What I personally regret so much is that we have been constantly
endeavoring since last spring to bring about discussions with the
United States regarding our reciprocal trade relations, and that
this
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desire has always
encountered obstacles on the part of your government. I can very
well realize that it is not a very simple matter for your government
either, to enter immediately into direct negotiations. On the other
hand, a proposal which I would like to make to you seems to me
adapted to opening the way at least, for direct negotiations. Would
it not be feasible for two or three prominent American business men
or competent officials to come to Germany in the near future, in
order to inform themselves as to conditions in Germany, without
being authorized to carry on negotiations of any kind. An
information tour by a small study committee of this kind would
surely afford bases for direct negotiations in the United States and
with your Government for the purpose of reviving American-German
trade. I have the impression that we are at present living too much
in a theoretical world and that an excessively passive attitude
prevails which, in the last analysis can lead to no good. We are in
need of some kind of initiative. This initiative must of course,
however, be directed toward the study of the question as to what
German goods your country can absorb, without prejudice to its own
development. I believe that this task can be accomplished only by a
visit to Germany for the purpose of studying conditions, and am
firmly convinced that such an initiative for the purpose of study
would yield positive results, which would be of value to your
government for further consideration, and might, at a later stage,
lead to taking up reciprocal negotiations. Of course the gentlemen
who come here must be persons enjoying the confidence of the
American Government.
Wishing you and your family a very merry Christmas and a happy New
Year, and with best wishes for your safe passage, I am most
sincerely
[Enclosure—Translation]
Memorandum by the German Minister for
Economic Affairs (Schacht)
II 57757
The general conviction at present is that one of the main causes
of the unusual gravity of the present crisis is the debt policy
of the postwar period. In this still unsolved problem the United
States plays an especially important role. The war changed
America from a debtor to a creditor country, in which the bulk
of the gold of the world was soon assembled. The American trade
policy has so far not adjusted itself to this revolutionary
change. During the years of “prosperity” the people in America
universally believed themselves able to receive gigantic sums,
as the world’s greatest creditor, and at the same time not only
close their own market to the world,
[Page 463]
but to exclude competition even of debtor
countries from the world market. Normally, however, a creditor
country must accept a surplus of imports from abroad, which
enables its debtors to make interest payments. This internal
paradox in the American economic policy was concealed on the
surface up to the outbreak of the crises by the fact that the
current surpluses of the payment balances were loaned again
directly and indirectly to the debtor countries, which in this
way sank ever deeper into debt.
Such a development could not but lead to a catastrophe. The banks
granting credits sought in 1931 to recall the short time loans
made, which they had previously fairly forced upon their
debtors, on a large scale. The debtor countries, Germany, in
particular, at first tried to meet their obligations. Germany
succeeded only temporarily in forcing exportation and failed,
due to the lack of willingness or capacity of many countries to
absorb an increased importation. Therefore, one country after
another finally found itself obliged, after exhausting its
reserves of exchange and gold, to discontinue transfers.
II.
Let us turn now to the commercial-political relations between the
United States and Germany and to German-American trade. The
commercial-political relations between the two countries are
governed by the Commercial Treaty which was concluded on
December 8, 1923, and went into effect on October 14, 1925. When
Germany concluded this treaty, she was still laboring under the
burden of the obligation forced on her in the Versailles Treaty
to grant most favored nation treatment unilaterally to her
former war time enemies.55 In this situation, the
conclusion of the German-American commercial treaty was of great
importance to Germany, and the German people have acknowledged
with gratitude that in the new commercial treaty the United
States Government granted unconditional, reciprocal, most
favored nation treatment, and again allowed German export trade
fair play in the American market. Since the expiration of the
unilateral most-favored-nation clause of the Versailles Treaty
on January 10, 1925, Germany has concluded tariff treaties of
wide scope with a great number of countries, and in return for
the granting of appropriate concessions in the markets of third
countries, has greatly reduced her customs duties for the most
important goods. The United States has enjoyed, without making
any concession in return, these advantages, which other
countries found it possible to grant to Germany. In contrast to
this, the United States has still further greatly
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increased in the
tariff schedule in effect since June 18, 1930,56 its already very
high tariff level, and has, in addition, on the basis of Article
336 of the American tariff law, for the purpose of balancing
costs of production, made 20 increases in customs duties, of
which alone nine are imposed on goods that are imported mainly
from Germany. In this situation Germany is naturally endeavoring
to adjust its trade relations with the United States to the
changed conditions. After all efforts by Germany to discuss this
question with the United States Government had failed, the
American Government was advised on October 13, 1934, that
Germany desired a change in Article VII of the treaty, which
laid down the principle of the unconditional most-favored-nation
treatment. Naturally Germany attaches the greatest value to the
further development of German-American commercial and economic
relations in the future also on a treaty basis. Germany has
therefore added to the statement of her desire for a change in
Article VII the declaration that she is always ready to
negotiate in regard to the future form of her
commercial-political relations with the United States.
Apart from these considerations of a general commercial-political
nature a glance at the development of German-American foreign
trade (see enclosure 157) clearly shows how necessary a new deal in
German-American trade relations is.
The fact that the United States stands at the head of the list of
countries supplying Germany, while it occupies only the eighth
place in the list of customers of Germany, and the other fact
that the German excess of imports in trade with the United
States is far greater than Germany has with any other country,
sufficiently shows what an important partnership is concerned in
this case. As in a mirror, the whole distress of present world
trade is shown in the trade of the two countries:
In the year 1928, exchange of goods between Germany and America
(imports and exports taken together) amounted to 2,800,000,000
reichsmarks in round numbers;* in 1933, it had shrunk to
approximately 725,000,000 reichsmarks.† At the same
time, the relation between the groups of goods which figure in
exports and imports between the two countries was remarkably
constant. In all those years, the proportion of raw materials
was about 71 percent of German imports, on the average, and the
proportion of finished goods was about 68 percent of German
exports, a proof of the regularity of the needs and
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the good covering of
the needs, worked out from long practice, between the two
countries. In the first half of 1934, Germany drew over 50
percent of her total imports of fruit, lard (Schmalz) and cotton from the United States. The
proportions are also considerable in the case of copper (43
percent) and mineral oils (23 percent). In all, Germany took
from the United States, in 1933, goods to the value of
483,000,000 reichsmarks, while her exports to the United States
amounted to only 246,000,000 reichsmarks. This resulted in an
excess of 237,000,000 reichsmarks in imports (as against
1,230,000,000 reichsmarks in 1928 and 622,000,000 reichsmarks
even in 1930). The lack of credits, the shrinkage in the volume
of trade and the drop in the prices of raw materials are shown
in these figures.
The retrograde tendency of the excess of imports came to a stop
in 1934. In the first 9 months of that year it already amounted
to 200,000,000 reichsmarks and it is to be expected that by the
end of this year, despite the restrictions imposed in
consequence of Germany’s position with regard to foreign
exchange, it will at least reach the level of the year 1933.
This fact, extremely undesirable for Germany, is to be attributed
to the circumstance that in the year 1934 German exports to the
United States fell off much more than did German orders of goods
from that country (see Annexes 2 and 358). In consequence of
the great need for raw materials due to the German Government’s
employment program, German imports of American goods amounted to
36,000,000 reichsmarks a month on an average during the first
nine months of 1934, as compared to 40,000,000 reichsmarks a
month in 1933. The falling off in German imports from the United
States thus amounts to 10%. On the other hand, German exports to
the United States experienced a drop of 30%, on the average,
during the first nine months of 1934, for they amounted to only
13,000,000 reichsmarks a month, as against 20,500,000
reichsmarks in 1933. If the development of German-American trade
shows a somewhat different picture according to American
statistics, that is to be attributed to the fact that the drop
in imports from Germany is veiled by the progressive devaluation
of the dollar. Only in that way can the fact be explained that
the importation of German goods, measured in dollars, even shows
an increase of 10%. But if this figure is compared with the
development of the dollar value of the total imports into the
United States in 1934, it is plainly seen that, relatively,
Germany has lagged behind in supplying the United States, for
the increase of 10% in the dollar value of German imports into
the United States is counterbalanced by an increase of 50% in
total imports.
[Page 466]
III.
The basic idea of the regulation of importation that has been in
effect in Germany since September 24, 1934, is that Germany will
purchase only as much merchandise abroad as she can actually pay
for. The character of her balance of trade is of the greatest
importance to this purchasing power of Germany abroad. The more
German exports diminish, under the influence of the depreciation
of the currency and the high tariffs of other countries, the
less will Germany be in a position to enter the world market as
a purchaser and the more will she be forced to employ her mental
faculties in creating new raw materials to take the place of
what Nature has denied her. The results that have already been
attained in this way are considerable. Other countries will
therefore have to consider whether they wish to force Germany
further along the course of a compulsory economic
self-sufficiency or whether they are willing by lowering their
tariff walls and relaxing other provisions in restriction of
importation from Germany, to enable Germany again to purchase
and to pay for with goods what the world has in abundance and
Germany needs.
This consideration applies in particular to a country such as the
United States, which, as before indicated, stands first in
Germany’s imports, and must therefore be hit the hardest by the
elimination of Germany as a purchaser of goods in the world
market.
The fact is therefore to be welcomed that President Roosevelt,
uninfluenced by the demand of parties interested in high
protective tariffs and industrial circles accustomed to them,
has attempted to open the way, by the Tariff Reform Act of June,
1934,59 for
a decisive turn. This Act opens the way, in the United States,
for a deviation from the high tariff policy of the postwar
period, which was so burdensome to Germany in particular. It is
evident from this Act that the United States has recognized what
danger economic independence of the world means, even for
it.
A survey of the goods that play the main parts in trade between
Germany and the United States is given in Annexes 4 and 5.60 According
to it, chemical and pharmaceutical products stand in first place
in German exports to the United States; then come textiles, iron
wares, machines, paper and paper goods, leather and leather
goods and children’s toys. At the same time, it can be seen from
this tabulation to how great an extent German exports to the
United States have fallen off in the last few years; special
attention is to be called in this respect to paper and paper
goods, glassware, leather goods, textiles and toys. In view of
the extraordinarily high duties to which these goods are subject
in the United States (see Annex 661), this is
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perfectly natural, in which connection the
fact is also to be taken into consideration that the devaluation
of the dollar forms another almost insuperable obstacle to the
ability of German goods to compete in the American market. In
contrast to the extraordinarily high tariff burden to which the
goods of interest to Germany in connection with exportation to
the United States are subject, the raw materials in the
importation of which into Germany the United States is chiefly
concerned (cotton, copper, hides and skins) are free of duty in
Germany and the other goods which Germany also takes from the
United States are, as is likewise shown by Table 6, subject to
light duties.
In his book On Our Way, President
Roosevelt writes:
“The disposition of other countries to grant an improved
place to American products should be carefully sounded
and considered; upon the attitude of each must somewhat
depend our future course of action. With countries which
are unwilling to abandon purely restrictive national
programs, or to make concessions towards the
re-establishment of international trade, no headway will
be possible.”62
If there is a country, in whose market the United States enjoys a
specially favored position, it is Germany, in whose imports the
United States occupies first place. Germany is ready even
further to import from America such goods as it needs, and
thereby to assure to the United States the sale of an important
part of its surplus production. This is on condition that it
will also be put in a position to pay for such deliveries. But
this is only possible if, corresponding to the importance of
Germany as a buyer of American goods, use is made of the
authorization granted to President Roosevelt, and the excessive
customs duties that stand in the way of the movement of German
goods to the United States, are removed. In this connection
there are first the customs duties on goods of especial interest
to Germany of more than 50 per cent, especially those duties
that, by virtue of paragraph 336 of the Tariff Act of 1930 were
raised, so far as they are primarily directed against
Germany‡
The great goal of future relations must therefore be, to bring
about, through tariff agreements, a perceptible reduction of the
duties on imports of German goods into the United States and by
this means to complete the most favored nation relations once
existing between the two countries. Germany itself is prepared,
on this occasion to meet half way the wishes that America may
express in connection with the reduction of German duties,
insofar as this is at all compatible with the security of her
own vital interests.
