611.5531/747

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

No. 24

Sir: Reference is made to the Embassy’s despatches no. 44 of August 31, 193814 and no. 36 of August 23, 1938, regarding the trade agreement between the United States and Belgium and certain measures which have been proposed for the regulation of the Belgian automotive industry.

It is gratifying to note that significant progress has been made in regard to the proposed automotive regulations. It is particularly gratifying that the proposed solution does not envisage any revision [Page 220]of the trade agreement and that it is based upon the desire of the Belgian authorities to adhere not only to the terms but also to the spirit and intent of the agreement.

Subject to the conditions envisaged in the proposed regulations, national treatment in respect of government purchases would be accorded to certain automotive vehicles produced in American assembly plants established in Belgium and import licenses would not be required for the importation from the United States of automotive parts destined for such assembly plants. In order to avail themselves of these advantages, the assembly plants would agree to incorporate Belgian labor and material to the extent of 40 percent of the value of imported materials used in the production of certain types of automotive vehicles and to the extent of 70 percent of the value of imported materials used in the production of certain other types. The assembly plants would agree to a semi-annual government inspection and would be free to withdraw from the arrangement at any time. Belgian assembly plants would be subject to the same inspection and requirements.

In the Department’s opinion, the proposed regulations appear to be equitable and to constitute an acceptable solution of the problem. Apparently, the 40 percent requirement has been in effect for some time by agreement between the more important assemblers and the Belgian Government and, according to the information available to the Department, there has been a very substantial increase in imports from the United States during the past two years of automotive parts on which concessions were obtained in the trade agreement. However, the Department is not aware that the 70 percent requirement in respect of certain types of automotive vehicles has been in effect and, therefore, is not in a position to know what effect this requirement might have on imports of automotive parts from the United States.

The proposed regulations apparently are acceptable to the General Motors representatives in Belgium but the views of other importers concerned had not yet been ascertained. In the Department’s opinion, the agreement of the other importers would seem essential to the successful operation of the proposed regulations. In this connection, the Department feels that full consideration should be given to the views of the agencies mentioned on page 4 of your despatch no. 36 which do not themselves maintain assembly plants in Belgium; and that it would be desirable to work out an arrangement whereby, for a period of one year at least, less stringent requirements would be applicable to assembly plants (presumably Belgian) to which automotive parts imported by those agencies would be destined.

The proposed regulations do not appear to be in conflict with the terms of the trade agreement and, although it would be difficult [Page 221]to predict whether they might have the effect of nullifying or impairing the concessions on automotive parts included in the agreement and thus be contrary to its spirit and intent, there appears to be good reason to believe that the proposed regulations would not have that effect. Therefore, although the Department considers that this matter is primarily one which concerns the interested importers and the Belgian Government, it feels that the Embassy might at the appropriate time indicate informally and orally to the competent Belgian authorities that this Government perceives no objection to the proposed regulations but that it must reserve the right to object if they should impair the concessions on automotive parts included in the trade agreement.

It is noted that the general difficulties which Belgian importers apparently have experienced as a result of an unsympathetic attitude on the part of certain subordinate officials of the Belgian Government (page 2 of the Embassy’s despatch no. 36) have been discussed with the new Premier, Mr. Spaak. It is gratifying to know that Mr. Spaak is so thoroughly in accord with the principles and objectives of the trade-agreements program and that he is anxious to preserve intact the spirit as well as the letter of the trade agreement. In view of his cooperative attitude and his efforts in regard to the proposed regulation of the automotive industry, it is hoped that a more sympathetic attitude may be expected on the part of subordinate officials.

There is, of course, an important relationship between this matter and the proposed general provisions of the trade agreement. As pointed out in the Department’s instruction no. 4 of July 30, 1938, it has been anticipated for some months that the Belgium Government would submit through its Embassy in Washington without delay a counter-draft which would serve as the basis for the successful negotiation of general provisions. You will recall that Mr. Paul Culbertson discussed this matter in detail with Belgian officials in Brussels at the end of April. It was understood that the various points of difference between the American and Belgian proposals had been clarified and that the official Belgian counter-draft would be sent to Washington within a few weeks.

This matter, although important, is not one of great urgency and the Department does not wish the Embassy to press unduly for early presentation of the promised counter-draft. However, in view of Mr. Spaak’s cooperative attitude, the Department feels that presentation of the draft might be expedited if you were to mention the subject to him at a convenient opportunity.

Very truly yours,

For the Secretary of State:
Francis B. Sayre
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