611.60F31/573: Telegram

The Minister in Czechoslovakia (Carr) to the Secretary of State

8. Your despatch No. 19, January 5, 1938. We had lengthy discussion today with Foreign Office. In substance the two Governments have diametrically opposite conceptions of the most-favored-nation clause. Czechoslovakia in practice regards clause as subject to interpretation and exception in respect to particular products including wines. Her acceptance of our position with respect to most-favored-nation clause would, it is claimed, necessitate granting most-favored-nation treatment to German wines which Czechoslovakia does not wish to do. Moreover, it would constitute an exception to an unbroken line of treaties with other countries containing wine clauses. Foreign Office suggested that remedy with respect to wine is to include a wine clause in proposed trade agreement and meanwhile if necessary conclude an agreement covering wine as supplementary to modus vivendi. We pointed out that inclusion of such clause was contrary to the most-favored-nation principle as we applied it and would moreover open the way to making exceptions in respect to other products. While unwilling to write into an agreement a provision that exceptional treatment would be limited to wine opinion was expressed that in practice it would be the only commodity affected. The question of most-favored-nation clauses as well as the wine question have not yet been referred back to Praha by the delegation. I made it clear that the divergent views of the two Governments on this subject would probably prove a serious obstacle to the success of the negotiations but that view is not held here. On the contrary optimism was exhibited that difficulty could be overcome by leaving the most-favored-nation clause intact and adding a wine clause below. I am promised written reply soon but have no expectation that it will differ in substance from foregoing.

Despatch follows.7

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