811.512356 Double/49

Memorandum by Mr. Horace G. White, Jr., of the Office of the Adviser on International Economic Affairs

It has not been possible for me to keep up the daily reporting of the negotiations that I originally set out to follow owing to the extent to which the days have been taken up in the actual conferences. It so [Page 610] happens, however, that at this morning’s meeting with the Netherlands delegation a very definite turning point was reached. Consequently, I can work backwards from this point to a better effect than would be possible under the original idea.

In my memorandum of June 15,6 which covered the meetings on Monday and Tuesday of this week, I outlined the general framework of concessions which Mr. King expected to follow in his negotiation. One of his principles is that no reduction of our withholding rates applicable to nonresident aliens can be considered unless we obtain from the Netherlands substantial concession of cooperation in the determination and collection of taxes due to the American Treasury.

On Wednesday and Thursday the discussions revealed pretty clearly that this exchange of concessions would be most difficult. Accordingly, at the very beginning of this morning’s conference with the Netherlands delegation Mr. King advanced the proposal that in our negotiations the question of rates and of enforcement and disclosure be dropped. Whereupon all of the Netherlands countenances grew sad, and Mr. Molekamp7 commented that of course the whole business would break down if this were to be done, and his colleagues nodded assent.

Mr. Molekamp’s pronouncement might not be an accurate prediction. At any rate, the two delegations immediately set about to explore some possible way of adjusting the situation. When we adjourned at one o’clock the following plan had been agreed upon. The Netherlands delegation should formulate to the best of its ability this afternoon the maximum concession that it thought could be made in regard to enforcement and disclosure, and communicate this to Mr. King as soon as possible. Mr. King might then board an airplane to visit Mr. Magill8 in New York and place the situation before him.

In addition, Mr. de Wolf and Mr. White should hold a conference with Mr. Feis9 this afternoon in order to get an idea of the State Department’s views on the matter of reducing our withholding rates in so far as they are applicable to citizens of the Netherlands.

This morning Mr. King went over the different items in the two draft conventions in an attempt to gauge the parity of the different concessions which each side might offer. Leaving out the highly controversial question of rates and enforcement and disclosure, he advanced the conclusion that most of the other items involved a fairly mutual exchange of advantage in themselves. Consequently, a convention could be set up limited in scope to double taxation of business incomes and to certain minor classes of income, but having no reference to investment incomes. Such a convention would have about the same [Page 611] scope as our convention with France on double taxation,10 and the conventions that the Netherlands has with Belgium and Sweden.11 Although the Netherlands very evidently has come over here with the main idea of getting rate concessions, Mr. King thinks that a convention of this scope would be worthwhile and that the Netherlands will not turn it down should it turn out that nothing of wider range can be obtained.

I think my three memoranda, that is of June 13,12 June 15,12 and this present one, give a fairly adequate general picture of what has happened in the past week. None of these memoranda get down to the details that have been the subject of such lengthy discussion. There is a mass of information which has turned up that should be made of record for use in connection with other conventions such as that with Sweden13 which is coming along this autumn. Unless you wish it otherwise, suppose I figure to put this information together rather gradually and systematically rather than try to report it in free-hand fashion.

  1. Not printed.
  2. Commercial Counselor of the Netherland Legation.
  3. Roswell Magill, Under Secretary of the Treasury.
  4. Herbert Feis, Adviser on International Economic Affairs.
  5. Signed at Paris April 27, 1932; Department of State Treaty Series No. 885, or 49 Stat. 3145.
  6. Signed March 21, 1935, League of Nations Treaty Series vol. clviii, p. 451.
  7. Not printed.
  8. Not printed.
  9. For text, see Department of State Executive Agreement Series No. 121, or 52 Stat. 1490.