611.6531/446: Telegram
The Secretary of State to the Ambassador in Italy (Phillips)
105. Your 193, August 3. Unless you perceive objection, you are requested to address the following note to the Ministry of Foreign Affairs:24
“The Embassy of the United States of America has the honor to reply to the Royal Ministry of Foreign Affairs’ Note Verbale No. 227214/92 of August 1, 1938 and to express the appreciation of the Government of the United States of America that in response to its Note Verbale No. 628 of April 25, 1938, action has been taken to establish satisfactory import quotas for the additional products not mentioned in the Pro Memoria of February 19, 1938, which were formerly subject to the regime of ‘bolletta’. Likewise, the Government of the United States is gratified that adequate quotas have been established for zinc in scrap, ingots, etc., (386a); and for products not mentioned in the Pro Memoria classified under Tariff Numerals (2), (42a), (97), (414a and b), (426a), (470), (748), and (888).
It is noted that phosphates have been segregated from the other products classified under Tariff Numeral 565 and that a quota of 47,500 tons has been established for the United States. This quota amounts to that percentage of the global quota of 421,000 tons which is equivalent to the percentage of total Italian imports of phosphates supplied by the United States in 1934, and is satisfactory.
As regards the proposed new contingents for solid paraffin (650), and manufactured tobacco (115b/1), information is requested as to the amount of the new global quotas for these products.
[Page 578]Although the quotas established for certain of the additional products in reference which were formerly subject to the regime of ‘bolletta’ are less than the amounts required by the terms of the Temporary Commercial Arrangement of December 16, 1937, no readjustment with respect thereto is requested insofar as concerns allocations for the present calendar year.
The Government of the United States of America, however, profoundly regrets that the Royal Italian Government does not see its way clear at this time to comply with the desiderata set forth in this Embassy’s Note Verbale of April 25, 1938, in respect of wheat flour (70a), dried prunes (96), raw cotton (181a), the six items listed in Annex B of the Pro Memoria of February 19, 1938, formerly subject to the regime of ‘bolletta’, and the remaining 15 items listed in Annex A of the same Pro Memoria. These products are important to American trade not only from the standpoint of their number and value but from the standpoint of their character as well. And as has already been indicated, the Government of the United States finds it extremely difficult to perceive any justification for the inadequate quotas either on the ground of economic necessity or on the basis of interpretation of the terms of the Temporary Arrangement. In that Arrangement, the Government of the United States undertook to continue to accord the benefits of its trade agreements to Italian commerce and the Government of Italy undertook on its part to accord non-discriminatory treatment to American commerce. There was no understanding on the part of the Government of the United States that the Royal Italian Government could, despite its obligations under the Temporary Commercial Arrangement, discriminate against any American product pending the negotiation of a reciprocal trade agreement involving tariff concessions on Italian products imported into the United States. As the Arrangement was entered into only after explicit assurances of the Royal Italian Government that all preferences would be totally abolished as of December 31, 1937, except those reserved for Austria, it can hardly be contended that the Government of the United States expected American exports to continue in the same or a similar discriminatory status in Italy after the Arrangement was signed.
Moreover, it will be observed that there is nothing in the desiderata of the United States or in the quota provisions of the Arrangement which fails to take into consideration Italy’s economic position. That is to say, neither the quota provisions of the Arrangement nor the requests of the United States in any way restrict the Royal Italian Government in determining the total quantity of any product which it will permit to be imported during a given period. This being the case, the Royal Italian Government may fix a global quota for any product at whatever amount it may deem best from the standpoint of its national economy. The quota provisions of the Arrangement merely require that once a global quota has been established, a share thereof shall be allotted to the United States which is equivalent to the share of total imports supplied by the United States during a previous representative period.
As regards the continued proposal to increase quotas for certain raw materials and semi-manufactured products, the Royal Italian Government is already aware that the Government of the United States does not concur with the principle that enlarged quotas for [Page 579] certain products can compensate for reduced quotas for other products. Inasmuch as that principle is also contrary to the quota provisions of the Arrangement which deal with each product separately, the Government of the United States has the honor to reiterate those requests set forth in this Embassy’s Note Verbale of April 25, 1938, which have not as yet been fulfilled and to express the hope that the Royal Italian Government can see its way clear to comply with them.”
You are authorized to make any formal changes in the foregoing which you may deem necessary. However, if the Embassy feels that any point of substance is objectionable, you are requested to report fully before sending the note and state the reasons for the objections.
With reference to your 68 and 70 of March 18 and 22,25 please report whether Italy now accords to Germany the preferences mentioned in your 492 of November 29, 1937,26 and, if not, whether any other preferences are now accorded to Germany.
Italy has not given the assurances requested in the Embassy’s Note Verbale of April 25, 1938 in respect of global quotas. You should therefore endeavor to ascertain either from the Italian authorities or from other sources whether all proposed global quotas are inclusive of permitted imports from all countries, including imports permitted by public or private clearing, compensation, or payment arrangements and report the results of your findings.