Foreign Relations of the United States: Diplomatic Papers, 1945, General: Political and Economic Matters, Volume II

740.00119 Council/9–1845: Telegram

The Acting Secretary of State to the Secretary of State, at London

Washington, September 18, 1945—6 p.m.

8118. Secdel 76. Part I. The following memorandum from the British Embassy concerning economic agreements recently concluded between the USSR and Rumania, Bulgaria and Hungary is transmitted for your information with the suggestion that you may wish to make it the subject of discussion in London. The Department’s comments on the memorandum are contained in Part II of this telegram.

[Here follows the text of memorandum from the British Embassy, September 11, printed on page 123.]

Part II

The Dept is in general agreement with the broad political and economic aspects of the memorandum, recognizing that any action in regard to them must be governed by developments in London.

In regard to para 4 of the memorandum, the Dept recognizes the exclusive bilateral character of these barter arrangements; nevertheless, Dept feels that short term arrangements of this type may be required as emergency measures, and is not disposed to object as long as these arrangements do not prejudice the eventual participation of these states in a multilateral trading and financial system. Moreover, Rumania has already concluded similar agreements with Hungary and Bulgaria as has each of these three countries with some of its Danubian neighbors and other European states.

The Dept has considered the question of the agreements for economic collaboration which the Soviet Union is reported to have concluded with Rumania and Hungary. These agreements appear to give preferential status in these countries to the economic interests of the USSR and therefore to discriminate against the interests of the United States and of other countries.

The Dept feels that protection for American interests in Hungary, Rumania, and Bulgaria can best be obtained through the economic and commercial policy articles of the peace treaties with these countries. In order to insure that no misunderstanding arises regarding the meaning of non-discrimination and most-favored-nation treatment, special paragraphs, not included in the suggestions for the peace treaty with Italy have been incorporated in the draft suggestions for the treaties with the three above-mentioned states, specifically as follows:

“General Economic and Commercial Relations.

“P. 1. Desiring to cooperate in the attainment of the objectives stated in preceding paragraph 39, the Government of Hungary, during a period of three years after the entry into force of this treaty, undertakes:

(a) To accord to the commerce of each signatory Allied State unconditional most-favoured-nation treatment with regard to:

(1) All customs duties, charges and regulations of any kind;

(2) All laws and regulations affecting the taxation, sale, distribution or use of imported articles within Hungary;

(3) All aspects of any quantitative regulations which the Government of Hungary may impose on imports or exports; and

(4) All aspects of any control which the Government of Hungary may establish over the means of international payment.

(b) To accord with respect to matters referred to in paragraph (a) above, unconditional most-favored-nation treatment to the nationals, corporations and associations of each signatory Allied State within the territory of Hungary.

(c) With respect to all matters affecting internal taxation or sale, distribution or use within Hungarian territory, to accord to the products of each signatory Allied State imported into Hungary treatment no less favourable than the treatment accorded like products of Hungarian origin.

(d) With respect to all matters affecting the internal taxation, sale, distribution or use of merchandise, export bounties, custom drawbacks and the warehousing of articles intended for importation or exportation, to accord to the nationals, corporations and associations of each signatory Allied State treatment no less favorable than the treatment accorded to the nationals, corporations and associations of Hungary.

(e) To accord unconditional most-favored-nation and national treatment to the nationals, corporations and associations of each signatory Allied State with respect to all matters pertaining to investment production, industrial activity, taxation and protection of property within the territory of Hungary; and to accord unconditional most-favored-nation treatment to the nationals, corporations and associations of each signatory Allied State with respect to the development of mineral, petroleum, and other natural resources within the territory of Hungary. The principles set forth in this sub-paragraph shall be understood to include the requirement that wi$i regard to the sale, lease or other disposal of public lands, products or natural resources by the Government of Hungary, the Government of Hungary shall accord to the interests of each of the signatory Allied States fair and equitable treatment as compared with the treatment accorded to the interests of any other country.

(f) To accord to the commerce of each signatory Allied State fair and equitable treatment in respect of the foreign purchase and sale of any product with respect to which the Government of Hungary maintains a monopoly, or other State enterprise.

“2. The provisions of paragraph 1 (a) and (f) above, shall be understood to preclude the Government of Hungary from establishing or maintaining any system of governmental operation which would involve, or control over foreign trade which would require, whether formally or indirectly:

a) the sale, or offer for sale, of any product for export from Hungary to any foreign country, at a price lower than the comparable price at which the like product can be sold for export from Hungary to any third country which is a signatory Allied State: or

b) the purchase, or offer to purchase for importation into Hungary, of any product of any foreign country at a price higher than the comparable price at which the like product can be purchased for importation into Hungary from any third country.

“3. Hungary shall not be obligated to accord the treatment provided for in the foregoing paragraphs to any signatory Allied State which does not in fact accord in like matters reciprocal treatment to Hungary, it being understood that the reciprocal treatment herein provided for is subject to the exceptions customarily included in the commercial treaties of such Allied State and of Hungary. It is further understood that Hungary shall be free to adopt, notwithstanding clauses (3) and (4) of paragraph 1(a), above, such measures as may be necessary to ensure the importation into Hungary of goods essential to Hungarian civilian life and to the reconstruction of the Hungarian economy. However, Hungary undertakes to give effect to the provisions of these clauses to the maximum extent possible.

“4. The provisions of this Article shall supersede any other treaties, agreements, or arrangements which are inconsistent with the provisions of this Article, and which Hungary may have concluded with any State party to the present treaty. Furthermore, Hungary undertakes to seek the termination of any other treaties, agreements, or arrangements which are inconsistent with the provisions of this Article and which Hungary may have concluded with any other State.”

Paragraph 4 above, which provides for the abrogation of any arrangements inconsistent with the principles of most-favored-nation and non-discriminatory treatment, would give this Govt a sound basis for protesting against any discriminatory provision of the agreements concluded between the USSR and Rumania and Hungary. It is suggested that a strong position be taken in support of the inclusion in the peace treaties of the language in paragraph 4 of quoted section above.

Acheson