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

611.60H31/102: Telegram

The Secretary of State to the Minister in Yugoslavia (Lane)

Washington, May 13, 1938—7 p.m.

10. Your despatch 224, April 20, and 228, April 22, and telegram 59, May 10.⁷

1. The Department has been giving consideration to a proposed unilateral declaration by the Yugoslav Government concerning the application of quota control to American imports, as presented by Fotitch. The conclusion has been reached that the contemplated declaration would be unsatisfactory because of the treatment which it envisages for American automobiles imported into Yugoslavia. We feel entitled to a much larger share of Yugoslav automobile trade than that proposed in Fotitch’s latest communication.

2. However, even if the proposed declaration should provide the United States with a fair share of the automobile trade, we should much prefer to conclude a satisfactory modus vivendi to govern our trade relations with Yugoslavia. The Department therefore has noted with interest intimations from you to the effect that the Yugoslavs would welcome a proposal from us looking to a liberalization of their trade policy and that the present moment would seem opportune for the presentation of such a proposal. Accordingly in your forthcoming interview with Stoyadinovitch⁸ you are instructed to indicate why the proposed unilateral declaration is not considered satisfactory and to suggest to him the desirability of concluding a modus vivendi on the most-favored-nation basis which, by assuring non-discriminatory treatment of American trade in Yugoslavia, would likewise assure Yugoslav trade of continuing enjoyment of benefits of trade agreements negotiated with third countries. Such an agreement would be along the lines of the modus vivendi proposed to the Yugoslav Government in December, 1936,⁹ copy of which was transmitted to the Legation along with a copy of the Note of December 17, 1936,¹⁰ in Instruction 183, December 21, 1936.¹¹ For a later draft of an agreement negotiated for a similar purpose you may wish to refer to the annex to the temporary commercial arrangement of December 16, 1937 with Italy, text of which appears in the Executive Agreement Series No. 116.¹² If it is indicated by the Yugoslav Government that the negotiation of such a modus vivendi is possible the Department would be prepared to send you a revised draft for transmission to the Yugoslav officials.

3. We are, of course, always prepared to consider and review the possibilities of concluding a trade agreement with the Yugoslav Government. The principal difficulty appears to be that Yugoslavia is in general not a leading supplier of the products we buy from her. In consequence Yugoslavia’s main benefit from our trade-agreements program would seem to lie in the generalization policy under which Yugoslav goods receive the reduced tariff rates provided in trade agreements negotiated with other countries. It should be noted that products imported into the United States from Yugoslavia with respect to which the benefits of trade-agreement concessions are now extended to Yugoslavia (the most important of which are natural cherries, hops, shoes and cement) accounted for 11 percent of the value of total imports of Yugoslav products into the United States in 1936. It is further significant that in the case of many of these articles there were no imports from Yugoslavia prior to the tariff reductions going into effect. Products of interest to Yugoslavia with respect to which concessions may be granted in agreements at present contemplated accounted for a further 6 percent of imports from Yugoslavia in 1936.

4. The conclusion of a modus vivendi such as proposed in paragraph numbered 2 above would not in any way prejudice the possibility of negotiating a trade agreement later if and when satisfactory basis therefor might be found, but would rather serve to improve the prospects by regularizing our commercial relations upon a substantially more satisfactory basis than that envisaged in Fotitch’s proposals.

For your information Fotitch is being informed of the sense of the aforegoing.

Hull

7. None printed.
8. Milan Stoyadinovitch, Yugoslav Prime Minister.
9. Foreign Relations, 1936, vol. ii, p. 827.
10. Ibid., p. 825.
11. Not printed.
12. For correspondence concerning commercial arrangement with Italy, see Foreign Relations, 1937, vol. ii, pp. 435 ff.