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

611.4131/343

Memorandum by the Chief of the Division of Trade Agreements (Hawkins)

[Washington,] July 21, 1937.

Conversation:	Mr. H. O. Chalkley, Commercial Counselor of the British Embassy;
	Major Henry Frank Heywood, Commercial Secretary, British Embassy;
	Mr. John A. Stirling, British Board of Trade;
	Mr. Harry C. Hawkins;
	Mr. John D. Hickerson;75
	Mr. Henry L. Deimel, Jr.;
	Mr. Constant Southworth.

Mr. Chalkley, Major Heywood and Mr. Stirling came to Mr. Hawkins’ office at 10 a.m., July 21, 1937, to discuss further the British statement of July 15 relative to concessions requested by the United States on commodities affected by the Ottawa agreements.

We informed the British representatives that their recent reply to our requests with respect to products covered by the Ottawa agreements seems to us entirely unsatisfactory; that a tabulation of their latest proposals with those made on April 13 and rejected by us showed no improvement whatever. In fact, on certain items the present offer is less definite, and therefore less satisfactory, than the previous one. We said that, while this represented our own opinion, we had not yet submitted the matter to the Secretary for definite decision, as we first wanted to discuss the matter with the Messrs. Chalkley and Stirling in order to see whether they could not give us something a little more encouraging to be laid before the Secretary.

The British representatives replied that what they have offered is as far as the position taken by the Dominions permits them to go. Canada, they said, is the principal obstacle to meeting our requests. The Canadians take the position that to sacrifice any part of their preferential position in the United Kingdom market without getting some compensation from us is not feasible from the standpoint of domestic politics. They pointed out that the Canadian producers of such important products as lumber and apples, rely to a very large extent on the United Kingdom market, and that acquiescence by the Canadian Government in the impairment of that market withnot obtaining definite compensating advantages for these important groups of producers is not within the realm of practical politics.

We replied that it is, nevertheless, very hard for us to understand why Canada should stand in the way of an agreement between the United States and the United Kingdom from which Canada and other countries stand to gain long-run benefits of the greatest importance. We find it especially difficult to understand the Canadian position in view of the often expressed desire of the Canadian Government to cooperate in the broad movement for the restoration of international trade. It seems to us, we said, that the Canadians are rather too inclined to look at the matter through a microscope, and to overlook the broad significance which a satisfactory agreement between the United States and the United Kingdom would have from the standpoint of Canada’s own broad interests. Of more immediate importance to Canada is the fact that a satisfactory agreement between the United States and the United Kingdom is a prerequisite to any further trade-agreement negotiations between the United States and Canada. As for compensation to Canada for acquiescing in modifications of the United Kingdom preferences to that country, we pointed out that the most logical compensation would be compensation in kind; i. e., an undertaking by the United Kingdom to waive its preferential position in Canada to whatever extent may be necessary to permit the successful conclusion of such negotiations for a supplementary trade agreement with the United States as may later be undertaken. The British referred to the fact that this form of compensation has already been offered to Canada by the United Kingdom. We stated that this would seem to be the most logical form in view of the considerations just mentioned.

The British representatives raised the question whether we would be willing, by way of compensation to Canada, to modify our chief source rule to the extent of including in the agreement between the United States and the United Kingdom some products in which Canada is interested, such, for example, as codfish. Canada would thus obtain benefits on such products under the most-favored-nation clause. We replied that we did not consider this possible; that any concessions from which Canada would derive the chief benefit must be reserved for any supplementary trade agreement which may be negotiated between the United States and Canada.

With reference to the Australian attitude, Messrs. Chalkley and Stirling said that Australia apparently could not be expected to endorse any abatement of its preferences in the United Kingdom prior to the pending election; that it would be undesirable for the Lyons Government to place itself in a vulnerable position in this matter because we might expect a labor government to be less inclined to cooperate than the present one. They said that, in view of this, if we insisted on a specific commitment on each product in our list before public announcement of contemplated negotiations is made, the announcement would have to be delayed until after the Australian elections. In order to avoid this delay they urged that announcement be made at once and that the question as to what should be done on our Ottawa list be dealt with in the negotiations.

We replied that immediate announcement seemed undesirable for the reason that we would be embarking on negotiations without having settled the question now before us, and that negotiations would break down if it turned out that our requests could not be met. Moreover, we pointed out that it is public knowledge in all the countries concerned that the question of the Ottawa preferences is the issue before us, and that announcement now would imply that the difficulty has been satisfactorily solved, which is not the case. The result would be that the Dominions would assume we had acquiesced in what they now offer and it might then be more difficult to get them to offer more. Also since the nature of our demands is known, it might be assumed in Australia that the Australian Government had acquiesced in them in whole or in part, with consequent embarrassment to the Government prior to the elections; this being the very thing it is sought to avoid. We also expressed doubt whether announcement now would really save any time.

Nevertheless, Mr. Chalkley felt that it would be better if announcement were made and if the present discussions of the Ottawa list were carried over into the actual negotiations. We asked him how a public announcement of negotiations and the mere fact of calling our present discussions “negotiations” could have any beneficial effects. Mr. Chalkley was unable to give any satisfactory answer to this.

Referring again to the attitude of Canada, Mr. Chalkley inquired whether, in order to facilitate negotiations with the Canadians, we would be prepared to enter into negotiations for a supplementary trade agreement with Canada. The thought behind this suggestion apparently is that Canada’s only chance of specific compensation for sacrifices in the United Kingdom market lies in the opportunity for a supplementary trade agreement with the United States. Apparently it is thought that Canada should have some idea of what it would get under such an agreement in the way of concessions in the United States in order to determine whether it would really be compensated for what it is giving up. We replied that simultaneous negotiations would not seem feasible, for two reasons: first, the procedural and organizational difficulties of carrying on two such important sets of negotiations at the same time, and, second, the fact that the announcement of simultaneous negotiations with an important agricultural country such as Canada would tend to impair the psychological benefits of the negotiations with the United Kingdom from which American agriculture is expected to derive substantial benefits. Mr. Stirling then asked whether we would be prepared to open “discussions” of an informal and confidential nature with Canada (similar to those which we had agreed to enter into with Australia and New Zealand) when a basis for negotiations with the United Kingdom had been found. We replied that an answer to this would have to be deferred until we could look at the record of the discussions with the Australians and New Zealanders and see what, if anything, had been said to them on this point, and could consider this suggestion in relation to the Canadian position. We promised to give them an answer soon.

Mr. Stirling referred to the fact that it is a little difficult for the British to take a position on our “must” list until they know what other demands we are going to make with respect to products not covered by the Ottawa agreements. He asked, therefore, that we prepare the remainder of our schedule I and give it to them. This we agreed to do.

In the course of the discussion, it was made perfectly clear to the British representatives that before announcement of contemplated negotiations is made we must have an explicit reply from the United Kingdom as to what the United Kingdom is prepared to do for each product on our “must” list. The British representatives admitted, with some reluctance, that this would not delay an eventual agreement since this would have to be done sometime, although it would delay an announcement of intention.

The British representatives indicated that in the light of their conversation with us they would probably telegraph London for further instructions.

Mr. Hickerson said that the United States would bring up the question of the United Kingdom’s treatment of American films if and when trade-agreement negotiations began. Mr. Chalkley said that the British might ask reciprocal concessions on films.

75. Assistant Chief of the Division of European Affairs.