As an emergency matter, the original copy which is signed by the
Minister is forwarded to the Department in haste to catch the pouch
which is leaving today at 1 o’clock. Other and additional copies are
being mailed under separate cover.
The reply of the Minister of Foreign Affairs is so lengthy and is in
the form of an argument that it is not practicable to send the full
contents or even a résumé or summary by telegram.
It is also to be noted that the cost of the telegram would be far in
excess of the allotment for telegrams to this Legation.
[Enclosure]
The Danish Minister for Foreign Affairs
(Munch) to the American
Minister (Owsley)
Copenhagen, May 23,
1938.
Monsieur le Ministre: In a note of
February 23rd, 1938 you have been good enough, acting upon
instructions from the Secretary of State of the United States of
America, to bring to the attention of the Danish Government
certain considerations in regard to the trade between our
respective countries and concluding in the declaration that the
United States Government, in view of the continued accord by it
of most-favoured-nation treatment to Danish products, hopes that
the Danish Government will be able to give assurances that
American commerce will be accorded non-discriminatory
treatment.
After a careful and serious consideration by the Danish
authorities of your note and the question especially referred
to, i. e. the treatment of the American trade during the
existing exchange control, I have the honour to state the
following:
As already mentioned in my note of March 29, 19536 it
became necessary at the beginning of 1932 for the Danish
Government to establish the exchange control as a temporary
measure. The consequence of
[Page 240]
the heavy fall in prices of agricultural
products at the beginning of the world crisis was that all
countries carried through restrictions against the import of
these products. As will be known to you, the national economy of
Denmark is chiefly based on the export of agricultural products
which constitute three fourths of the total export. If under
these circumstances Denmark might hope to maintain the balance
of payments and continue to pay instalments and interest of the
foreign debt (of which an essential part is placed in the United
States), it was an absolute necessity for Denmark to establish
an import control. In case Denmark could not any more reckon on
selling her products to a similar extent as hitherto, this must
inevitably lead to a corresponding reduction of her import of
foreign products.
The Danish Exchange Control Law does not discriminate between the
different countries, but is applied to the imports from all
countries without exception. In accordance with the purpose of
this act, the foreign exchange available is first and foremost
used for the payment of interest and instalments of Denmark’s
foreign debt and for the import of raw materials for the
exporting industries and the other industries, so that
production, employment and export may be maintained; only what
remains when the requirement for raw materials for the
production is met, is used for import of manufactured goods.
The Danish Government has endeavoured to administer the act in
such a manner that reasonable considerations are given to all
quarters. But a certain country to which the export of Danish
agricultural products is decisively bound, has made even a
reduced import of agricultural products from Denmark dependent
upon some reciprocity, so that it has proved inevitable at the
practical carrying out of the act to a certain extent to pay
regard hereto by issuing import licenses to this country in
order to ensure to Denmark the maintenance of her export and
thereby her power to pay for her import and to meet her other
financial obligations.
The Danish Government has always been animated by the desire to
limit as much as possible the extent of the import control
exercised. During 1937 a certain improvement occurred in
Denmark’s balance of payments and thereby a strengthening of her
exchange position. In consequence of this development the Danish
Government immediately carried through not unessential
facilities in the exchange control. After the passing of the new
Exchange Control Law of December 22, 1937, about one third of
Denmark’s total import is exempted from restrictions. By this
act were transferred to the free list goods—both raw materials
and other goods—the total import of which from the United
States, apart from grain and feeding stuffs, in 1930 amounted to
20 mill. Kr. In this connection I beg to draw your attention to
the fact that the balance of trade between Denmark and
[Page 241]
the United States in
the first three months of 1938 compared with the same period of
1937 shows a development very favourable to the United States.
While the export of Danish goods to the United States has fallen
from 10,0 mill. Kr. to 5,7 mill. Kr., Denmark’s import from the
United States has increased from 17,8 mil. Kr. to 36,6 mill.
Kr.
The Danish Government has thus availed itself of the improvement
in the exchange situation to introduce at once an alleviation in
the system in force and hopes that the development will make it
possible to continue by this way—the above-mentioned act
provides that not later than the autumn 1938 the list of goods
is to be taken up for revision with a view to securing possible
further facilities for the trade—but as long as the countries
who are the principal purchasers of Danish goods, especially
agricultural goods, hold by the principle of reciprocity as the
basis of their commercial policy and thus more or less make the
possibilities of sale of Danish goods dependent upon Danish
purchases, the Danish Government unfortunately does not see its
way to abandon the exchange control which enables Denmark to
fulfil the obligations she must undertake in order to have her
goods sold on her principal markets.
At no time after the introduction of the exchange control the
Danish Government has wanted to discriminate against the
American import to this country. It is not only the
proportionate share in Denmark’s import of the United States of
America which has fallen in the period 1931–37, but the same
holds good of the import from several other countries and in the
case of some of them even to a still higher degree than from the
United States. Thus Germany’s share has fallen from 33,6 per
cent, to 24 per cent., that of U. S. S. R. from 3,9 per cent, to
0,9 per cent., of France from 3,6 per cent, to 1,2 per cent., of
Poland from 2,3 per cent, to 1,0 per cent. and of Czechoslovakia
from 1,3 per cent. to 0,7 per cent.
In this connection it should also be noted that several important
American export articles, such as benzine, petroleum, solar oil
and lubricating oil, the import of which from the United States
in 1931 amounted to more than 20 mill. Kr., still are imported
to the same extent, but in such a manner that the import now by
far the greater part takes place through branches of American
firms in the United Kingdom, so that the goods are entered in
the Danish statistics as Sported from the latter country.
As will be known to you, the high American customs tariff
constitutes a serious impediment to the import of Danish
products to the United States. The Danish Government therefore
fully appreciates the extension to Danish products of the tariff
concessions which the United States have given in their
commercial treaties with third countries,
[Page 242]
whereby it seems to become
possible that Danish products to a greater extent than hitherto
may gain access to the American market. As will appear from what
has been stated above, the main difficulty for Denmark is to
procure the necessary amount of foreign exchange, so that the
country is compelled to the greatest possible extent to pay for
her imports with goods. An increase in the Danish exports to the
United States of America will, therefore, place Denmark freer as
regards her purchases in the United States.
I need hardly assure you that Denmark whose commercial policy
until 1932 for more than one hundred years uninterruptedly was
based on a moderate customs tariff administered on the principle
of equality, follows the endeavours of the United States
Government to reestablish freer and sounder conditions for the
international trade with great sympathy and in the hope that
they may bear fruit. Just because the Danish Government in
principle shares the view of the United States of the basis of
the international exchange of goods, it is its desire and
intention to give the American commerce a fair and equitable
treatment within the existing possibilities which it is beyond
its power to alter. With this in view the Danish authorities are
willing in concrete cases together with the Legation of the
United States—as has already been done in certain cases of
late—to go in to the difficulties which might arise for the
American export trade and discuss the possibilities of
redressing them, and I venture to express the sincere hope that
my Government in its efforts in this respect may continuedly
count on the collaboration and understanding of the United
States Government.
I avail myself [etc.]
