The Ambassador in Belgium (Davies) to the Secretary of State

No. 36

Subject: Assembly of American Automobiles in Belgium, and the Trade Agreement.

Sir: I have the honor to refer to the Department’s instruction No. 4 of July 30, 1938, and, with reference to the above entitled matter, beg leave to report as follows:

Since my arrival, I have had several conferences with different representatives of automobile companies of the United States doing business in Belgium. On this date I asked all of the representatives of the various American companies to meet with me at the Embassy to discuss the situation and afford me an opportunity to meet them personally. I took the occasion to advise these gentlemen that the policy of the Secretary of State and that of our Government was, of course, to aid in every manner that was consistent and fair in the promotion and protection of American business interests outside of the United States, and that I wished them to feel that, within those limitations, they could count on my active aid. The conference was characterized by general discussion and not by the discussion of any specific proposal, for reasons which will subsequently appear.

The facts appear to be, briefly, that there has been a good deal of what might appear to be “chiseling” so far as the spirit and even letter of the trade agreement is concerned, particularly in connection with the granting of import licenses, which has harassed American importers of automobile parts, etc. The origin of the trouble seems to have been in the chief of the particular Department in the Ministry of Economic Affairs, which is characterized by an intense nationalist zeal as well as by a “functionnaire” attitude in its methods; and it is [Page 216] suspected that it is the head of this Department who has pressed the policy that has induced these embarrassments.

Following Ambassador Gibson’s representations to former Premier van Zeeland, the situation apparently bettered, and then subsided again. Since then the matter has been taken up with the new Premier, Mr. Spaak. He has manifested a very lively interest in the situation and is much concerned in preserving intact the trade agreement both in letter and in spirit. He is heartily in accord with the ideas of the Secretary of State in the projection of these trade agreements as a part of a program to restore world peace, and in addition thereto is exceedingly anxious not to do anything that would appear to indicate a lack of cooperation with the purposes back of this policy.

The importing industries, as far as automobiles are concerned, are divided, practically, into two groups: those which have assembly and quasi-manufacturing plants, and those which have only agencies who import parts and assemble cars in a retail sort of way and without manufacturing facilities. In the first class are General Motors, Chrysler and Ford, who furnish approximately 92% of the truck imports into Belgium. The other 8% is absorbed by the agencies of Packard, Studebaker, Federal, Diamond T, and others.

In a conference which I recently had with Mr. Zdunek, who is the Managing Director of General Motors here, and who is taking a very active interest in the projection of a settlement of the matters in dispute, he advised me that he understands that the Premier and Foreign Minister was desirous of finding some machinery which would implement a satisfactory arrangement, without going to the length of repealing the laws establishing the import license system, which would undoubtedly entail extensive debates in Parliament and a very long delay. The plan which is being considered is to place upon a “national” basis all those American automobile concerns that would establish and would agree to a condition whereby 40% of the total cost of the finished article would be paid out for either Belgian labor or material, so far as autocars and trucks (with a pay load of five and one-half tons) are concerned. The advantage of such a classification to the American importers would be also that it would place them on the same footing as Belgian nationals in the matter of furnishing Government agencies with trucks, which is now denied them. It was Mr. Zdunek’s opinion that such an arrangement, in its practical effects, would be most advantageous to American importers, and would be generally acceptable to them. Under such conditions the importers would not be required to obtain licenses for importation of parts.

In response to my inquiry, he stated that it would work no hardship upon the large assembly plants to conform to the 40% requirement, for the reason that currently they were incorporating that percentage [Page 217] already in their manufacturing operations. In response to my inquiry as to what effect it would have upon the agencies who were not fortunately situated in having assembly manufacturing plants, he stated that in his opinion it might effect some hardship upon them, but that such hardship would be relatively small and that they would acquiesce in such a proposal. He pointed out that this new arrangement did not change the status of these agencies under the trade agreement but only served to give additional advantages to those who could qualify under the terms of the compromise arrangement. Again in response to my inquiry, he stated that he thought that a situation could be worked out whereby a special provision might be made for the agencies, by a reduction of the percentage from 40% to 30% for a period of a year, within which time they could arrange to accommodate themselves to a new arrangement and procure all of the advantages any other American importer would have during the transition period.

He states that they have a kind of trade association here in which all of these interests have membership. Mr. Zdunek left with me today a copy in French of a memorandum which had been worked out in principle and which he considered probably would be acceptable to both sides. He asked that we treat the matter as confidential until their Committee and their Board of Governors had an opportunity to discuss it with their “agency” members, in the expectation that they would be able to submit an arrangement that would be unanimously approved by all those interested.

For this reason the matter was not discussed at the general conference held today. I am forwarding, however, the original memorandum in French13 so that the Department will have it immediately available and so that it may catch the first mail, and will forward the translations in the next pouch.

Upon the occasion of my first call upon the Premier and Foreign Minister, Mr. Spaak, I touched upon this matter and stated that I wished to call to see him to discuss the matter formally and more in detail. Since that time I have had the opportunity to talk with him about the matter informally, and to express the gratification of my Government that he had manifested so keen an interest in this particular matter and that his disposition was of so constructive a character.

If the sanguine expectations of Mr. Zdunek are realized, so far as the “agencies” are concerned, there is probability that a practical arrangement may be worked out here without modification of the terms of the trade agreement.

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While this solution might be entirely satisfactory to American import interests here and be a “practical” disposition of the matter, it occurs to me that there might still remain a question as to whether the policy of the Department would permit recognition of such an arrangement, and I would appreciate the views of the Department thereon for my guidance.

I have [etc.]

Joseph E. Davies
  1. Not printed.