611.6231/687
Memorandum by the Assistant Chief of the Division of Trade Agreements (Hawkins) of a Conversation With the First Secretary of the German Embassy (Meyer) and Mr. R. E. Schoenfeld of the Division of Western European Affairs
Mr. Meyer called at the Department to hear the decision reached regarding his proposal of August 23, 1935, that the issuance of notice to the Treasury Department regarding the termination of the most-favored-nation treaty obligations with Germany be postponed.
Mr. Meyer was informed that his request and the reasons therefor had received consideration in the highest quarters, but that it is considered impracticable to postpone sending the notice. It was pointed out to Mr. Meyer that the decision to send this notice involved no new [Page 460] decision; that Germany had taken the initiative in terminating the most-favored-nation treaty obligation; and that last spring consideration was given to the treatment to be accorded German commerce after the obligation had expired. The decision in regard to suspending the application of minimum rates to German products was embodied in an order sent by the President to the Secretary of the Treasury on April l.21 The next step of notifying the Secretary of the Treasury formally of termination of the treaty obligation is merely a routine formality pursuant to that order. In view of the fact that there has been an opportunity during the five months since the order was issued to work out an arrangement, it is felt that a further extension of time would not be warranted.
It was pointed out further to Mr. Meyer that the mere suspension of the application of minimum rates to German products is very moderate action indeed in view of the extent and destructiveness of the German discriminations against American commerce. It would be possible under our law not merely to withhold from German products the benefit of reductions in present rates, but to apply the provisions of Section 338 of the Tariff Act,22 which authorize penalty duties up to fifty percent of the present tariff rates on products of countries which discriminate against American commerce. The President’s order of April 1 and the forthcoming notice to the Treasury Department pursuant thereto does not involve any action of this latter kind. It will involve merely withholding the benefit of reductions which are made in present tariff rates under trade agreements with other countries; not the imposition of penalty rates. Moreover, the suspension of the application of our minimum rates will not immediately be of serious practical importance to Germany since the only rate reductions which will be immediately withheld are those resulting from trade agreements with three countries, and the products involved in one of these agreements are not of interest to Germany. In other words, we will be withholding only on a very small scale most-favored-nation benefits which Germany has withheld from us on a very large scale. It is true that in the course of time, the withholding of our minimum rates will become of increasing importance to Germany since our trade agreements program is a comprehensive one envisaging numerous trade agreements. But there will be ample time for working out an arrangement for reciprocal non-discriminatory treatment before the benefits withheld from Germany even remotely approach in importance the German discriminations against the United States.
Mr. Meyer stated that he did not suggest that we refrain from withholding from Germany the benefit of our minimum rates or contend [Page 461] that our action in doing so would be unjustified. He merely had suggested postponement of the action for a short time. He indicated that our decision in the matter was what he had expected.