The Ambassador in France ( Bullitt ) to the Secretary of State

No. 5260

Sir: I have the honor to transmit to the Department, for its information and study, a memorandum which has been prepared at the Ambassador’s direction by our Commercial Attaché on the basis of interviews with French Government officials and trade representatives. It reflects the growing anxiety in this country that French exports to the United States must be stimulated in order to offset in some measure at least the tremendous expenses inevitably incurred through imports from the United States to meet French war-time requirements.

In an address before the American Club yesterday, Minister of Finance Reynaud summarized the present trade problems between France and the United States as follows:

“… What we need is not men, but arms, and raw materials and machines.

“And here comes a great problem, the problem of commercial exchanges between our countries. Long before this war began President Roosevelt and Secretary Cordell Hull often emphasized the need—which was one of the reasons for the tripartite monetary agreement28—for stimulating exchanges of wealth among nations. They proved that freedom of trade is one of the important aspects of that ideal of liberty which we cherish. When goods move across frontiers they carry ideas with them.

“Now what was true before the war is still truer today. Let us not forget the bitter lessons of the last war, which was not so long ago; let us not forget the unprecedented economic depression that it brought about. If, during the present war, we should commit the [Page 497] old blunder of letting ships come over from the United States full of goods and go back empty, we should be sowing the seeds of another and perhaps more terrible post-war crisis. French purchases in America must in large part be paid for by French labor or if not, both countries will suffer.”

It is obvious that France must make war-time purchases abroad and that the growing dependence upon the United States for arms, munitions and raw materials will further augment France’s unfavorable trade balance with the United States.

Respectfully yours,

For the Ambassador:
Robert D. Murphy

Counselor of Embassy

Memorandum by the Commercial Attaché in France (Reagan)

In view of the heavy purchases which France is making in the United States to meet its war-time needs, French officials, and trade and press sources have emphasized that every legitimate effort should be made to stimulate French exports to the United States in order to keep the adverse physical trade balance as low as possible and thereby reduce the amount of gold which may have to be transferred in payment against these imports.

French exports to the United States have already been reduced by the handicaps resulting from export prohibitions, increased war-time requirements for various commodities and the partial or complete lack of availability of typical items in this trade.

From a preliminary study made here on the basis of the principal products imported into the United States in 1937, from all French sources, it appears that 30% of this trade has already been stopped either by complete embargo or lack of available supplies for export; an additional 10% has already been affected by partial or conditional embargoes or by partial lack of raw materials. For Metropolitan France alone, the corresponding percentages are 23% and 13%; for French Colonies, Possessions and Protectorates, on the same basis, items representing 56% of the value of this trade are already affected by rigid export prohibitions some of which, however, will undoubtedly be relaxed after stocks necessary for France have been accumulated. Obviously, the restraint apparent in this trade is subject to change, as new prohibitions may be imposed or existing prohibitions relaxed, or the availability of products and of raw materials may improve.

French Government officials, trade association executives and individual exporters have since the beginning of the war brought up in informal conversations their strong desire to facilitate French exports [Page 498] to the United States. However, Alphand, director of foreign trade, Ms experts and these trade interests have uniformly centered their suggestions for improving French exports to the United States upon the obvious means of duty reductions for some items not yet included in any of our trade agreements or for further reductions upon some items which have not been accorded the maximum cut. Most of the items to which they attach special interest as the object of such duty cuts are given in the list attached to the memorandum handed to the French Ambassador on July 7, 1939, and transmitted in the Department’s confidential despatch No. 1657 of August 3.28a In their efforts to explore the possibility for increased sales through duty concessions they have also mentioned, in addition to the items cited in the list under reference, shelled almonds, shelled walnuts, certain China and porcelain ware, corn oil, olive oil, and certain categories of glassware and gloves formerly included in the Czech agreement.

The reliance upon duty reductions as the principal and almost exclusive proposal for increasing French exports, even if the major portion of the reductions on the items of special interest were feasible in exchange for adequate concessions or assurances for our exports, does not appear to be an adequate answer to their problem. Even radical increases in the sales of these products in the United States can scarcely be expected to make up the reduction, due to export control measures, which is equivalent to from 30% to 40% of the total exports from French sources to the United States on the basis of 1937.

A quick survey indicates that this gap might be materially reduced through an increase in the sales to the United States of such products as potash, champagne, brandies and liqueurs, hides, skins and furs and certain colonial raw materials, such as rubber, cocoa, chromite, nuts, olive oil, crin végétal, graphite, mica and fine woods, provided a special effort is made to maintain or increase production. For most of these items, the possibility of increased sales to the United States is not dependent upon duty reductions—some of them are already on the free list—but upon the capacity of the French to increase production and to improve their export organizations and sales bases and methods in the United States.

In the informal talks with the French officials and trade representatives who have recently approached the Embassy, we have considered it advisable to point out that French producers, exporters, and their representatives in the United States must get down to brass tacks in their sales methods and be willing to participate in the expenses of developing this trade. From the trade information available [Page 499] here, we have felt it necessary to cite certain instances, as in the wine and glove trades, where the exporters continue to quote in dollars at approximately the same levels as prevailed when the franc was at 15 to the dollar. As a result, these exporters complain that their volume of sales continues to be moderate, while they continue to skim off a large portion of the franc equivalent of their dollar prices. That French officials and French exporters are counting almost entirely upon possible duty reductions as a means of increasing their trade is indicated by the fact that they have brought forth no practical trade promotion suggestions nor have they indicated any sincere willingness to contribute part of their profits, in some instances very high in francs, to stimulate this trade.

The only instance of a concerted, if limited, effort to stimulate American buying of French products is the advertising campaign to be run in several of the leading American papers during this month, presumably paid for by the French Government, and in which, it is said, it will employ the theme “France is fighting for the liberty of the democracies—Buy French wines, de luxe articles, cheese, porcelain, etc.” It would appear that one weakness of this general campaign is the fact that some of the articles which Americans are asked to buy do not now have adequate distribution in the United States. Its hasty conception appears to be indicated by the fact that several of the French trade association representatives have stated that they have no knowledge whatsoever of this campaign and were not consulted with regard to its policy.

Obviously, we are not in a position to appraise definitely whether there is a real basis for the French belief that duty reduction for a number of items would help their trade materially. From the general trade information at hand, it is our impression that they are exaggerating the value of such reductions in the hope that they would be an easy answer to their export problems. If and when consideration is again given to possible further duty concessions for French products, the soundness of the French hopes can, of course, only be tested by the usual investigation of the Trade Agreements Committee through the import studies of the Tariff Commission.

Daniel J. Reagan