The Secretary of State to the Ambassador in Italy (Phillips)

No. 466

Sir: With reference to your despatches nos. 1202 and 1282 of December 16, 1938, and February 6, 1939, respectively,5a please acknowledge the Ministry of Foreign Affairs’ Note Verbale no. 241101/151 of December 10, 19386 and Pro Memoria of January 24, 1939,7 and, after expressing concern that the Ministry has not only rejected the Embassy’s requests of November 2, 1938,8 but has established 1939 import quotas for a substantial number of important American products on the same unsatisfactory basis as that employed for 1938 quotas, continue your note substantially as follows:

This Government is disposed to agree, as it did last year, that for the purpose of determining the amount of Italian import quotas for American products during the calendar year 1939, the year 1934, with certain exceptions, is generally acceptable as a “previous representative period”. It does not concur, however, that under the terms of the Arrangement increased quotas for certain products can compensate for reduced quotas on other products. Accordingly, the Italian Government is requested to establish for each product listed in Attachment A of the Pro Memoria of January 24, 1939, except dried prunes (96), a quota based upon the actual proportion of Italian imports thereof supplied by the United States in 1934.

For the same outstanding reasons set forth in the Embassy’s Note Verbale no. 628 of April 25, 1938,9 it is again requested that quotas for dried prunes (96), wheat flour (70–A), and raw cotton (181–A) be established on the basis of the actual proportion of Italian imports of each supplied by the United States during the three-year period 1932–1934. As regards the Ministry’s comment concerning the three-year representative period for these three products, it should be recalled that the provisions of the Temporary Arrangement permit the selection of a separate representative period for each of all products of considerable interest. An understanding on this point was reached during the negotiations. The Embassy informed the Ministry of Foreign Affairs on December—, 1937 that paragraph three of Article VIII dealt with quantitative limitations on the importation [Page 626] of individual products and that the formula laid down in the Article was based upon that past period of trade in any individual product which was in fact representative. The Ministry replied on December—, 1937 that insofar as the representative period was concerned the year 1934 was specified in its comment only as an indication of a year which was not affected by special conditions and that it did not propose any definite years for all products. [The Embassy will see the Department’s 192 of December 14, 193710 and the Embassy’s 517 of December 15, 193711 and set in the appropriate dates in the blank spaces above.]12

With reference to the Ministry’s comment respecting foreign exchange attention is invited to the substance of what was said during the negotiations, namely, that under the exchange provisions of the Temporary Arrangement the Government of either country may limit the amount of exchange which can be used for commercial payments by limiting the quantity of commercial imports, provided quantitative import restrictions are administered in accordance with the proportionate share formula set forth in the Arrangement.

Adverting to the principal reasons given by the Ministry during the past year for establishing short quotas, i. e., commitments to other countries and the needs of the national economy, it is again recalled that the Temporary Arrangement was entered into only after assurances of the Italian Government, particularly as set forth in its communication No. 240759/127 of November 24, 1937,13 that all preferences would be totally abolished as of December 31, 1937, except those reserved for Austria. Further, as already explained in a prior communication, the Arrangement imposes no restrictions whatsoever upon the Italian Government insofar as concerns the total quantity of any product which it will permit to be imported.

Considering the foregoing, it is hoped that the Italian Government will find it possible during the current year to restore the reduced 1939 quotas in the manner suggested herein and at the same time establish quotas for dried prunes, wheat flour and raw cotton on the basis of the proportion of total Italian imports of these products supplied by the United States during the period 1932–34.

Your 325 of November 8, 1938.14 Please endeavor to obtain informally (1) a list of the products of considerable interest to the United States for which the proposed global quotas are not inclusive of permitted imports from all countries and (2) information as to the amount whereby each of such global quotas has been increased by [Page 627] reason of special accords between Italy and other countries, and report by cable unless the list is unduly long.

Very truly yours,

For the Secretary of State:
Francis B. Sayre
  1. Neither printed.
  2. See telegram No. 374, December 12, 1938, 7 p.m., from The Chargé in Italy, Foreign Relations, 1938, vol. ii, p. 580.
  3. See telegram No. 33, February 1, 1939, 7 p.m., from the Ambassador in Italy, supra.
  4. See telegram No. 105, October 25, 1938, 3 p.m., to the Ambassador in Italy, Foreign Relations, 1938, vol. ii, p. 577.
  5. See telegram No. 40, April 23, 1938, 3 p.m., to the Ambassador in Italy, ibid., p. 561.
  6. Foreign Relations, 1937, vol. ii, p. 490.
  7. Ibid., p. 492.
  8. Brackets appear in the original.
  9. See telegram No. 488, November 24, 1937, from the Ambassador in Italy, Foreign Relations, 1937, vol. ii, p. 466.
  10. Ibid., 1938, vol. ii, p. 579.