740.00112 European War 1939/6312
The Swiss Trade Delegation to the British-American Delegation 16
Memorandum
The Swiss Delegation has the honour to hand the British-American Delegation herewith two lists (Annexes I. and II.17) showing clearly the position attained so far in the present War Trade negotiations, which indicate the basis on which it should be possible for a settlement to be reached on the points still outstanding.
The Swiss Delegation desires to make the following observations with regard thereto:
First, they would like to give a short general survey of the questions at issue; they cannot refrain from drawing attention once more to the economic structure of Switzerland which is typical of a country vitally dependent on the import and export of goods; indeed Switzerland depends to an almost unparallelled extent upon international trade. She can only feed her population and maintain an adequate level of employment if she is able to import the necessary agricultural commodities and raw materials for her industry, paying for them by the products of her labour. The very existence of between a third and one half of her population depends upon her being able to export goods.
Whilst in peace-time this exchange of goods was free, the war has placed it in shackles, to which the Swiss economic structure has been compelled to adapt itself. Until the collapse of France, the exchange of goods was possible between Switzerland and both belligerent parties in the war and Mr. Sulzer, in his letter of 20th May to Mr. Foot,18 drew attention to the considerable exports of Swiss industry to the Allied Nations during the first nine months of the War. The collapse of France fundamentally changed the position; from that time onwards Switzerland has been completely surrounded by the Axis Powers and cannot import or export a single pound of goods which does not pass through their control. Notwithstanding these difficulties Switzerland has made every possible effort to maintain her trade with the United Nation and is still making strenuous efforts in that direction. Her efforts to arrive at a continuously working Compensation Agreement to enable her to supply the United Nations with certain products of Swiss industry which they particularly need, are well known to the British and American Governments, and if she has not [Page 391] so far been successful, it is owing to delays which it was not in her power to overcome. The Swiss Government state once more that they are still animated by the strongest desire that a Compensation Agreement on the lines proposed should be concluded as soon as possible and that this Agreement should be followed by similar agreements in future. The Swiss Government will make every endeavour to this end and hope that they may rely on the support of the Allied Governments in reaching a successful conclusion.
An indication of the manner in which Swiss trade with the United Nations could be further developed was also contained in Mr. Sulzer’s letter to Mr. Foot of the 20th May, and the Swiss Government hope that a number of other openings will be found which will enable Swiss production to be placed in an increasing measure at the service of the United Nations. If, or insofar as this is not possible, however, Switzerland, having regard to the necessity of providing work for her population to replace her lost export trade, besides satisfying the increased calls made on her production by her own requirements and in particular, the needs of her national defence, has no option but to maintain her trade with those countries with whom she can still exchange goods. This necessity explains the marked increase of Swiss trade in all fields of her economic activity with European countries who have always been her traditional customers.
The Swiss Government have been conscious that ever since the beginning of the war, Switzerland, standing as she does in the very centre of the economic struggle, would have to submit to numerous severe restrictions imposed by both sides. As regards the Anglo-French blockade, the War Trade Agreement of 25th April, 1940, in fact subjected Switzerland to extensive restrictions. The Swiss Government understand the desire of the Allied Governments to intensify to a certain extent these restrictions and are ready to accept them within bearable limits. In the negotiations which have been proceeding in London since March, this readiness has been proved by the Swiss Government’s acceptance of numerous far-reaching concessions. The Swiss Delegation recalls the many export positions which, in accordance with the Allies’ request, have been transferred from Lists B1 and B2 to List A (total prohibition of exports to Axis Europe) or from the free List to one of restricted exports and the conciliatory spirit shown in particular with regard to the settlement of the chemical items.
The anxiety of the Swiss Government for the very existence of their country impels them to make an urgent appeal to the Allied Governments that their demands should not exceed the limits beyond which the country’s life would be imperilled and at the same time the Swiss Government’s endeavours to revive Swiss exports to the United Nations would be jeopardised.
[Page 392]In the light of the foregoing the Swiss Delegation earnestly requests the British-American Delegation to reconsider the following points which have already formed the subject of discussion.
1) As regards the export of agricultural products to Axis Europe, Switzerland cannot go below the annual limits set out in the relevant List. The Swiss Delegation recalls that the representative of the British Government in the “Commission Mixte” agreed at the time to such exports being completely free; these export limits already represent a great reduction on the figures for previous years and constitute the absolute minimum required to secure in exchange the necessary imports from Axis Europe. The allocation of these exports between the various countries concerned is shown in the List annexed. In Mr. Sulzer’s letter to Mr. Stirling of the 22nd June, attention is drawn to the decisive fact that, against these exports of Swiss agricultural products must be set imports from Axis Europe of several times as much of most vital foodstuffs. The recent complete prohibition of the consumption of meat in Switzerland for four full weeks may provide striking proof of the sacrifices made by the Swiss people in order that their country may be able to obtain important goods of other kinds in exchange. For these reasons the Swiss Government believe that they are justified in expecting that the British and American Governments will not insist on opposing such exports to Axis Europe and will consequently waive the various restrictions on import quotas, which were linked up with them in the course of the negotiations.
In this connection the Swiss Delegation wishes to emphasise the urgent need for renewed imports of fodder; should these imports be further delayed, it would bring about in a short time a marked reduction in the quantity of the existing live-stock and consequently a grievous further deterioration of the food situation in the country. Imports of fodder are also particularly needed for the horses of the Swiss Army. The Swiss Government cannot believe that it is the intention of the British and American Governments to penalise Switzerland for her exports of cattle and dairy produce—which are relatively unimportant to the Axis Powers in their conduct of the War, but which are most important to Switzerland for obtaining in exchange products essential to her—by the complete stoppage of the import of fodder for her horses and cattle. It is surely in the general interest that Switzerland should be enabled to carry into the after-war period a sufficient quantity of livestock.
2) In respect of textiles, the Swiss Delegation has succeeded in finding further elements for concessions. As regards wool, Switzerland has agreed during the present negotiations to prohibit exports to Axis-Europe of all items of importance. The new proposals contained in the list concerning cotton (vide items 344, 347/359, 360/370, [Page 393] 434 b/c, 446 e/h) provide particularly drastic restrictions compared to the figures of exports for previous years. The new figures constitute the minimum of what Switzerland must have available in order to secure the imports which are essential to her from the respective countries. Here also, as Mr. Sulzer pointed out in his letter to Mr. Stirling, the Swiss Delegation was able to prove that if imports of hemp, which forms a substantial part of the textile group, be included, imports of textile materials from Axis-Europe considerably exceed Swiss exports of textiles to those countries. Silk, although it has so far been exclusively supplied to Switzerland by Axis-Europe, is not even included in this computation.
The following example is intended to show the manner in which Switzerland endeavours, through an adequate subdivision of her exports, to secure in exchange a maximum of vital imports from the various European countries: Switzerland is able to import considerable quantities of eggs produced in Yugoslavia and Bulgaria against exports to these countries of fine cotton goods which are by no means essentials of war; it is surely in the interest of the United Nations that, under the circumstances, these eggs should go to Switzerland rather titan be supplied to Germany, as would otherwise be the case.
The Swiss Government believe, therefore, that they may expect, in this field also, that the British and American Governments will recognise the economic necessity of such limited exports to Axis Europe and will allow them to continue on the proposed greatly reduced scale by not curtailing the yearly import quota for cotton much below the figure of 24,000 tons fixed for the past. It must be particularly emphasised here that these exports to Axis-Europe are confined to fine tissues and luxury fabrics, and that Switzerland has agreed to the complete cessation of all exports to Axis-Europe of cotton yarn and waste. Also the insignificance for the conduct of the war by the Axis Powers of these drastically reduced exports is recalled.
3) The Swiss Government, while fully appreciating the considerations underlying the attitude adopted by the British and American Governments, sincerely regret that they are unable, for the reasons set out in Mr. Sulzer’s letter to Mr. Foot of the 20th May, to agree to give a formal undertaking for the reduction of, or for the fixing of a ceiling for the Swiss exports of war-materials and of certain machinery. The Swiss Government feel certain that the British and American Governments will understand that it is impossible for them to interfere with the contractual obligations entered into by Swiss industry under the regime of blockade hitherto subsisting or to force Swiss industry to refuse further orders in the event of threatened unemployment in Switzerland. They remain convinced, however, that for a number of reasons, the deliveries of these materials will in future tend to decrease rather than to increase.
[Page 394]The Swiss Government have therefore no option but to accept the suggestion embodied in Mr. Stirling’s draft letter of the 11th June. It would still be necessary, however, to determine more precisely the items of the Customs Tariff which should be subject to periodical revision. The Swiss Government are of opinion that the only items subject to revision should be actual war-materials, arms and ammunition and should not include goods which are the normal and traditional products of the old-established iron and machine industry. Moreover, it is of the utmost importance to the Swiss Government to know which are the import quotas the British and American Governments would wish to reserve the right to reconsider. Any reduction of the already barely sufficient import quotas for foodstuffs would be considered totally unbearable.
4) The Swiss Government are perturbed by the fact that some of the new import quotas proposed by the British and American Governments must be considered insufficient, while a number of raw materials, such as rubber, copper, iron and steel, tinplate, hides and leather, all of which are essential for the maintenance of the country, have so far been completely omitted. They cannot imagine a satisfactory War Trade Agreement which does not at least allow Switzerland to obtain the imports which are essential to her for the proper maintenance of the National Defence; List No. 2 shows the outstanding items concerned.
5) In the War Trade Agreement of the 25th April, 1940, the contracting parties confined themselves to laying down certain principles regarding the use to be made of the goods imported into Switzerland through the British/French blockade, the quantities to be imported being left unlimited. It was not until the collapse of France that the British Government thought it necessary to fix maximum import quotas for certain goods. No responsibility of any kind was assumed by the blockading Power with regard to the supply of the goods; it was left to Switzerland to make her own arrangements to obtain the goods and generally speaking no difficulties were encountered until the entry of the United States into the War.
Since the United States entered the War the situation has altered fundamentally. With regard to a number of goods for which the United States were the sole remaining Source of supply, American export permits were refused, in spite of the fact that navicerts had been granted. In consequence of the growing scarcity of essential agricultural and industrial raw materials, control and pooling became daily more drastic, with the result that the obtaining of such goods is now dependent in every case upon the consent of the blockading Powers. Switzerland is thus exposing herself to the growing risk of giving onerous undertakings limiting her trade with Axis-Europe in exchange for assurances of import quotas from the Allied Governments, [Page 395] without any guarantee that she will actually receive the goods. A logical corollary of any such undertaking should surely be some reasonable certainty that goods permitted to be imported should effectively be made available. The Swiss Government must therefore make the undertakings they are to give subject to the following provisos:
- a)
- that as regards goods which are not officially controlled by the blockading Powers, the latter will not put any obstacles in the way of their shipment to Switzerland and that, in particular, where imports from the United States are concerned, American export permits will always be granted within the framework of existing import quotas;
- b)
- that where the purchase of goods is officially controlled or where their acquisition meets with difficulties, the British and American Governments will use their best endeavours to assist Switzerland to procure these commodities.
6) At the outset of the present negotiations the British and American Governments declared that the conclusion of a new War Trade Agreement would depend on the settlement of various financial questions connected therewith. The Swiss Delegation is also of the opinion that the questions of finance and blockade are interdependent and that it is therefore necessary for a satisfactory solution of both questions to be reached simultaneously.
On this understanding and in order to demonstrate once again to the British and American Governments their desire to bridge the existing difficulties, the Swiss Government have authorised this Delegation to offer to His Majesty’s Government a credit for the equivalent of up to two hundred million Swiss Francs on the terms and conditions set out in Annexes III and IV.19
In consideration of this offer of credit, the Swiss Government rely on the British Government being prepared to give an assurance that they will maintain for the duration of the credit the full and unimpaired transfer in Swiss francs of both the income on Swiss capital invested in the British Empire and the proceeds of Swiss exports to the British Empire.
The Swiss Government hope that the credit will also induce the British Government to facilitate the purchase of more Swiss goods than has hitherto been possible owing to the prevailing currency restrictions; such additional imports might also serve as a useful contribution to the maintenance of British supplies.
In a Note dated 9th September, 1941, His Majesty’s Minister in Berne, on behalf of the British Government, informed the Swiss Government that the policy which they have thought necessary “to frame towards Switzerland following the situation created by the signature of the German-Swiss Trade Agreement would be capable of modification [Page 396] and that His Majesty’s Government would be prepared to take into account both the developments of Swiss trade with the enemy and the extent to which Swiss industry may, in practice, be able to export to the United Kingdom, the Empire and allied destinations, goods to which the Authorities in these respective markets attach importance”.
The Swiss Government were aware of the motives which prompted the British Government’s statement and have done everything in their power to meet the British Government’s wishes. They regret that for reasons for which they are not responsible, it has not yet been possible to increase the trade between Switzerland and the United Nations as requested in the Note quoted above.
The Swiss Government continue to attach particular importance to these exports and hope in the not too distant future to succeed in meeting more fully on this point also the desires of the United Nations, on whose active assistance they count to that end.
On the other hand, the Swiss Government believe that in their readiness in the present negotiations to accept drastic curtailments of Swiss exports to Axis-Europe, they have already gone far to comply with the wishes of the Allied Governments. Indeed, to go further would imperil the very existence of their country. They feel that they are entitled to expect that the Allied Governments on their side will also show their understanding of the position of Switzerland. The Swiss Government must again point out that the goods which Switzerland receives from Axis-Europe in exchange for her exports, are not only of the utmost importance for her existence but also consist to a very large extent of commodities which, particularly insofar as Germany is concerned, constitute materials essential for the conduct of the war by the Axis Powers.
The outcome of the present negotiations is of momentous significance for the fate of Switzerland. Owing to circumstances beyond her control, Switzerland now finds herself in a situation pregnant with difficulties hardly ever greater in her long history.
Switzerland has always been well aware of the high duties laid upon her by her freely chosen policy of neutrality and there can be no doubt that she has always honourably striven to carry them out. The Swiss people have at all times made sacrifices for the defence of their country such as few other peoples can show and they are firmly determined to go on shouldering these sacrifices in the future.
The Swiss Government hope that the foregoing Swiss proposals will pave the way to an agreement acceptable to both parties and thereby contribute to the strengthening of the economic independence of Switzerland.