611.5131/1035

Memorandum by the Chief of the Division of Western European Affairs (Moffat)

The French Ambassador called this morning by appointment on Assistant Secretary of State Sayre. Mr. Grady41 and Mr. Moffat were present.

The Ambassador said that he had received a long telegram from his Government in reply to the aide-mémoire we had given him the previous week (December 10th) and to the suggestion we had informally advanced to conclude a modus vivendi. The Ambassador said that his Government had telegraphed that it would find it very difficult to agree to a modus vivendi of the sort described at the present time. The French Government would have to justify granting de facto most favored nation treatment to American products by pointing to specific advantages gained in return. Unless and until we were in a position to inform the French Government of the nature of the concessions we are going to give to the products of other countries through our trade agreements, it would be impossible for the French to estimate whether or not it was to their best interest to conclude such an understanding.

This solution being temporarily out of the way, the Ambassador read the maximum concessions which France was prepared to give at the present moment. These were:

(a)
The establishment of as large a list of products as possible containing both those under quota and those not under quota to which France would accord minimum tariff treatment. Such a list is being mailed to the Ambassador at present and should reach Washington in about twelve days. It contains more than a thousand items but similarly makes certain important exceptions involving items of interest to American trade.
(b)
The 6% and 4% turnover taxes would be uniformly reduced to 2%.
(c)
Quotas for certain types of American merchandise would be increased. In return for these concessions France desires to obtain advantages for specific French products, notably lace, champagne, cigarette paper, et cetera, and the length of the list she presented covering minimum tariff rates would probably depend in large measure on the amount of reduction we could grant her on these principal products.

Mr. Sayre explained to the Ambassador that this proposal was a return to the old idea of negotiating a trade agreement. He explained, in order to make the situation perfectly clear to the Ambassador, [Page 190] that any agreement involving the reduction of a single item of the American tariff would fall within the category of a trade agreement and would have to be negotiated according to the provisions of our law.42 This would involve public hearings and specified delays amounting to at least eight weeks. On the other hand, a modus vivendi covering as it does merely de facto most favored nation treatment could be concluded by an exchange of notes overnight.

The Ambassador said it was so difficult to bargain with us as we had only a single column tariff. Mr. Grady remarked that without employing the name, we were none the less being driven towards a system of a double tariff, one rate for those to whom we made or generalized concessions in trade agreements, the other rate for those countries to whom we did not generalize. Mr. Grady admitted that the modus vivendi was in effect asking France to accord us an immediate advantage in return for an advantage which would only come into play at a later date although it would probably be greater in the long run. To be sure, the concessions made in other trade agreements would probably not be given in the four or five products in which France was predominantly interested as it was our policy to make concessions only in those items where the country negotiated with was the principal supplier. Nevertheless there were many items of secondary importance in which France had a real interest and in which her competitive position would be gradually weakened. Perhaps no one treaty would give enough from the French point of view but certainly the aggregate of the treaties we are now negotiating, namely, those with Belgium, Sweden, Switzerland, Spain, et cetera, would contain a very real advantage.

The Ambassador said that he understood all this and could only report it once more to his Government. Meanwhile, he would present us the list previously referred to as soon as it had been received in the early days of January.

Pierrepont Moffat
  1. Henry F. Grady, Chief of Tariff Section.
  2. An Act To Amend the Tariff Act of 1930, approved June 12, 1934; 48 Stat. 943.