Foreign Relations of the United States, 1946, General; the United Nations, Volume I

560.AL/4–2346

The Ambassador in the Soviet Union (Harriman) to the Secretary of State

secret
No. 51

Moscow, April 23, 1946.

The Ambassador has the honor to refer to the Department’s secret instruction no. 969 of January 17⁶³ transmitting documents prepared for inter-Departmental use concerning items for consideration in connection with possible concessions in a trade agreement with the Soviet Union.

In this instruction, the Department invited the Mission’s comments and suggestions on the documents in question and listed the following specific points in this connection:

(1) Is it likely that the U.S.S.R. will not be interested in tariff reductions or bindings on some of the items to be listed?

(2) Are there any other items for which the U.S.S.R. might desire tariff concessions from the United States?

(3) Are there any other forms which might be used to obtain a quid pro quo from the U.S.S.R. in return for tariff reductions?

1. The answer to the first of these questions is as follows: In general we do not believe that the Soviet Union is much interested in American tariff rates. Not only have a large portion of its exports to the United States always been duty free, but its entire relationship to foreign tariffs is different from that of capitalist countries. From the Soviet standpoint, exports to other countries are not desirable. They represent a sacrifice to the Soviet State. Their purpose, in the case of exports to the advanced western nations, is only to bring in foreign exchange. Wherever tariff duties can be passed on to the consumer (in other words, wherever Soviet goods dominate the market), the Soviet Government is not interested in them. Their interest arises only in cases in which they are forced to take a lower compensation in foreign exchange than would have been the case had there been no duties or had the duties been lower. Just what such price differences could conceivably amount to in case of trade with America, the Department will be able to calculate. According to our estimate, however, they could not amount to more than a few hundred thousand dollars in the very utmost. Compared to questions of credit, this is an item of almost negligible significance. The amount of credit we propose to give to Russia merely in connection with the sale of surplus property alone would probably compensate for all Russia might suffer financially over several decades from American tariff duties. In these circumstances Soviet interest in our tariff rates is naturally minor, compared to their interest in credits.

The answer to the Department’s first question can thus be broken down as follows:

A. With respect to a number of the items listed for tariff reductions or bindings, these items are now deficit in the U.S.S.R. and the Russians will have only a remote interest in them.

B. With respect to other items, the Russians will not be interested, because the duty can be passed on to the consumer.

C. With respect to the remaining items, the Russians will have a financial interest, but this interest will be so insignificant that it is not likely to play any appreciable part in Soviet policies on international economic matters.

2. In answer to the second of the Department’s questions, this Mission knows of no other items for which the U.S.S.R. is likely to desire tariff concessions from the United States at present.

3. The third of the Department’s questions raises again the prob-problem of what quid pro quo the Soviet Union could give for tariff concessions on our part. The Embassy has now given careful thought to this question and wishes to advance the following views:

A. We reject the global purchase commitment as a satisfactory approach to this question. It is against the policy of the Soviet Government to publish either its foreign trade plans or the statistics of the actual trade conducted. To accept a global purchase commitment would be in effect to publish the main outlines of the annual import plan. We do not believe that in reality the Russians would ever engage themselves internationally to any import program which they had not already decided unilaterally to carry out. Furthermore, in the absence of adequate Soviet statistics, it would be a major job for a research institute to ascertain from the statistics of other countries to what extent such a commitment had actually been carried out. All in all, we consider the global purchase commitment impractical, unlikely to find Soviet agreement, and unlikely to bring about any appreciable increase in the volume or stability of Russian import trade.

B. We do not believe that there is any alternative quid pro quo which Russia could offer in the form of a treaty obligation which would be satisfactory as a means of fitting Russia into an international lowering of trade barriers. It can not be emphasized too often that the Soviet system is not a system of law as we know it. Public affairs in the Soviet Union are not conducted on the basis of binding norms laid down for given periods in the form of laws or regulations. Soviet authority is 98 per cent administrative, and the central power in Moscow insists on retaining effective freedom of administrative action in all matters of any importance to the State. The Soviet leaders will never consent to have their administrative freedom of action limited by any effective provisions of law or treaty. Just as their power over the individual is unlimited and subject to no restraints of law or usage, so in all other matters, including economic, they always assure to themselves freedom to treat every individual question, if they like, on its merits according to the political exigences of the moment. It is the experience of this Mission that the Soviet Government is profoundly reluctant to accept any treaty obligations which could possibly bind it to act in hypothetical questions in ways which might run contrary to the interests of the Soviet State. In other words, they will generally obligate themselves to do only those things which they know they would otherwise have done anyway in their own interests; and even these obligations they will undertake only when they can see substantial concessions to be gained thereby. For these reasons, we do not feel that there are any concessions which the Soviet Government could and would make by way of treaty obligations which could essentially alter existing Soviet practice in a way which would be beneficial to other countries. This judgment finds support in the entire history of the foreign economic relations of the Soviet State. We could point to no instance in which general obligations assumed by the Soviet Government with respect to the treatment of the goods or nationals of foreign countries have ever been of appreciable value to the foreign nation concerned.

C. Since the character of Russia’s activities in the field of foreign trade is going to be determined in any case on day by day administrative actions of the Soviet authorities, the motives of which will never be discussed with foreign countries, it is our belief that each country must remain the judge of the degree to which Soviet trade practices meet its requirements in the line of international economic collaboration. We would therefore recommend that the question of tariff concessions to the Soviet Union be left as a question to be settled individually between the U.S.S.R. and each of the countries with which Russia may conduct trade.

D. In the case of the United States we feel that the following procedure should be adopted. If, as we assume to be the case, the Trade Agreements Act does not permit us to extend our minimum tariff concessions to the Soviet Union except in pursuance to treaty obligations, then we should recognize frankly that the Act as it stands does not fit the case of a country which has a complete government monopoly of foreign trade. We should then initiate legislation which would give the executive branch of our Government the authority to extend or withhold tariff concessions (within the limits of the Trade Agreements Act) at its own discretion in the case of countries having a complete governmental monopoly of foreign trade—such concessions to be granted or withheld in accordance with the degree of helpfulness and willingness to collaborate which we meet at the hands of the country in question. Such legislation would enable us to make the initial gesture of extending our lowest tariff concessions to the Soviet Union, and we feel that this should be done. It would also enable us to withdraw these concessions in the event that Soviet trade practices might not, in our opinion, justify their retention or that Russia should decline to cooperate with an international trade organization. It would leave our Government the judge of whether or not Soviet collaboration in international economic matters was satisfactory and would obviate all wrangling with the Russians over the question of whether treaty provisions had been fulfilled.

E. We wish to reiterate, however, that this a matter of small importance to the Russians; and it is by no means certain that any action on our part either in the granting or withholding of tariff concessions would have any appreciable influence on Russian economic policies. The main points in our trade with Russia are Russian need for our products, our willingness to grant credit and our willingness to accept gold as a medium of exchange. Of these, the first two are of far the greater importance.

63. Not printed.