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

611.5731/183

Memorandum of Conversation, by Mr. Hugh S. Cumming, Jr., of the Division of European Affairs

[Washington,] March 4, 1938.

Participants:	Mr. Morgenstierne, Minister of Norway.
	Assistant Secretary Sayre.
	Mr. John C. Ross, Division of Trade Agreements.
	Mr. Hugh S. Cumming, Jr., Division of European Affairs.

At his request, an appointment for Mr. Morgenstierne to call on Mr. Sayre was made for this afternoon. Mr. Morgenstierne said that the Foreign Office in Oslo had been carefully studying all angles of the commercial relations between the United States and Norway. Although their investigation was not yet complete, and they were continuing their studies, they had reached the tentative conclusion that the present state of the trade between the two countries was very satisfactory to both sides, and that there seemed to be little basis for tariff concessions satisfactory to the United States which might be made by Norway. The Norwegian Government had not yet been able to find any commodities on which Norway might promise actual reductions in tariff rates. It believed that it might be possible to offer the United States the benefit of certain of the bindings which had been made in the Norwegian commercial agreements with Poland, Greece, Portugal and Hungary. Mr. Morgenstierne handed to Mr. Sayre four memoranda⁹ listing the commodities mentioned.

Mr. Morgenstierne said that in addition to the commodities mentioned in the memoranda, linoleum, grapes and tomatoes were bound in the Oslo convention¹⁰ and the subsequent Hague agreement,¹¹ and the benefit of these bindings could also be extended to the United States.

Mr. Sayre said that the binding of tariff rates was of course useful and might have a part in a broad agreement. However, Mr. Morgenstierne should remember that the binding of the duty rates on a few commodities would not in itself give us a broad satisfactory agreement which we could defend against attacks by various lobbies and interested groups in this country, who might protest against a Norwegian-American trade agreement. He particularly mentioned in this connection certain agricultural interests which could be expected to protest against any concessions made by the United States in the duty and excise tax on whale oil.

At Mr. Morgenstierne’s further request, Mr. Sayre said that he would discuss the matter with the Secretary of State to see whether we would be interested in pursuing further the tentative offer now being made by the Norwegian Government.

Mr. Morgenstierne then referred to previous conversations on the subject of whale oil, and asked whether Mr. Sayre had anything new on the matter which might be transmitted to the Foreign Office at Oslo.

Mr. Sayre then read to Mr. Morgenstierne and handed to him the original of the attached memorandum stating the Department’s position.

Mr. Morgenstierne said that he was glad to have the memorandum since it agreed with reports which he had been making to his Government. He was afraid, however, that it would not be entirely satisfactory, since his Government felt very strongly that insofar as whale oil was concerned the status quo ante should be restored. Mr. Sayre said that that raised the question as to exactly what the status quo ante was, and he repeated what had been told Mr. Morgenstierne in previous conversations, that since the excise tax was placed on whale oil similar taxes had also been placed on other competing oils. It was this changed situation which we must all bear in mind.

In conclusion, Mr. Sayre again mentioned to Mr. Morgenstierne that we were interested in a broad general agreement, and believed that sufficient basis for such an agreement existed; that while binding the rates on a few commodities would have some value, it was very little to offer in return for actual reduction in duty on the part of the United States; that, however, he would be glad to study the proposals, to discuss them with the Secretary of State, and to receive the further results of the studies being made by the Norwegian Foreign Office.

[Annex—Memorandum]

The Department of State to the Norwegian Legation

1. The attitude of the Department with regard to the excise tax on whale oil is well known to the Norwegian Government. It has been felt that this tax was uneconomic and that it imposed a heavy burden on an important Norwegian export product.

2. As is well known to the Norwegian Government, the Department exerted every effort to secure the removal of the tax through legislative action. That effort was unsuccessful.

3. It may be stated frankly that the removal of the tax through legislative action now seems outside the realm of possibility.

4. Since the legislative approach to the problem is no longer open, only one alternative approach remains.

5. It would be legally possible, under the terms of the Trade Agreements Act of June 12, 1934, to reduce both the duty and the excise tax on whale oil by a maximum of 50 percent. It would not be possible, under any circumstances, to grant any greater reduction in either the duty or the tax.

6. The United States would consider a reduction in the duty and tax on whale oil only in connection with negotiations for a broad trade agreement concerning all or most of the products of which each country is the principal supplier to the other. The object of such an agreement would be to increase the trade in both directions between the two countries, by means of reciprocal reductions in existing tariff rates on certain products, as well as bindings of such rates on other products. It will be remembered that the list of products of which Norway was the principal supplier of imports into the United States in any year of the period 1931–1936 included 45 items which accounted for 61 percent of total imports for consumption from Norway valued at $21,811,771 in 1936.

7. In considering the possibility of any reduction in the duty and tax on whale oil, the United States would bear in mind two special factors, as follows:

(a) The differentials between the duty and tax on whale oil and the duties and taxes on the principal competitive foreign fats and oils, such as palm oil and tallow, which are used in the soap industry.

(b) The cost of the hydrogenation process to which whale oil is subject before it is used in soap making.

8. The United States would be prepared to consider, in connection with broad trade-agreement negotiations, a reduction in the duty and tax on whale oil sufficient to establish, in so far as the duty and tax and the cost of the hydrogenation process are factors in the situation, a fair and equitable competitive relationship between whale oil on the one hand and such other foreign fats and oils as palm oil and tallow on the other hand. In this connection, it must be borne in mind that it is impossible to undertake any commitment as to the extent of any reduction (within the limitations referred to in paragraph 5) in advance of the public notice and hearings required by the Trade Agreements Act.

February 11, 1938.

9. None printed.
10. Signed at Oslo December 22, 1930; League of Nations Treaty Series, vol. cxxvi, p. 341.
11. Signed May 28, 1937; ibid., vol. clxxx, p. 5.