611.60H31/130: Telegram

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

148. Department’s 39, October 6, 2 p.m. As stated in second [first] paragraph of my 133 Yugoslav authorities have no objection to negotiation of a modus vivendi but do object to one along the lines of Department’s draft modus vivendi. In other words they decline to conclude an agreement providing for non-discriminatory treatment in general or specifying any other principles such as most-favored-nation treatment. Pilja informed me this morning that by “practical” agreement he had in mind solely the application of import control to American goods or, to use the Department’s language, [Page 701]“individual adjustments with respect to trade matters.” Pilja said that if the Department prefers such adjustments may be effected through the medium of a modus vivendi.

The Department instructs me to point out that we could not enter into any so-called “practical” agreement since it would not be in harmony with our commercial policy. On the other hand in the absence of specific authorization if I might infer from the statement “the only alternative would appear to be individual adjustments with respect to trade matters” that the Department has no objection to our proceeding to a discussion of the following points with a view to reaching what Pilja terms a “practical agreement”:

quota to be allotted to automobiles and trucks;
method of application of ratio to automobiles (last paragraph of Department’s 39);
treatment to be accorded to other American products included on import control list.

Our feeling is that even though Foreign Office is unwilling to commit itself in writing to accord us nondiscriminatory treatment it is desirous of finding some practical formula which will enable the United States to feel that we are not being discriminated against materially.

I should appreciate Department’s urgent telegraphic instructions as to whether in the light of the foregoing I am authorized to negotiate three points mentioned. Next meeting to be held Monday morning October 10.