611.60H31/123: Telegram

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

35. Your 118, September 19, 9 p.m. You should inform the Yugoslav authorities that this Government would much prefer that the entire trade between the two countries be regularized by a modus vivendi substantially along the lines of the one transmitted in the Department’s instruction No. 55 of June 24.

You might point out that action by the Yugoslav Government in respect of the quota to be applied to imports of American automobiles would not, of course, furnish a basis for a formal agreement between [Page 698]the two countries. In our opinion the conclusion of a modus vivendi providing for non-discriminatory treatment would appear to be far more effective as a means of counteracting demands by other countries for preferential treatment than unilateral action by the Yugoslav Government to accord to the United States an equitable quota on automobiles.

You should reaffirm this Government’s desire for a quota based on a ratio of 45 percent. The ratio suggested by Pilja is considerably smaller than any figure based upon a representative period. During the entire period covered by available statistics on automotive products alone, excluding the recent period of trade diversion, no ratio of less than 45 percent would represent a fair share. Separate statistics apparently are not available for years prior to 1925, and, in any event, this period would appear to be too far removed in time to be representative of more recent trends.

With reference to the method of applying the ratio, we should prefer that the Yugoslav Government establish a quota covering imports from all countries with a quota period of not less than 3 months, beginning with the last 3 months of 1938. The ratio for imports of American automobiles would then be applied to this current global quota.

For your information, if the Yugoslav Government should wish to establish separate quotas for automobiles and trucks and any other classification such as automotive parts, there would appear to be no objection. This might make our proposal more acceptable to the Yugoslav authorities. If it should be found possible for the two Governments to reach an agreement as to the quota basis for American automotive products, there would appear to be no compelling reason why the Yugoslav Government could not readily agree to the principles expressed in the draft modus vivendi.

Hull