The Acting Secretary of State to the Ambassador in France (Bullitt)
635. A memorandum18 has been handed to the French Embassy here, reading as follows:
“In response to the memorandum presented to the French Embassy on July 7,18a proposing negotiations for a revision of the Franco-American trade agreement of 1936, the French Embassy has communicated informally to the Department certain views of the French Government relating to the proposed negotiations.
It is understood that the French Government would be prepared to consider an agreement terminable in general on 2 years’ notice but containing a provision similar to paragraph 5 of Article I of the present agreement and, in addition, a provision for termination on 6 months’ notice in the event that the French Government should undertake a complete revision of its present tariff. Furthermore, it is understood that the French Government would wish to stipulate that the [Page 492] concessions on particular products made by each party in the agreement of 1936 should remain unchanged in the new agreement subject to certain specified exceptions and that any new concessions to be made by the French Government should be limited to increased quota allocations and the removal of some commodities from the list of exceptions to the most-favored-nation clause.
This Department has also been informed, through the American Embassy in Paris, that the French Government contemplates, in connection with a general tariff revision, suppressing a large number of quotas and simultaneously increasing the customs duties on the articles affected, and that the termination on short notice of any trade agreement with the United States might be found necessary in connection with such a procedure.
As regards the relation between the proposed new agreement and any general tariff revision contemplated by the French Government, this Department perceives no reason why a revised agreement could not be made to facilitate, rather than to hinder, a general tariff revision. If the French Government should avail itself of the 6 months’ termination clause in the present agreement in order to increase duties on articles on which it has made concessions, such action would entail the entire loss to France of the concessions made in that agreement by the United States, unless a new agreement could be negotiated to replace the present one. Such a new agreement, however, could be negotiated only through the use of the powers conferred on the Executive by the Trade Agreements Act,19 which act, unless renewed, will lapse on June 12, 1940. On the other hand, should a revised agreement be negotiated, on the basis of the proposal of July 7, in the latter part of this year, this Government would, of course, be prepared to give the most sympathetic consideration to any proposal which the French Government might wish to make, during the negotiations, with a view to introducing any necessary and reasonable elements of flexibility into the new agreement. It should be possible, during the negotiations for a revised agreement, to work out some formula, not contained in the present agreement, which would make it possible for the French Government to adjust the customs duties on articles on which it has made concessions, when quotas on such articles are abolished, without denouncing the agreement, provided that such changes would not result in a less favorable situation for American trade in the articles affected. This approach to the problem seems to provide the only feasible method of avoiding the entire termination of the benefits now enjoyed by France and the United States under the present agreement in the event of a general revision of the French tariff affecting articles on which France has granted concessions in the present trade agreement.
As regards the possible duration of a revised trade agreement, it should be noted that the acceptance by the French Government of the basis of negotiations proposed in the memorandum of July 7 would not involve any commitments by either party regarding the duration of the proposed agreement. This Government is convinced, however, that it would be in the interest of both parties to avoid, so far as possible, the danger of termination of the entire agreement within a short time.[Page 493]
As regards the limitations of the scope of the proposed negotiations which the French Government has informally suggested, this Government is not disposed to accept such limitations before the negotiations are initiated. To eliminate from the published list any of the items on which the United States has made concessions in the present agreement would invite criticism on the ground that particular articles had been selected from among those contained in the existing agreement, in advance of public notice and public hearings, for the making of additional concessions. It would be extremely difficult to answer such criticism. On the other hand, the inclusion of any particular product in the list involves no commitment on the part of this Government to make any new or additional concession on that product. This Government is convinced, therefore, that the scope of possible revisions of the concessions contained in the present agreement can most appropriately be determined after negotiations have been formally initiated.
The delay which has elapsed since the memorandum of July 7 was presented to the French Embassy is greater than was anticipated when that memorandum was presented. If a decision regarding the issuance of public notice of intention to negotiate cannot be made very soon, it will be necessary for this Government to reconsider the proposal made in the memorandum. In order to avoid further delay, it is earnestly hoped that it will be possible to reach agreement concerning the issuance of public notice of intention to negotiate without further discussions concerning the possible provisions of the proposed new trade agreement. It is not believed that such discussions could produce any result of sufficient importance to justify the loss of time involved, especially since it is impossible, under the rules of procedure which this Government must follow, for the United States to make any definite commitments until after the public hearings, which would be held not less than 6 weeks after publication of the notice of intention to negotiate.”
You are requested to communicate the above informally to the French authorities, to impress upon them the necessity for a prompt decision, and to endeavor to persuade them to consent to our issuing immediately a public notice of intention to negotiate, as proposed in our memorandum of July 7.
If the French should agree in principle to our proposal, but should express a desire to ascertain before our public notice is issued whether there are any additional items which they would wish to have included in the list of articles, you may reply as follows:
We have endeavored to include everything of which France has been the principal supplier or a supplier of sufficient importance to justify inclusion on the list, but if the French should find that any articles on which they consider it important to secure concessions and which we would feel justified in including in the negotiations have not been included in our public announcement, we will give the most sympathetic consideration to any request which the French may make at an early date for the publication of a supplementary announcement listing such additional items.
You should not, of course, mention the possibility of a supplementary announcement if the French appear satisfied with the list attached to our memorandum of July 7.