560.AL/10–1945: Telegram
The Ambassador in the Soviet Union ( Harriman ) to the Secretary of State
[Received October 19–12:48 p.m.]
3597. ReDeptel 2098, October 4.10 From our point of view I see little point in informing Soviet Government of proposals for conferences [Page 1338] in March and June prior to transmitting them to other United Nations. It is improbable that Soviets will wish to comment on conference proposals before date contemplated for invitations to be sent out.
As concerns Soviet participation in “proposed United Nations Conference on Trade and Employment” the records of Embassy do not show that Soviet Government ever replied to our repeated invitations to join in Article VII discussions.11
Under Soviet system foreign trade is a monopoly of the State. All foreign trade transactions are controlled according to plan for furtherance of national economic interests and often political objectives. Soviet national monopoly of foreign trade is integral part of Soviet system and cannot be altered.
Attitude of Soviet Union toward lowering of tariff barriers and freer trade will be different in different areas depending upon their interests.
- (1).
- In those areas bordering on USSR Soviets are proceeding on unilateral basis to conclude agreements for exchange of commodities on quota basis and for economic collaboration which involves participation of Soviet capital in the major industries and trade of country concerned. In these bordering countries they will wish to have predominant influence both political and economic and will resist any attempt of other nations outside Soviet influence to participate to more than a nominal extent in trade of these countries.
- (2).
- As regards Soviet attitude toward freer trade between countries outside its sphere of influence Soviet Government will be happy to see growth in foreign trade based on lowering of tariff barriers and free competition between individual private producers in which media Soviet foreign trade monopoly can most effectively buy and sell on most favorable market.
As regards proposed March talks on specific reductions of tariffs and other trade barriers there is absolutely no point to negotiations with USSR for mutual reduction of tariffs. In such negotiations if actual reductions were obtained US would be making concessions and receiving nothing in return.
Soviet tariffs do not hamper or restrict Soviet foreign trade and even if all Soviet tariffs were completely abolished no objective of US policy would have been accomplished and the volume and direction of Soviet foreign trade would not be affected.
[Page 1339]Soviet tariffs are not designed to protect Soviet industry and agriculture against foreign competition. In a totalitarian economy such as that of USSR where whole economy and foreign trade included are operated up State according to plan, concept of “protection” has no meaning in connection with tariffs.
Soviet tariffs do bring revenue to State. This is not, however, reason for existence of tariffs since revenue from foreign trade would be collected by Soviet Government in many different ways.
At present Soviet tariffs serve largely bookkeeping purpose. Soviet accounting procedure requires that imported goods be made available to Soviet enterprises at approximately same cost as comparable Soviet manufactured goods since if underpriced imported goods would give advantage to enterprises using them enabling them to show higher profits than enterprises using Soviet manufactured goods. Since profits in Soviet system are intended to measure efficiency of operation of economic units, imported goods must cost enterprises using them same as comparable domestic goods. Soviet tariffs apparently aim to make prices of imported goods comparable to those of Soviet goods.
Soviet Government, for instance, charged tariffs on lend-lease imports. This is evidenced by fact that in 1940 3 billion rubles were collected from tariffs in USSR and in 1944 it was planned to collect 24 billion a year when practically all imports into USSR came from US, UK and Canada under lend-lease and mutual aid programs. This was clearly done for reason mentioned in above paragraph.
Same end could be obtained without tariffs. Foreign Trade Commissariat would be permitted for instance to release imported goods to Soviet institutions at prices comparable to those of Soviet made goods without charging any tariffs. In this case profit would accrue to Foreign Trade Commissariat and could be taxed 100 percent by Government.
Thus tariff reductions by USSR would be fictitious concession and would not have any effect on Soviet foreign trade.
The question of our own tariff policy should be judged therefore on considerations other than obtaining reduction of Soviet tariffs.
- Not printed.↩
- In September 1943 an invitation to hold such discussions had been extended by the United States to the Government of the Soviet Union. Additional information was given to the Soviet Government at the time of the Foreign Ministers’ Conference in Moscow in October 1943, and again in December 1943. However, the Embassy had never succeeded in having any discussions whatsoever with Soviet representatives on this subject. For documentation regarding the September and December approaches, see Foreign Relations, 1943, vol. i, pp. 1099 ff.; for the paper handed to the Soviets at the time of the Moscow Conference, see memorandum entitled “Bases of Our Program for International Economic Cooperation”, ibid., p. 763.↩