Foreign Relations of the United States Diplomatic Papers, 1938, The British Commonwealth, Europe, Near East, and Africa, Volume II

611.4131/1548½

The British Trade Delegation to the Department of State

1. The detailed proposals contained in the document which the United States representatives handed to the United Kingdom Delegation on the 26th April have been examined in so far as they concern import duties on United Kingdom goods. The United Kingdom Delegation are examining the other matters covered by the United States proposals.

2. All the interchanges made during the informal discussions leading up to the formal announcement of negotiations led the United Kingdom Government to believe that the United States Government contemplated radical reductions in the United States tariffs over the whole range of goods of which the United Kingdom is the principal source of supply. Nothing less could, in the opinion of the United Kingdom Delegation, lead to a substantial expansion of the market for United Kingdom products. Moreover, it was stated in the United States memorandum of the 4th June, 1937,³⁷ that out of reductions of duty on United Kingdom trade amounting to $43,117,000 on the basis of 1935 figures reductions of duties of between 40 per cent, and 50 per cent. appeared feasible in respect of United Kingdom trade to the value of practically $20 million, i. e., 46.2 per cent. of the total. This document confirmed the United Kingdom Government’s belief that the United States Government contemplated concessions on a really important scale.

3. The United Kingdom Delegation consider as altogether inadequate the reductions of duty offered on many important classes of United Kingdom goods. In particular, the Delegation have made it clear in the course of recent discussions that they attach as much importance to textiles (particularly cottons and woollens) as the United States attach to agricultural products. They have, therefore, examined with special interest the proposals on the textile items.

4. As the United States representatives are aware, the United Kingdom cotton industry is largely dependent on export markets. It has suffered intensely from the contraction of those markets. Its exports to the United States have fallen to 13 million square yards in 1936, compared with an internal production in the United States of some 6,000–7,000 million square yards. In the case of countable cotton cloth, in regard to which the United Kingdom Delegation note that the United States proposals are marked “tentative in part”, those proposals offer no relief at all from the duties affecting more than 40 per cent. of the total value imported from the United Kingdom in 1936. The incidence of the present duties in that year on British cloth averaged 43 per cent. ad valorem and the effect of the proposals would be to reduce this figure to 38 per cent (i. e., by one-eighth). Only a trifling increase in trade could be expected to result from such concessions. This offer is all the more unsatisfactory because the requests submitted by the United Kingdom were so drawn as to confine the benefit of tariff reductions to goods of types of which the imports come almost entirely from the United Kingdom. Moreover, no reduction is offered in the 60 per cent. duty at present levied on lace curtains or in the 37½ per cent. duty on cotton clothing and wearing apparel.

5. Woollen manufactures are, from the commercial point of view, even more important than cotton manufactures and here the United States proposals are equally unacceptable. The trade covered by paragraph 1109(a) is of great importance to the United Kingdom, the value in 1936 being over $6 millions. The average incidence of the duties under this paragraph in 1936 was approximately 88 per cent, ad valorem and the effect of the United States proposals is to reduce this figure to about 75 per cent. (i. e., a reduction of about 15 per cent.). Even if the specific (compensatory) part of the duty is ignored the proposed reduction amounts to only 19 per cent. Moreover, it is observed that the United States proposals contain no reference to the statement made in the United States memorandum of 4th June that if the existing duties on the raw or semi-manufactured products which serve as the basis for the specific (compensatory) rates should be subsequently reduced, it would be feasible to make corresponding adjustments in the specific rates and that consideration would be given to the inclusion in an agreement of a provision to this effect. Such a provision is essential. The following table illustrates the effects of the proposed concessions on a few of the important items in the woolen schedule.

Commodity.	Ad val. incidence of present duties.*	Ad val. incidence of proposed duties.*	Percentage reduction of duty.
	%	%
Woven fabrics, weighing more than 4 oz. per sq. yard, wholly or in chief value of wool.
(a) including specific duty	88	75	15
(b) excluding specific duty	56	45	20
Wool wearing apparel (except hats and hat bodies) not knit or crocheted:
Valued not more than $4 per lb.
(a) including specific duty	58	48	17
(b) excluding specific duty	45	35	22
Wool blankets
(a) including specific duty	94 } 36	No offer
(b) excluding specific duty

The ad valorem incidence of the specific part of the duties is based on values of imports from the United Kingdom in 1936.

It is true that substantial reductions are offered on woollen wastes but, for the reasons explained in the course of the recent discussions with the United States representatives, the United Kingdom Delegation can regard this offer as only of minor importance.

6. It is not the purpose of this memorandum to set out all the items on which the United States proposals are inadequate, but the following table illustrates some of the other more important items.

Commodity.	Ad val. incidence of present duty.	Ad val. incidence of proposed duty.	Percentage reduction of duty.
	%	%
China clay	25*	20*	20
Table etc. earthenware, decorated	57*	42*	26
Bone china—
Plain	61*	50	18
Decorated	71*	55	22
Silver plated ware on copper.	50	No offer
Sterling silver ware	65	55	15
Linen towels (not over 120 threads to the square inch)	55	No offer
Machine made nets and nettings of—
Cotton	90	65	28
Rayon	65	65	Binding
Silk	65	65	Binding
Flouncings, quillings and all-overs	Mainly 90	No offer

* Ad valorem incidence has been calculated on average values of imports from the United Kingdom in 1936.

As regards the proposals affecting the products of the lace and net industry, it is necessary to bear in mind that the United States declined to include in the published list of items of possible concessions the Levers laces on which the duty is 90 per cent, ad valorem. This has given rise to serious criticism. In general, it is calculated that actual reductions of 40 per cent. or more in the duties on United Kingdom goods would apply to only about one quarter of the United Kingdom trade in 1936 on which reductions of the present duties are possible under the Trade Agreements Act.³⁸

7. The United Kingdom Delegation are convinced (and they feel confident that the United States will share this view) that only harm would result from an agreement which could not justly be represented to public opinion in the countries concerned as fair and equitable. So far as the United Kingdom is concerned, the task of His Majesty’s Government will not be made easier by the lack of balance in the visible trade between the two countries, which has become even more marked in the first quarter of this year.^* These facts are well known and are attributed largely to the height of the United States import duties. It is therefore essential that the concessions given by the United States should be such as to afford the opportunity for an important increase in United Kingdom trade. For their part the United Kingdom Government have done their utmost to meet the “essential” requests of the United States Government in advance of the negotiations, in spite of their dislike of this procedure. As it was impossible to meet all these requests, they made an important alternative offer of entry free of duty for wheat. In the same spirit, the United Kingdom Delegation have indicated the possibility of concessions on a wide range of important United States industrial products, as part of a satisfactory agreement. The United Kingdom Delegation cannot regard the concessions offered in return as calculated to achieve such an agreement. They must urge the United States representatives to revise their offer and they are ready to enter into immediate discussions with the United States representatives for this purpose.

[ Washington ,] May 6, 1938.

37. Foreign Relations, 1937, vol. ii, p. 37.
38. Trade Agreements Act of June 12, 1934; 48 Stat. 943. The Act was extended by a Joint Resolution approved March 1, 1937; 50 Stat. 24.

39. Imports into the United States from the United Kingdom fell as follows:–

    	$ millions.
    1st quarter 1937	58.9
    1st quarter 1938	27.3

    Whereas exports to the United Kingdom increased as follows:

    1st quarter 1937	108.3
    1st quarter 1938	153.5

    [Footnote in the original.]