740.00112 European War 1939/11138 1/2

The Foreign Economic Administrator (Crowley) to the Secretary of State

Dear Ed: The Foreign Economic Administration is greatly disturbed about the lack of progress in economic warfare negotiations with Switzerland which have been conducted by our Legation in Bern upon instructions from the Department and FEA. These discussions have now been under way for more than three months, although when minimum demands were presented in September the Allied representatives insisted on their acceptance within five days as a condition for our making the supply concessions offered in return. Although the Swiss acquiesced in part, their replies on certain aspects of our démarche, especially the transit traffic question, have been entirely inadequate. The possibility that the campaigns in Italy and at the German border may continue for a considerable time makes it more and more essential that effective action be taken by the Swiss to terminate at once their aid to our enemies.

The Swiss contend, of course, that only by continuing trade with Germany and the transit traffic through Switzerland can they obtain supplies essential to the Swiss economy. While that argument may have been valid a year or even six months ago, I believe that present conditions make it untenable. The Swiss have built up substantial stocks of coal (amounting, according to the last report, to ten months average consumption) and of other supplies. They have stored in Spain and Portugal substantial quantities of food, fodder, and related commodities, and some textile raw materials, which are now awaiting transportation into Switzerland as soon as SHAEF2 permits it. However, the fact that they have been able to forego receiving them for several months without any real hardship strongly indicates that they had stockpiled considerable quantities, and that the onshipment of their supplies in Spain and Portugal would simply replenish these [Page 766] stockpiles. From an economic standpoint, therefore, there appears to be no reason why Switzerland cannot follow, to a very large extent at least, the example now being set by Sweden.3

The possibility of military retaliation by the Germans for any withdrawal of Swiss assistance now appears so remote as not to deserve consideration.

Despite these circumstances, which appear to make possible a far-reaching reorientation of the economic policy followed by Switzerland for the past five years, all available evidence indicates that the Swiss expect to continue their assistance to the enemy’s war economy to the bitter end, making any reductions only very haltingly and under the strongest Allied pressure. Their collaboration with Germany on financial matters—the cloaking of enemy funds, the purchase of Axis gold, the Swiss banks’ assistance to the enemy, etc.—is also continuing, a fact which does not promise extensive voluntary cooperation in our financial objectives, especially on the problem of enemy assets. Moreover, even where concessions have been made in principle, in both the economic warfare and financial spheres, there have been serious derogations in practice.

The Foreign Economic Administration believes, therefore, that the time has come when, for the sake of both present and future objectives, we must take immediate measures to convince the Swiss not only that we mean business, but also that to continue their present economic policy vis-à-vis the Germans would be disastrous to their own interests. On the basis of past experience, it appears unlikely that a reorientation of their policy can be obtained simply by presenting another note to the Swiss Government. Some new initiative must be taken to convince the Swiss that they can no longer count on our tolerating their assistance to the Germans. At the same time, if we were satisfied that the Swiss were doing everything possible to meet us on these objectives, we would be prepared to give them every possible assistance on supply matters consistent with overriding military requirements and our commitments to our Allies. We are not willing, however, to make any further economic concessions to the Swiss in advance of value received.

The Foreign Economic Administration recommends, therefore, that the following measures be taken at once, unless there are the strongest overriding political objections:

An immediate withdrawal of the offer of supplies made in September. To hold this offer open any longer, after having originally emphasized that it was valid only for a few days, would disastrously weaken our position in dealing with the Swiss.
A demand for immediate renegotiation of the export ceilings in Annex I of the existing War Trade Agreement4 for the period following December 31, as provided in the Agreement, for nil ceilings on all Annex I commodities, and for a drastic reduction of other Swiss exports to Germany.
A concurrent demand for stoppage of all southbound transit of coal; and of all transit of other commodities in either direction except where they are demonstrated to be directly for civilian consumption and excluding any loot.
Immediate and strong notice to the Swiss that if our demands on points 2 and 3 above are not met, we will consider our obligations under the War Trade Agreement to be at an end, and will reconsider entirely our policy of permitting Switzerland to receive supplies from overseas. Moreover, they should be put definitely on notice that transit facilities across France cannot be made available, at the expense of Allied transportation needs, for a country which continues to work with our enemy.

I hope that you will inform me of the views of the Department of State on this important question at your earliest convenience.

I understand that the Joint Chiefs of Staff are now considering the problem of the transit traffic through Switzerland. In view of their interest in this question, I am sending copies of this letter to the Secretary of the Navy and the Under Secretary of War.

Sincerely yours,

Leo T. Crowley
  1. Supreme Headquarters, Allied Expeditionary Force.
  2. For documentation regarding negotiations of the United States and the United Kingdom with Sweden for the cessation of Swedish exports to German-occupied Europe, see pp. 731 ff.
  3. The Anglo-American-Swiss War Trade Agreement effected by exchange of letters December 19, 1943, Foreign Relations, 1943, vol. ii, pp. 888892.