740.00112 European War 1939/11092: Telegram

The Ambassador in the United Kingdom (Winant) to the Secretary of State

4943. For Department, FEA and Riefler from Lovitt. Following sent to Bern as 176, June 21 in compliance with your telegram 4839, June 19:

Comments of Embassy and MEW on Department’s 4839, June 19 repeated to you as Embassy’s 177, June 21 are as follows:

We believe you should have discretion to decide when to approach Swiss with reference to listing, in view of the recent informal offer of the Swiss. Without in any way detracting from your latitude of discretion we suggest that on an appropriate occasion it may be advisable to inform the Swiss of our view as to the question of our freedom of action with respect to listing as outlined in Embassy’s 4774, June 14 to Department, repeated to you as 172. It would seem to be inappropriate now to threaten firms in the metallurgical industry exporting items on Annex I of the December Agreement.
We believe the new Swiss proposals should be accepted leaving it to you to attempt to secure any last minute concessions. Owing to disruption of traffic through France, quotas for raw materials and even quotas under the December Agreement tend to become theoretical and Swiss interest in reaching an agreement may wane. By December Agreement we obtained reductions in priority items from 229,000,000 Swiss francs to 140,000,000 Swiss francs. The March 23 offer reduces this to 122,000,000 Swiss francs. In May we asked for 61,000,000 Swiss francs and Swiss now offer 98,000,000. We desire to gain the immediate advantage of this offer before Swiss have a chance to protract the negotiation. The acceptance of this offer does not preclude us from asking further reductions in return for raw materials when transit is again available or if fundamental conditions change.
We further feel that Bern should press for a formal offer which should be then clinched in Bern. The bargain thus made should then [Page 736] be referred to London for incorporation in an agreement covering such other objectives as we may be able to work in: If offer is not accepted in Bern but referred to London delegation, we believe delegation will probably prolong negotiations and ask for raw materials.
Counterproposal made to Swiss May 25 envisaged two global ceilings but we prefer single global ceiling with 35% limit to separate ceilings with 40% limit. We do not, in our opinion, lose substantially by combining Germany with other Axis Europe because ceilings for any one tariff item cannot exceed total for Germany and other Axis Europe under December agreement.
MEW agrees not to ask for further tranches in compensation agreement. If cancellation of unused balances would be helpful, supply departments here would consider the question promptly. You should have freedom of action to use this position to best advantage.
(a) No ceilings in group I are increased over March 23 offer. (b) MEW has asked Bern whether Swiss will ask for industrial raw materials. It seems to us less likely that Swiss will ask for them if offer is clinched in Bern promptly than if it is referred to Keller for further negotiations, (c) Transfer of M9 from group III to group IV does not change ceiling which remains at 40% as in the December agreement. Transfer was made at our suggestion, (d) See Embassy’s 4876, June 1961 which we are repeating to Bern as our 177.
We agree that further reduction in M6 is desirable but bearings, piston rings and arms and ammunition are still regarded as having priority here.
We entirely agree.

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