611.5231/1212: Telegram

The Secretary of State to the Ambassador in Spain (Weddell)

78. Your 144, May 24, 10 p.m.11 and Department’s instruction of May 28, 1940. With reference to the possibility suggested by the Minister of Finance that exploratory conversations might be undertaken to ascertain whether a basis exists for the initiation of negotiations for an agreement between Spain and the United States for the purpose of improving existing commercial relations between the two countries, you may in your discretion inform General Franco on the occasion of your forthcoming interview with him that this Government would be glad to undertake such informal and confidential conversations if the Spanish Government so desires. It is observed in this connection that the Minister of Finance recognized that Spain must envisage trade with the United States on a triangular rather than on a bilateral basis and indicated the belief that a mutually beneficial agreement along these lines might be negotiated in spite of the fact that Spain has already concluded a number of bilateral trade balancing agreements with other countries.

You should point out that it is the purpose of the trade agreements negotiated by the United States under the authority of the Trade Agreements Act to reduce barriers to trade through mutual tariff concessions [Page 805] on important products entering into the commerce between the two countries and that any trade agreement negotiated by the United States must be based upon the most-favored-nation principle as applied to all forms of trade and payments control, including tariffs. In this connection you may mention the note which you have been authorized to address to the Minister of Foreign Affairs with reference to blocked funds owing to private American creditors in Spain.

For your own confidential information and guidance:

The Department fully appreciates the desirability of improving our commercial relations with Spain and to this end of negotiating a trade agreement if a basis therefor can be found. For this reason the Department would be willing to enter into informal discussions along the lines suggested by the Minister of Finance if the Spanish Government so desires and feels able to present a satisfactory solution of the problems confronting us, even though the Department is itself unable to visualize a satisfactory basis for a trade agreement in view of existing conditions and the commercial policy heretofore followed by the Spanish Government. The Department has in mind that a satisfactory solution of existing problems in our commercial relations with Spain must be comprehensive in nature. In your conversations with General Franco and other appropriate officials of the Spanish Government you should bear in mind the foregoing considerations with respect to a possible trade agreement and the improvement of our commercial relations with Spain in general, which it is apparent are closely related to the questions of credits and sale of surplus commodities mentioned in the Department’s instruction under reference.

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