Foreign Relations of the United States Diplomatic Papers, 1937, The British Commonwealth, Europe, Near East and Africa, Volume II

611.4131/335

The British Embassy to the Department of State⁶⁹

undated

The attached statements show in greater detail the attitude adopted by the individual Governments concerned and its effect on the particular commodities involved:—

Australia

In the case of Australia there is a special difficulty. A general election is due to be held towards the end of this year. It seems to the U. K. Government very doubtful whether the Australian Government would be prepared to make concessions on some dried fruits, especially raisins and on certain of the canned fruits. On the other hand, it is understood to be unlikely that the Australian acreage devoted to the production of some of these fruits will be increased in the near future. This might be regarded as going some way to meet the United States requirement expressed in paragraph 4 of their memorandum of March 2nd.

The other commodities in the United States’ proposals, in respect of which Australia enjoys guaranteed preferences under the Ottawa agreement, are apples, pears, grapefruit and honey. For all these other items Australia is less concerned than other Dominions and given time it is hardly to be expected that an impasse should arise on such items owing to the difficulties of Australia.

This statement of the position of Australia as it appeared to United Kingdom Ministers at the close of the London conversations should be read in conjunction with the State Department record of their subsequent conversations in Washington with Mr. Casey.

New Zealand

The discussions in London with New Zealand Ministers and officials showed that the attitude of New Zealand was not unlike that of Canada. They pointed out that any easing of the position on apples, pears and honey (the three items on which they at present have guaranteed margins of preference) in favour of the United States would prejudice New Zealand interests. They added that, if it could be shown that an Anglo-United States agreement would benefit both the United Kingdom and New Zealand, then their Government would be ready to make such concessions as might be necessary.

This statement of the position of New Zealand as it appeared to United Kingdom Ministers at the close of the London conversations should be read in conjunction with the State Department record of their subsequent conversations in Washington with Mr. Nash.

South Africa

The discussions in London with Union of South Africa Ministers and officials showed that they thought that some of the United States requirements were excessive, but the Union Government would, within reason, accept any decision reached by the United Kingdom Government.

Southern Rhodesia

The discussions with the Ministers of Southern Rhodesia showed that they would make no difficulty in regard to grapefruit. As regards tobacco, the Southern Rhodesian representatives were asked to consider some reduction in the existing margin of preference (which for revenue reasons would have to take the form of an increase in the preferential rate of duty and not a decrease in the general rate). It became evident, however, in the course of the discussions that it would be politically impossible for the Southern Rhodesian Government to agree to any waiver of their rights. Political power in Southern Rhodesia rests mainly in the hands of the agricultural settlers. Tobacco is their great export crop and the United Kingdom is by far their largest market for that tobacco, taking about two-thirds of their total production. Moreover, there seems no possibility of developing exports of tobacco or other agricultural products to the United States of America or other foreign countries. In view of the attitude of the Southern Rhodesian Government and of the fact that the tobacco preference is guaranteed until 1942, there can be no possibility of meeting the United States request on this item.

Canada

The Canadian Ministers in London indicated that the Canadian Government would give early and earnest consideration to the question of how Canada could reasonably and effectively cooperate in facilitating a successful outcome to the discussions between the U. K. and the U. S. A. Pending consideration of the question by the Canadian Government as a whole the Canadian Ministers in London made an informal and preliminary examination of the U. S. proposals.

Their view was that if they were to justify the impairment of the advantages which they obtained in the recent Anglo-Canadian Agreement, they must be able to point to satisfactory compensating advantages. They added that it would be easier for the Canadian Government to justify sacrifices on their part if they were only part of a comprehensive agreement, in which the U. K. Government also made concessions in the duties designed to protect the U. K. home producer.

They pointed out that, while in general the Canadian Government would be prepared to consider the adjustment of preferences on the basis of compensation, the abandonment of the preference on lumber would be impossible. Apart from lumber, the most difficult item for Canada would be apples, for which substantial compensation would be necessary. It is not anticipated that they would make any great difficulty about the other items on which they have guaranteed margins of preference (apart from tobacco which must be ruled out on other grounds).

The discussions in London with Canadian Ministers and officials showed that they felt very strongly that the Canadian Government should either be a party to any Anglo-United States negotiations, or that they should themselves conduct simultaneous negotiations at Washington. The Canadian Ministers seemed to be more and more turning in the direction of a simultaneous and linked negotiation between Canada and the United States.

India and Burma

The position has not yet been discussed with the respective Governments, and it is therefore only possible to conjecture what their attitude will be. In view of the decision reached in regard to tobacco, rice is the only item on the American “essential” list which concerns these two countries. The suggestion in the United States memorandum of 18th May for a differentiation in duty based on the value of rice, has been examined and appears to be impracticable. Attempts to frame a similar differential scheme for malting barley have been abandoned. Apart from difficulties created by fluctuations in value there would be a strong incentive to price manipulation, and it would pay to increase the declared value in order to get the article in at the low rate of duty. In these circumstances, the question of the duty on rice must be reserved pending discussions with the Indian and Burmese Delegations who have recently arrived in London.

Summary

The position resulting from the discussions in London on the products affected by the Ottawa agreements, is that a concession on tobacco is impossible, as is also any substantial concession on timber. As regards most of the dried and canned fruits, any concession is impracticable at present, although it is just possible that something might be achieved later in a negotiation which secured counter-concessions satisfactory to Australia. At present it is not possible to say anything definite on rice though it is hoped that further instructions in this regard will be received from London shortly.

For the rest the U.K. Government believe that it is possible that the Dominions will go at least some of the way toward meeting the desiderata of the United States, subject to means being found to compensate Canada (especially on apples) and, in less measure, New Zealand and Australia (both of whose interests are comparatively small, apart from the Australian dried and canned fruits).

The United Kingdom

Home producers are affected (a) by some of the United States proposals dealt with above and notably by that in regard to apples, (b) by the demands for the conventionalization of the existing tariff treatment of the products mentioned in List 2 (attached to the United States memorandum of 2nd March), (c) by the demands on hog products and (d) by the further demands which are still to be put forward and which will be examined with the same readiness to subordinate particular interests to the general objective as the U.K. Government think they have shown hitherto. Their readiness to go as far as possible in meeting the United States demands under these heads must be taken to mean, not that the demands occasion no difficulties, but that the U. K. Government are prepared to face the difficulties. Reference was made to the question of apples in the U. K. Government’s memorandum of 13th April, and it is unnecessary to add to it. As regards conventionalizations the U.K. Government are prepared to go far to meet the United States requests on List 2, although this involves real difficulties. For example, a concession on canned pilchards, owing to their competition with canned herrings, will provoke considerable criticism.

Most careful consideration has been given to the requests of the United States Government in regard to hog products. In view of the importance which is attached to them the U.K. Government would be prepared, as part of a satisfactory agreement, to meet those requests to the extent shown below (the references are to the sub-paragraphs in paragraph 5 of the “Supplementary Statement”⁷⁰ attached to the United States memorandum of 18th May).

(1) The U.K. Government could not offer to guarantee free entry for hams and shoulders, but they would be prepared to offer an undertaking not to impose a duty higher than a certain minimum percentage ad valorem. Normally they would not be prepared for this purpose to name a figure lower than 10% which, as the United States Government are aware, is the level of the general ad valorem duty. But in the special circumstances the U.K. Government might in this particular case, be prepared to agree to a somewhat lower figure. So long ago as June 1935 the United States Government together with other Governments interested, was informed of our proposal to impose a levy on imported bacon and hams. This proposal was not brought into force at the time only because it required the consent of certain countries having the right of free entry.

(2) (a) The United States proposal raises great practical difficulties but the U.K. Government are prepared in principle to establish a separate quota for hams. They could not undertake to extend this treatment to shoulders which, they are informed, are normally cured as bacon and are always entered as bacon for British Customs purposes. Apart from questions of Customs definition there is the difficulty that there would be no statistics of imports of shoulders upon which any separate quota could be based. In the last 2 years United Kingdom imports of bacon from the United States have been less than 3% of total United Kingdom imports of bacon and hams from the United States of America so that it does not appear that the point can be of much practical importance.

(b) The U.K. Government would be prepared, in principle, to accord to the United States a percentage of the quota for hams based on past imports. The proposal to guarantee a specific percentage, however, affects the rights of certain foreign countries with which trade agreements have been made: the Swedish Agreement⁷¹ contains an undertaking by the United Kingdom Government not to guarantee to any country other than Denmark a percentage of imports of bacon and hams, and the Danish and Polish Agreements⁷² contain guarantees applying to bacon and hams taken together. It will be necessary to agree with these countries modifications of the guarantees given to them before any guarantee can be given to the United States, but no insuperable difficulty is anticipated from this.

(c) The request for a minimum quantitative guarantee raises serious difficulties. At present hams are included in the general bacon scheme under which imports from foreign countries are adjusted to the general supply position, after taking into account home production and imports from Empire countries. A minimum guarantee to the United States of America in regard to hams might in certain circumstances involve a progressive increase of imports with serious effects on the market. The U.K. Government would, however, be prepared to discuss this question with the United States delegates during the negotiations.

(3) The U.K. Government would also be prepared to undertake not to impose any quantitative restriction on imports of lard from U. S. They would also be prepared to give an undertaking not to increase the present amount of duty (probably in the form of a specific duty, and possibly to offer some reduction on a specific basis).

69. Handed to the Assistant Chief of the Division of Trade Agreements on July 15.
70. Not printed.
71. Agreement with Sweden, signed May 15, 1933, League of Nations Treaty Series, vol. cxl., p. 317, and amended May 27/June 15, 1935, ibid., vol. clx, p. 422.
72. Agreement with Denmark, signed April 24, 1933, ibid., vol. cxxxix, p. 127; supplementary agreement, June 19, 1936, ibid., vol. clxxvii, p. 421. Agreement with Poland, signed February 27, 1935, ibid., vol. clxii, p. 181.