611.4131/383½
Memorandum by the Assistant Secretary of State (Sayre)
Mr. Mallet and Major Heywood called to see me with regard to the British trade agreement. They informed me of their conversation with the Secretary yesterday when they had brought in Sir Frederick Phillips to see him. Mr. Mallet began by saying that he wanted to clear up what seemed like a possible misunderstanding which arose out of his conversation with the Secretary. He said that it was his own understanding that the next move in the British-American trade agreement must come from the United States. He went on to say that owing to the fact that Great Britain could not go further with the negotiations until Canada had relinquished its preferential rights under the Ottawa Agreement, it now remained with the United States to secure the consent of Canada to such a relinquishment. He understood, however, from yesterday’s conversation that the Secretary took a different viewpoint and this is what he wished to clear up.
I replied to Mr. Mallet that I was glad to tell him in confidence that confidential conversations had taken place between my Government and the Canadian Government. I went on to say that the heart of the difficulty was due to the inescapable fact that politically we would be blown higher than a kite if we should undertake negotiations or even conversations with an agricultural country to which we would have to give agricultural concessions before we had assurance of a thoroughgoing and satisfactory trade agreement with such an industrial country as Great Britain through which to enlarge our agricultural export markets. I said that we could not afford to live in a fool’s paradise, that we must be realistic and look facts in the face, that it would be folly to negotiate a trade agreement only to see it blown to pieces by a sufficient political opposition generated by failure to keep political conditions in mind. For this reason I said that whatever our desires might be it would be utterly impossible to announce negotiations with Canada or even to enter into detailed conversations concerning commodities [Page 69] with Canada until after we had the trade agreement with the United Kingdom “in the bag”, i. e. until we were able to give positive and definite assurances to our farm groups for the enlargement of agricultural export markets so as to win their support and prevent their torpedoing the trade agreements. For this reason I explained to Mr. Mallet that we could not possibly enter into conversations with the Canadians concerning commodities at this time. All we could discuss with the Canadians was the “timing problem”, i. e. how to get around the difficulty that we could not enter into negotiations with Canada until after we had positive assurances that the Canadians would relinquish their preferential rights in the United Kingdom. I said that this formed the subject of our conversation with Mr. Skelton who came down here from Canada a short time ago. I added that both sides had frankly discussed this problem but that as yet we saw no light. I further told him that Mr. Skelton at the conclusion had asked whether we would be willing to discuss the matter further, and we replied that our door was never shut in the face of a friend and that we would be glad to discuss this again at any time that he desired. I also told Mr. Mallet that we were expecting him to return but that so far as that matter was concerned the next move was up to Canada.
Both Mr. Mallet and Major Heywood thereupon exclaimed that they understood that the Canadians were waiting for us to move. I said that that was not the fact,—that so far as these conversations were concerned, while we were always ready to entertain any suggestions which the Canadian Government might lay before us, the initiative must come from them. I added that I referred throughout to conversations seeking to solve the problem of “timing”, and that in no event could we enter into conversations in the nature of negotiations until this “timing” problem is definitely settled.
Mr. Mallet then brought up the question of what Great Britain could do to forward negotiations. I replied that the present difficulty arose out of the Ottawa preferences. I remarked that when Mr. Runciman was here last winter we expressed to him in earnest terms our fears lest if another Ottawa preferential agreement were signed it would create difficulties and obstacles to the negotiation of an American trade agreement. I said that, to be quite frank, in the face of our expressed fears Great Britain and Canada signed the agreement creating reciprocal preferences. Now each desires to modify the provisions of that agreement. I said that how to do so was entirely a problem as between the British and Canadian Governments and clearly not the problem of my Government. I then made it very clear that there could be no question of the United States’ paying with concessions for the elimination of these preferences; and when Major Heywood suggested that it might be worth the United States’ giving concessions [Page 70] to secure the elimination of these preferences, I replied that one of the fundamental bases of our trade agreements program was not to pay for the removal of discriminations entered into shortly before the undertaking of negotiations. I said that the whole basis of such negotiations as might be undertaken with Canada must be concessions given only in return for concessions gained, and I made it emphatically clear that the United States could not consider under any circumstances paying Canada in return for Canada’s relinquishment of British preferences.
I summed up by saying that we must have the assurance that Great Britain would sign a trade agreement including each item covered in the “must list” as well as the items covered in the “non-Ottawa list” so that we could make definite promises to our farmers before we could support negotiations with an agricultural country like Canada.
Mr. Mallet next spoke of the “non-Ottawa list”. He said that he hoped we could give his Government this list at the earliest possible moment and intimated that negotiations were being delayed by our failure to hand his Government this list. I replied that it did not seem to me that negotiations should be held up on account of this list. I explained that in the list which we handed the British Government on November 16, 1936,79—the so-called “must list”,—each single item was a sine qua non for the agreement so that unless this list could be satisfied in its entirety it would be useless to continue further negotiations. On the other hand, I explained that in the “non-Ottawa list” if there were individual items which for political or other reasons the British Government could not grant, it might be possible to substitute for them other items of equal interest to the United States. In other words, whereas each of the two lists was of prime importance, nevertheless no single item in the “non-Ottawa list” would present an insuperable barrier as in the case of the items in the “must list”. I went on to say, however, that our men were working on this “non-Ottawa list” night and day and were losing not a single minute in its preparation. I said, however, that we did not want to present a hasty list which would have to be constantly revised but that we desired to present a list subject only to such changes as later might prove necessary, but prepared in such a way that the British Government could rely upon its accuracy. I said that while I could not promise it on a definite day, my expectation was that it would be finished sometime next week and that as soon as it is completed we will at once transmit it.
The conversation was entirely friendly in tone. But I used the occasion to emphasize in no uncertain terms, first, that the success of the negotiations would depend upon our obtaining complete satisfaction [Page 71] with respect to the “must list”; second, that there could be no thought of our paying Canada or anyone else for the removal of discriminations or preferences; third, that the “next move” was not up to us but that the problem is distinctly a British one, i. e. the removal of discriminations and preferences which they themselves created on the very eve of our negotiations after we had expressed our fears to them on this very point.