sphere in which it can produce practical results, and they are ready as they have always been to consider any definite projects which the United States Government may have in mind for the realisation of the aims which they believe to be common to both Governments.

With regard to Mr. Cordell Hull’s observations on the agreements negotiated between the United Kingdom and Dominion Governments, the United Kingdom Government cannot refrain from observing that in their opinion there is no justification for the suggestion, based on reports of the nature of the United Kingdom agreement with Canada, which is on the point of signature and of which no particulars have been published, that their policy is obstructing and impeding economic disarmament. On the contrary the apprehension which the United States Government appear to entertain that this agreement is likely to restrict the expansion of the trade of the United States with Canada or with the United Kingdom is unfounded. On the United Kingdom side there is no increase in the fixed margins of preference while on the Canadian side the United Kingdom Government have agreed in a number of cases to reduce or abolish fixed margins, thus making it possible for Canada if she so desires to offer concessions in those cases to the United States.

The United Kingdom Government desire to make it clear that in their opinion the Ottawa agreements do not constitute a bar to the rehabilitation of world trade, as is evidenced by the far-reaching agreement made a year ago between the United States and Canada,22a nor can they agree that these agreements which form part of the considered policy of the United Kingdom Government have had any prejudicial effects upon armaments or upon the cause of world peace.

Subject however to the general principles governing this policy the United Kingdom Government are ready to examine any possibilities of making adjustments in individual Ottawa agreements to meet particular [Page 10] cases, with the consent of the Dominions concerned. In this connection the United Kingdom Government have informed the Canadian Government very confidentially that negotiations may take place between themselves and the United States Government and that in that event they may have occasion to approach Canada with a view to modification of certain margins of preference fixed on certain imports into the United Kingdom.

  1. Signed November 15, 1935, Department of State Executive Agreement Series No. 91, or 49 Stat. 3960; for correspondence, see Foreign Relations, 1935, vol. ii, pp. 18 ff.