853.24/138: Telegram

The Minister in Portugal (Fish) to the Secretary of State

308. My 303, February 20, 3 p.m.21 At our meeting with Salazar yesterday the British Ambassador began the interview by making an oral statement along the lines laid down in Ministry of Economic Warfare’s 246 of February 6, referred to in Department’s 227, February 12, 6 p.m., to me and he handed to Salazar copy of the notes which he had taken along for his own guidance together with certain statistical data designed to support the points he made. I then explained that since the views of my Government were substantially the same as those outlined by the Ambassador I did not wish to weary him with a repetition of these statements and that I had embodied my Government’s views in an aide-mémoire22 which I would leave with him.

Salazar replied that the documents would be duly studied and considered but that if they contained no more than the statements the Ambassador had made he did not think that they would be satisfactory to the Portuguese Government. He then proceeded to expound with some feeling his views on the question of price raising the substance of which may be résuméed as follows:

When his negotiators had brought to him the news that we proposed to raise prices on certain commodities he had asked them to clarify the question and to ascertain just what was meant by this statement. He had then after renewed conversations been given to understand that prices were to be raised according to the principle of price equalizations mentioned in his note. In agreeing to this and to the proposition that the method of price increase should not be fixed in writing the agreement he had relied on his experience of previous dealings with us and his belief that we would not take advantage of such a loophole in the written accord. He had now found himself faced with arbitrary and unilateral price increases which had not been discussed individually with the Portuguese and which bore no ascertainable relation to what had taken place in the negotiations. If our position were to be accepted it would mean that no objective criterion had been established during the negotiations by which such increases might be governed. This in turn would mean that we were theoretically free to continue to raise prices arbitrarily as we liked. We could set up prices for example another 100 per cent next week and 200 per cent the week after at our pleasure. Meanwhile Portuguese prices were at least partially fixed in the agreement. How could we ever have supposed that he would assent to an agreement on this basis? No one but a fool, he said, would have allowed such an under [Page 511] standing to rest. If it had been made clear to him last fall that that was what we had in mind he would have broken off the negotiations at once.

He understood what the British Ambassador had to say about the sacrifice involved for warring nations in making these supplies available. He found this a reasonable basis for discussion. If we had come to him and demonstrated to him that these considerations demanded even say a 300% increase in the price of copper sulphate he would have been glad to examine and discuss the question on this basis. But if our attitude were to prevail there was no objective measuring stick by which such increases could be governed and thus no limit to what we could do, a situation to which he would never knowingly have assented. He closed the discussion by saying that after the documents had been examined he would submit the matter to the Mixed Commission where it could be further discussed.

Since the British Ambassador had further matters not involving us which he also wished to discuss with the Prime Minister I withdrew as soon as the Prime Minister had concluded his remarks on price raising.

In comment on the above I may say that I did not gain the impression of any political resentment or personal unfriendliness in Salazar’s remarks or bearing. His tone was rather that of a man whose feelings had been hurt by the assumption on the part of his friends that he could knowingly have assented to something which was legally and formally unsound. His objections were not to price raising per se but to the implication that the conversations failed to provide any definite criterion by which price increases should be governed and that he had acquiesced in this state of affairs. It was his pride as a jurist not his political sentiments which had been offended.

I did not think it wise to invite discussion at that time of our future plans with respect to price increases by drawing his attention orally to the statement made in my aide-mémoire that it was our present intention to confine these increases to five commodities. Nevertheless I believe that when he has digested this written statement it will go far to answering his objections and to easing the task of the negotiators who will have to pursue these discussions further.

Meanwhile I can see no real grounds for pessimism with respect to the future of our supply purchase program. I am reasonably sure that if we can go a certain way toward meeting his wish for some standard by which price increases can be limited the question can eventually be satisfactorily solved.

At the close of his remarks the British Ambassador referred to wolfram and made it clear that we could not refuse to consider an interim agreement designed to bring the termination dates of the two agreements into line but that we would wish to have at least 50% of the free wolfram assured to us for that period. The Prime Minister [Page 512] made no comments on this suggestion in my presence and his reaction will presumably be forthcoming through his negotiators.

I was accompanied on this visit by Kennan23 who concurs in the views expressed above.

  1. Not printed.
  2. See supra.
  3. George F. Kennan, Counselor of Legation in Portugal.