662.9131/27
The Chargé in Iran (Merriam) to the Secretary of
State
No. 1013
Teheran, March 11, 1937.
[Received April
16.]
Sir: I have the honor to refer to my
despatch No. 947 of December 9, 1936,41 informing the
Department of the Legation’s communication to the Minister of
Foreign Affairs, on the same date, of the Department’s views with
reference to the apparent discrimination against American trade with
Iran which arises from Article 17 of the Irano-German Convention of
October 30, 1935.42
There is enclosed herewith a memorandum of an interview between the
Chargé d’Affaires and M. Massoud-Ansari, Chief of the Division
handling American affairs, at which the Legation interpreter was
present, during which M. Massoud-Ansari undertook to answer the
objection that had been raised.
The Iranian position contains in effect two lines of defense:
- 1.
- While a percentage of the value of the goods imported from
Germany is not charged as in the case of goods imported from
other countries, this is counterbalanced by the fact that
exporters of Iranian goods to Germany do not receive the
bounty which exporters receive when sending goods to other
countries.
- 2.
- Even if the foregoing explanation is not acceptable, there
is no discrimination because Iran is prepared to enter into
a similar clearing agreement with the United States.
Whatever may be thought of the first argument, the Foreign Legations
at Teheran who have received the second argument in answer to their
protests have considered it as theoretically valid,
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whether or not their Governments were
prepared to negotiate a clearing convention.
The main interest of the Legation in making the protest was to
ascertain whether, in view of the certain tension existing in the
diplomatic relations of the two countries, the Foreign Office would
offer to negotiate a clearing convention with us as it had done in
the case of other countries. Should such an offer be forthcoming, an
opportunity would be afforded of saying to the Foreign Office that
while we were uninterested in a clearing convention, we had proposed
the negotiation of a reciprocal trade agreement43 and were still awaiting a
reply.
During past months the Department’s unfavorable attitude toward
compensation or clearing conventions has become so clear through the
speech of the Secretary of State at Buenos Aires44 and other pronouncements that, when confronted with
the reply of the Foreign Office, it seemed a waste of time to put
the question to the Department whether or not it desired to
negotiate such an agreement. Moreover, M. Massoud-Ansari’s remark
that it was his personal opinion that clearing conventions were
unsound (incidentally he was a member of the Iranian delegation
which went to Berlin to negotiate the agreement with Germany)
indicated that the Foreign Office is unhappy about the German
convention and would be unenthusiastic about negotiating an
additional agreement of the kind. Negotiations begun under such
circumstances would have little hope of success.
In view of these considerations, I ventured to give at once my
personal view that my Government would be disinclined to enter into
a clearing agreement with Iran, and to remind M. Massoud-Ansari that
our proposal to enter into negotiations with a view to concluding a
reciprocal trade agreement was still before the Iranian Government.
He was unfamiliar with the matter since he did not, when this
question was forward, occupy his present position, and has agreed to
examine it.
Respectfully yours,
[Enclosure]
Memorandum by the Chargé in Iran (Merriam)
The Chargé d’Affaires called on M. Massoud-Ansari by appointment
on March 6, 1937, to discuss the publication of certain
documents in Foreign Relations. When this
subject had been concluded, the latter referred to the note of
the Chargé d’Affaires to the Foreign
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Minister of December 9, 1936, calling
attention to the apparent discrimination involved in the
Irano-German Compensation Agreement of October 30, 1935.
M. Massoud-Ansari said he was instructed by the Foreign Minister
to say that there was no discrimination against American trade
because, while import permits are not required in the case of
Germany, the advantage is offset because export certificates,
which involve a bounty to Iranian exports, are not exacted. In
any event, there was no discrimination because Iran was prepared
to negotiate a similar clearing convention with the United
States—a reply which had been made to all the other Legations
which had protested. He personally thought, however, that such
clearing conventions were not sound.
The Chargé d’Affaires replied that the question whether the
disadvantage of the requirement of export certificates was
counterbalanced by the advantage of import permits would have to
be studied by the experts of the Department of State. He did not
think, speaking personally, that his Government would be
interested in negotiating a clearing convention. Its program was
embodied in fifteen reciprocal trade agreements which had been
negotiated within the last few years. This program contemplated
the general revival of trade through the mutual lowering of
tariffs on the commodities of chief interest in the trade
between the United States and individual countries. Under the
most favored nation principle, these tariff concessions were
generalized. The result was a general increase in trade as
contrasted with the uneconomic funnelling of trade which
resulted from compensation agreements.
Mr. Massoud-Ansari said that he did not understand, if the tariff
concessions were generalized, what inducement there was for
additional countries to enter into reciprocal trade agreements
with us.
The Chargé d’Affaires answered that it had been found by
experience that if the trade of any two countries is analyzed,
the bulk of the trade is made up of comparatively few
commodities, which are of interest to other countries in a minor
degree only. When, therefore, mutual tariff concessions are made
on the principal commodities, the effect on the trade of the
other countries to which they have been generalized is so slight
that they are willing to negotiate agreements with us dealing
with the commodities of chief interest to them.
Mr. Massoud-Ansari asked, supposing the Iranian duty on American
automobiles were reduced 10%, what competition would remain?
The Chargé d’Affaires replied that if the duty on American
automobiles were reduced by 10%, this reduction would be
generalized under the most favored nation principle to Germany,
England, Russia and to all the other countries supplying Iran
with automobiles. The competitive basis would therefore remain
exactly what it had been, but
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because automobiles would cost 10% less,
presumably more would be sold. We should not mind the
generalization of the concession because the share of other
countries in the automobile trade was slight.
Mr. Massoud-Ansari then repeated what he had said at first.
The Chargé d’Affaires said again that this answer would be
studied in the Department. He thought he could go so far as to
say that Mr. Massoud-Ansari’s personal opinion regarding the
unsoundness of compensation agreements was the official view of
his own Government. He supposed that the Foreign Minister’s
reply would later be communicated in writing and asked whether,
before it was sent, the Foreign Office would not reconsider the
question of negotiating with us a reciprocal trade agreement.
The Foreign Office had been on the point of giving a favorable
answer to this question at the time certain difficulties
arose.
Mr. Massoud-Ansari did not commit himself beyond promising to
look it up and to reexamine the question of a reciprocal trade
agreement.
In an effort to acquaint Mr. Massoud-Ansari further with the
nature of a reciprocal trade agreement as contrasted with the
nature of a clearing convention, the Chargé d’Affaires spoke of
the trade of the United States with Brazil. The United States
bought tremendous quantities of coffee from Brazil, and exported
lesser values of manufactured goods to that country. If a
compensation agreement should be concluded between the two
countries, American coffee imports from Brazil would be greatly
reduced, causing economic distress in Brazil. On the other hand,
we should have to make up our requirements in coffee elsewhere,
and be compelled to pay higher prices for an inferior
product.
He added that while fifteen agreements were in effect, and all
the tariff reductions had been generalized to Iran, actually
Iran had not benefitted at all because the duties on the
principal exports of Iran to the United States had not been
touched.
He continued by saying that we had had considerable experience
with reciprocal trade agreements and that they had worked well.
While it was impossible to say what portion of the trade
increase resulted from the conclusion of such agreements, and
what portion resulted from general economic improvement, the
fact was that, generally speaking, trade with the countries with
whom we had agreements had improved, in some instances markedly
so. The reciprocal trade agreement program was generally well
regarded by traders and economists as a sound and courageous
program, and had been described in such terms by the economic
experts of the League of Nations. The Secretary of State, Mr.
Hull, had always been interested in tariff matters as a Senator,
and the whole program was the result of his familiarity and long
experience with them.
