611.6831/201
The Minister in Greece (MacVeagh) to the Secretary of State
[Received May 31.]
Sir: In connection with the Department’s instruction No. 454 of April 13, 1938, and following my telegram No. 29 of April 28, 12 noon, I have the honor to report that Mr. Metaxas, the Greek Premier and Minister of Foreign Affairs, informed me on May 5 of his appointment of a Commission to discuss with me the proposed modus vivendi in commercial matters. The Commission named was composed of Mr. Arvanitis, Minister of National Economy, president, Mr. Varvaressos, Vice Governor of the Bank of Greece, and Mr. Argyropoulos, Director of the Trade and Treaty Section of the Foreign Office. In communicating the appointment and composition of this commission, Mr. Metaxas stated that his Government believed that the surest grounds for an accord would be found, by common consent, in the draft modus vivendi submitted by the American Government on July 19, 1937, and expressed his hope that an agreement might be reached on the basis of that text.
At the first meeting, which took place yesterday, May 13, I informed the Commission that my Government prefers the second draft, and in our discussions the various points were taken up in order as they appear in that text. Mr. Varvaressos, who is credited with being the Premier’s most influential adviser in financial matters, acted as spokesman for the Commission. He stated at once that the Greek Government accepts Article I as it stands and that the inclusion of the word “taxation” in line 7 offers no barrier. He said, however, that as the Greeks desire to sign something which will “contribute to our future relations,” and not “give rise to endless discussions,” the principle of the representative period contained in our first draft appears to them superior to the corresponding provisions in the second. In this connection, he urged that it might be found impossible to agree on what American imports of a given commodity would be if no [Page 531] restrictions existed, whereas it should not be difficult to arrive at the actual proportion of such imports in a representative period of record. As a basis for the application of this proportion to each future quota period he proposed the total import figure of the next preceding period.
To these remarks I replied that the present form of Article II had been proposed by my Government to meet Greek objections to the “doctrinaire” quality of the earlier proposal, and that my Government considered it, in fact, superior, as being in some respects less rigid and in others less ambiguous, but that if the Greek Government now felt very strongly that a reversion to the earlier draft was desirable in this matter, I could only offer to submit the matter to Washington. At the same time I stipulated that any proposals in this connection should be put forward concretely as part of a definite draft which the Greek Government would be prepared to sign, since so much time has already elapsed in the discussion of general principles. I also stipulated that any proposal involving the representative period should include the question of trade trends and the importation of articles for which no representative period exists.
Mr. Varvaressos agreed to both these stipulations, and said that it was his Government’s aim to evolve a text on the basis of our proposals which will work under the conditions imposed on Greece by her present situation. He admitted that Greece had violated our modus vivendi of 1924, but said that she had been forced to do so, and that she desires not to sign anything now which she cannot be sure to be able to live up to in the future. In regard to Article III, he accepted the principle that exchange control should not be used to influence competitive relationships, but entered strong objections to the strict provisions of paragraph (b), claiming that it is impossible to combine real non-discrimination with absolutely equal treatment of exchange transactions involving sound and fictitious currencies. Furthermore, in regard to Article IV, he said a government must, in some cases, be guided by other considerations than those of price, such as quality or credit. I replied that our modus vivendi was intended to be administered by reasonable men, but that if the Greek Government objected to the provisions of these articles, it might re-draft Article IV (I did not propose to drop it altogether), and in regard to Article III, adopt the corresponding article on exchange control of our first draft, which Mr. Varvaressos found unexceptionable.
Mr. Varvaressos then said that Article V was agreeable to his Government but that in reciprocation it desired that similar exception be made of Greek commerce with the Balkan states.
The Commission then reverted to sub-paragraph (d) of paragraph 3 of Article II, and Mr. Varvaressos explained that his Government [Page 532] desires to keep within limits the number of licensed Greek importers, and that this is both an internal regulation and one which does not effect any discrimination against the sources of supply. In the past, however, such regulation has certainly, in some cases, been administered to our detriment, and I hope that the forthcoming Greek proposals will be found to include a provision that if a limitation of this sort is adopted or maintained by either country, it shall not be applied so as to discriminate against the other.
Finally, Mr. Varvaressos alluded to the first paragraph of Article II, which states that neither government shall limit etc. the importation of articles “in which the other government has an interest”, and asked whether we have an interest in coffee, sugar and sardines, on the importation of which from free exchange countries the Greeks now charge a premium. To this I replied that at the present moment it may be that we have no interest in the exportation of these articles to Greece, but that I could not tell about the future, particularly as regards sugar, and would have to refer the matter to Washington. Furthermore, I pointed out that the agreement under consideration is a general one, as well as one that aims to be applicable over a long period, and makes no attempt to specify the individual articles of interest to either party, so that I felt the determination of this question belongs properly outside the scope of our discussions. I gathered that Mr. Varvaressos might make a special request for information in this matter in a separate communication.
It is my understanding that the Commission is now engaged in formulating its suggestions along the lines indicated above. As soon as it is ready, I expect that further conversations will take place, probably the end of this week, and I hope to have a definite Greek draft for forwarding with comments by the next pouch.
Respectfully yours,