611.60H31/126: Telegram

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

39. Your 133 September 28, noon. It is not clear from your telegram and recent despatches whether the Yugoslav authorities still desire to negotiate a modus vivendi. If they object to concluding a modus vivendi prior to agreement on a quota for American automobiles [Page 700]the Department believes there is nothing to be gained by insisting on such a course. However, as indicated in telegram 35, September 24, 3 p.m. the Department believes that a basis for better economic relations between the two countries depends largely upon the regulation of trade by means of an agreement providing reciprocally for nondiscriminatory treatment in general.

After repeating to the Yugoslav officials our desire for an agreement embodying the principles contained in the proposed draft modus vivendi, you should point out that we could not enter into any so-called “practical” agreement such as appears to be desired by some of the Yugoslav authorities since such an agreement would not be in harmony with our commercial policy. Moreover, any question of negotiating a new treaty between the two countries would also seem to be precluded at this time if the two Governments do not succeed in agreeing on the principles to which reference is made above.

If the Yugoslav authorities are not prepared to sign such a modus vivendi the only alternative would appear to be individual adjustments with respect to trade matters. If modus vivendi discussions have to be dropped for the present, you should not fail to bring up in your discussions any products in addition to automobiles in respect of which quota adjustments are called for.

With respect to the application of the ratio to imports of American automobiles, you should point out that a ratio must of necessity be related to either total past or total prospective imports during a particular period. If the Yugoslav authorities should insist on relating the ratio to total imports in the preceding year we have no great objection although we would prefer the establishment of a global quota for total prospective imports.

Welles