611.623/382: Telegram

The Chargé in Germany ( Geist ) to the Secretary of State

259. When, I saw Bergemann, Director of the Commercial Policy Section of the Economics Ministry, a few days ago he inquired somewhat plaintively what Germany could do to maintain its exports in face of the “handicap” of the 25% countervailing duties. He said that it was inconceivable that Germany would adopt the solution of a total devaluation of the mark at this time.

He admitted that the Economics Ministry had given some thought to such devices as making “free gifts” of merchandise to exporters who were regular importers of German goods but that he supposed that such procedure would run afoul of our customs laws.

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When I saw him again yesterday he remarked that the countervailing duties would not presumably affect duty-free goods which he said account for about 40% of German exports to the United States. (I construed this as an admission that duty-free goods had received, at least in certain instances, export bounties in the past and might receive additional bounties in the future in order to extend their sale in the United States to provide the foreign exchange which Germany needs). During the conversation he said that Germany would endeavor to sell for free foreign exchange some of the goods which in the past had been exported over inland accounts. Also, he said an endeavor would be made to export goods on the basis of payment partly in free exchange and partly in “eigene sperrmarken” (blocked marks which have remained in a single ownership since being blocked. In other words an effort would be made to get bondholders, banking or other interests to become importers of German goods in order to obtain payment of their blocked credits. To date there have been few such transactions).

Bergemann said that the German Government had not yet canceled the “inland account procedure” and was awaiting information from Washington to ascertain whether as a practical matter trading could still be conducted with them. He supposed however it would be very difficult to use this system in face of the 25% countervailing duties. He said that in view of the present tension no effort would be made at this time to revive Brinkmann’s suggestion of an “American mark”25 which would sell at a discount.

Bergemann left last night for Slovakia. It appears that Slovakia is unable to absorb German goods to the extent which Germany wishes to import its timber and agricultural products. He said that it was an extremely difficult problem for which to date he had found no solution. It could not easily be solved by Germany engaging in development work and investment in Slovakia in payment for raw materials since the opportunities for investment there were not as great as in Rumania.

In Rumania he said there has been a thriving “normal” trade which was more or less in balance and a need for investment and development work.

Referring to the Rumanian treaty26 he said it was a “sheer accident” that its announcement coincided with the “events” in Czechoslovakia. Negotiations had started last November and agreement had been reached by Wohlthat27 in Bucharest some 2 or 3 days before the “event”. He denied that any ultimatum was given to Rumania [Page 571] saying that Rumania’s fear of Hungarian Irredentism with regard to Transylvania caused her to desire to conclude the treaty thinking that Germany would thereafter restrain Hungary from any aggressive action toward that area. He denied that there was a secret supplementary treaty with Rumania. He said that it was originally planned it had to keep the treaty secret but that after “the events” in Czechoslovakia it was deemed better to publish the treaty.

He did not deny the existence of extreme foreign exchange stringency in Germany but remarked that the situation was not yet acute in Bohemia, Moravia since the Czech factories had in general stocks of raw materials sufficient to last them for some time.

Repeat to Treasury as No. 15 from Heath.

  1. See letter of October 31, 1938, from the State Secretary for the German Economics Ministry to the American Ambassador and enclosed memorandum, Foreign Relations, 1938, vol. ii, p. 428.
  2. League of Nations Treaty Series, vol. cxcix, p. 82.
  3. Helmut Wohlthat, of the German Ministry for Economic Affairs, in charge of negotiations for German-Rumanian commercial treaty.