611.4131/2487a

The Department of State to the British Embassy

Memorandum

Products on which the United Kingdom granted concessions in the trade agreement with the United States56 and which are now subject to United Kingdom wartime import restrictions are set forth in the attached list.55 These products account for approximately 90 percent of the value of the American export trade covered by Schedule I of the agreement. Trade-agreement commodities not as yet subject to United Kingdom restrictions represent a normal annual trade of only $30,000,000 and approximately one-third of this total is accounted for by raw fur skins.

The restrictions upon American agricultural products included in the trade agreement are particularly severe. There is official information that no licenses are being issued at present for a number of such products which normally account for about one-half of our agricultural export trade with the United Kingdom. American agricultural products thus prohibited were valued at $113,000,000 in 1936. As regards other agricultural-agreement products subject to licenses, no licenses are being issued for several other important products, according to unofficial information, and restrictions on most of the other items appear to be extremely severe.

To summarize, it appears accurate to state that all agricultural products included in the trade agreement, with the exception of cotton and a few relatively minor items, are either prohibited by British regulations or subjected to restrictive measures so severe as to amount, for practical purposes, to prohibitions. Furthermore, the outlook for cotton, which is subject to indirect United Kingdom import regulations through the operation of the Commodity Control, and the Ministry of Shipping, is not entirely reassuring.

The seriousness of the effect of these restrictions upon the trade agreement and upon American agriculture is even more apparent when it is recalled that approximately two-thirds of the American [Page 116]trade covered by the agreement is accounted for by agricultural products and that approximately 95 percent of American agricultural exports to the United Kingdom, normally our overwhelmingly most important export market for agricultural products, are included in the trade agreement.

As regards American non-agricultural products included in the trade agreement, no British import licenses are being issued for certain of these commodities which accounted for trade valued at about $9,000,000 in 1936. Licenses are also required for other non-agricultural products included in the trade agreement which represented American export trade to the United Kingdom valued at about $49,000,000 in 1936, and it is understood that in most instances the operation of the licensing system is already causing severe curtailment of trade. In other words, almost 75 percent of the American nonagricultural trade—valued at approximately $58,000,000 in 1936—on which the United Kingdom made concessions in the agreement is subject to the British import-license system. It is noted that a number of highly important products, from the American export point of view, are subject to these prohibitions and restrictions, e. g. automobiles, lumber and lumber products, certain office machinery, and canned salmon.

Other wartime economic measures, in addition to the import prohibitions and restrictions, are adversely affecting American trade.

It is noted that the British arrangement to purchase Turkish tobacco, an arrangement covering a twenty-year period, is prejudicial to the interests of American tobacco producers and exporters and incompatible with the provisions of the trade agreement.

In addition to the restrictions on imports into the United Kingdom, there are also severe restrictions on imports from the United States into the other British territories included within the scope of the trade agreement.

In view of the sharp curtailment of American exports to the United Kingdom and the British colonies of products included in the trade agreement, and the depreciation of British currency, the maintenance of the trade agreement is becoming increasingly difficult.

  1. See Foreign Relations, 1938, vol. ii, pp. 1 ff. For text of agreement, signed November 17, 1938, see Department of State Executive Agreement Series No. 164, or 54 Stat. 1897.
  2. Not printed.