Foreign Relations of the United States Diplomatic Papers, 1935, The British Commonwealth; Europe, Volume II

611.5531/629

The Ambassador in Belgium (Morris) to the Secretary of State

No. 609

Brussels, October 22, 1935.
[Received November 6.]

Sir: I have the honor to refer to the Embassy’s despatches Nos. 508, of July 25, 1935, 551, of September 5, 1935, and 552, of September 7, 1935,³³ concerning Belgian regulations with respect to the importation of automobile parts into Belgium. In continuation of those despatches, I now have the honor to report that the Embassy has made every effort to obtain for the assemblers of American automobiles in Belgium the treatment to which they are entitled under the United States-Belgian Trade Agreement.

For Background:

(1) It will be recalled that during the negotiations for the United States-Belgian Trade Agreement, which was signed at Washington on February 27, 1935, the Belgian Ministry of Foreign Affairs consulted the Embassy concerning the question of a “labor safeguard” clause and that in its telegram No. 8, of February 9, 1 p.m., the Embassy warned the Department regarding the danger of accepting the Belgian proposal. Briefly, the Belgian proposal was that in all American cars assembled in Belgium an average of 40% of Belgian materials and labor should be used.

(2) In its telegram No. 19, of April 22, 2 p.m., 1935, the Department informed the Embassy that the question of a “labor safeguard” clause was discussed during the negotiations in Washington, but that owing to numerous difficulties which arose the problem was not fully explored. In any event, no commitments on this point were made in the United States-Belgian Trade Agreement.

(3) Although no commitments concerning the “labor safeguard” principle were made in the United States-Belgian Trade Agreement, the Belgian Ministry of Economic Affairs had apparently made mental reservations on this point and has fought tenaciously to secure its adoption as a Belgian government policy. The Moniteur Belge of June 16, 1935, published a Ministerial Decree, dated June 13, 1935, emanating from the Ministry of Economic Affairs, establishing a system of import licenses for a number of automobile parts imported into Belgium. None of the parts on which concessions were granted in the United States-Belgian Trade Agreement were contained in this list, but it soon became apparent that the idea behind the system of import licenses was to force assemblers of foreign automobiles in Belgium to use a minimum quantity of Belgian labor and materials. The amount of Belgian labor and materials was to differ and was to be regulated by an agreement between the Belgian Ministry of Economic Affairs and the assemblers of foreign automobiles in Belgium.

(4) In the case of General Motors and Ford, an arrangement was voluntarily concluded by the two companies with the Belgian Ministry of Economic Affairs wherein the two companies agreed to use 40% Belgian materials and labor. General Motors and Ford were able to accept such an arrangement because they export a large part of the cars which they assemble in Belgium and the Ministry of Economic Affairs allowed them to count the Belgian materials and labor used in the assembling of exported cars to raise the average of Belgian materials and labor used in cars sold in Belgium. Hence, General Motors and Ford have been from the beginning and remain moderately well satisfied with the “labor safeguard” clause as applied by the Belgian Ministry of Economic Affairs to them.

(5) As regards the assemblers of other American cars in Belgium, including Studebaker, Packard, Hudson, Essex, International, Dodge, Nash, Graham-Paige, Pierce-Arrow, Willys-Knight, Reo Truck, and International Harvesters, it soon became apparent that the system of import licenses was contrary to their interests. These companies were willing to incorporate an average of 4,000 francs of Belgian materials and labor into each car assembled by them in Belgium, but the Belgian Ministry of Economic Affairs insisted on 4,000 francs of Belgian materials alone. The companies protested strenuously to the Commercial Attaché.

(6) On July 9, 1935, a member of my staff (Mr. Sussdorff) called on Mr. van Langenhove, Secretary-General of the Belgian Foreign Office, and pointed out that the Ministerial Decree of June 13, 1935, seemed clearly to be contrary to the spirit of the United States-Belgian Trade Agreement. Mr. Sussdorff asked Mr. van Langenhove to use his good offices to secure the rescinding of the Ministerial Decree. Mr. van Langenhove promised to make representations immediately to the Ministry of Economic Affairs. According to the Foreign Office, Mr. van Langenhove made the representations to the Ministry of Economic Affairs which gave an encouraging reply and promised to study the question with a view to finding a solution that would satisfy the Embassy. Shortly afterwards, Mr. van Langenhove went on leave, as did also Mr. Suetens, Chief of the Division of Commercial Agreements of the Foreign Office, and Mr. Camu, the competent official at the Ministry of Economic Affairs. The Embassy took the case up again with some of the minor officials at the Ministry of Foreign Affairs, but the answers received were non-committal, the persons in question lacking authority. End of Background.

Mr. Suetens, Chief of the Division of Commercial Agreements of the Belgian Foreign Office, returned from his vacation on September 9. Mr. Sussdorff called on Mr. Suetens on September 10 and pointed out that, in the opinion of the Embassy, the establishing of a license system and the insistence of the Ministry of Economic Affairs on 4,000 francs worth of Belgian materials was a violation of the spirit of the United States-Belgian Trade Agreement. Mr. Sussdorff said that in the Trade Agreement no mention was made of restricting the trade of the two countries in any way; that, on the contrary, the Agreement was drawn up with the idea of furthering trade and of mutually increasing exports. He declared that the United States was loyally carrying out its commitments under the Trade Agreement. Mr. Sussdorff pointed out to Mr. Suetens that the licensing system established by the Belgian Government is causing long delays and uncertainty which is highly damaging to the interests of the American assemblers. He explained that the American assemblers (other than General Motors and Ford) are willing to incorporate into their assembled cars Belgian tires, batteries, glass and paint, but that they could not use spare parts which did not satisfy their requirements in regard to quality or price. Mr. Sussdorff also stated that the American companies give a guarantee of one year for cars sold in Belgium and that they could not employ parts that did not come up to their requirements.

Mr. Suetens saw the point at once and promised to use his good offices in an attempt to remedy the situation. A memorandum of this conversation is enclosed.³⁴

Almost immediately after this conversation, Mr. Suetens was obliged to leave Brussels on a succession of trips to other European capitals on commercial negotiations. In between these trips, the Embassy telephoned him several times concerning the automobile case and was informed that the matter was being pushed, but that technical difficulties presented themselves at the Ministry of Economic Affairs.

With a view to getting at the causes of the obstruction at the Ministry of Economic Affairs, Mr. Sussdorff called on Mr. Colson, Secretary-General of the Ministry, on October 4, 1935. Messrs. Gérard and Camu were also present on this occasion. Mr. Sussdorff explained to Mr. Colson, as he had already done to Messrs. van Langenhove and Suetens, that the Embassy considered that the institution of a system of import licenses and the insistence of the “Belgian contents” requirement were a violation of the spirit of the United States-Belgian Trade Agreement. Mr. Sussdorff declared that the Embassy insisted on the integral application of the Trade Agreement and regarded it as essential that the licensing system established by the Belgian Government should be abolished.

Messrs. Colson and Camu explained that the system of licenses for the importation of certain automobile parts did not include any parts on which tariff concessions were granted in the United States-Belgian Trade Agreement and that it was established in order to protect the Belgian market against the importation of automobile spare parts from France.

Mr. Camu declared that strong pressure is being brought to bear on the Ministry of Economic Affairs by Belgian manufacturers with a view to making the Ministry insist on the inclusion of Belgian materials in foreign automobiles, including American automobiles, assembled in Belgium. The pressure, according to Mr. Camu, comes from the firms which formerly supplied the Belgian firms, Minerva and F. N. (Fabrique Nationale d’Armes). Mr. Camu stated that he was convinced that the American assemblers could easily purchase an average of 4,000 francs worth of Belgian materials for the cars assembled by them in Belgium. Mr. Colson said he felt that Belgian manufacturers could supply an increasingly large number of parts if they were given the specifications.

Mr. Sussdorff replied that this procedure was impractical and that it presented insurmountable technical difficulties. He repeated that the Embassy insisted on compliance with the terms of the United States-Belgian Trade Agreement; that the concessions contained in the Trade Agreement would have little value if a licensing system were maintained and if the American assemblers were obliged to purchase in Belgium materials which could not profitably be included in their cars.

In conclusion, Mr. Colson said that he wished to call a meeting of the American assemblers (except Ford and General Motors, with whom the Belgian Government already had a working agreement) in a few days and that he would be glad if Mr. Sussdorff would also attend.

A memorandum of this conversation is enclosed.

On October 8, 1935, Mr. Sussdorff called on Mr. van Langenhove, Secretary-General of the Belgian Foreign Office and went over the entire automobile case with him again. Mr. Sussdorff explained to Mr. van Langenhove that the Embassy was having great difficulty in reaching a solution of the case through negotiations with the Ministry of Economic Affairs and urgently invoked the good offices of the Foreign Office with a view to securing a satisfactory settlement. Mr. van Langenhove grasped the significance of the protest and promised to make the necessary representations immediately to the Ministry of Economic Affairs. A memorandum of this conversation is enclosed.

On October 11, a meeting was held at the Belgian Ministry of Economic Affairs at which the following persons were present: Mr. Colson, Secretary-General of the Ministry, Messrs. Gérard and Camu, of the Ministry, Mr. Sussdorff, Mr. Hughes and the representatives of Packard, Essex, Hudson, Nash, International, Studebaker, Pierce-Arrow, Willys-Knight, Graham-Paige, Federal Truck, Dodge, Reo Truck, and International Harvester.

At the beginning of the meeting, a memorandum of which is enclosed, Mr. Sussdorff stated that he and Mr. Hughes were present by invitation as observers. Mr. Sussdorff explained to Mr. Colson again that, in the opinion of the Embassy, the license system was a violation of the spirit of the United States-Belgian Trade Agreement and that the Embassy’s general position is an insistence that there shall be no derogation from the concessions accorded in the Trade Agreement.

In the discussion which followed between Messrs. Colson and Camu and the American assemblers, Mr. Colson said that he was in a difficult position: on the one hand, he was being pushed by Belgian manufacturers who felt that they were able to furnish a large part of the materials used in the assembly of foreign cars in Belgium; on the other hand, he was dealing with the American companies who had an entirely different point of view. Mr. Colson said that he felt that a compromise could be reached. He thought that the American companies could use an average of 4,000 francs worth of Belgian materials on the cars assembled by them in Belgium.

The representatives of the independent companies replied that the 4,000 francs must include Belgian labor as well as Belgian materials; that they could only purchase tires, glass, batteries and paint in Belgium; that Belgian firms were not able to supply other materials of the quality required or at the same price as could be obtained in the United States.

Mr. Colson then said that he thought that Belgian firms, if given the specifications, could learn to produce exactly the materials required by the American assemblers. This point was categorically rejected by the American assemblers, who pointed out that the constant changes in models of American cars would make it difficult, if not impossible, to furnish the specifications sufficiently far in advance to enable the Belgian manufacturers to supply them. The American representatives pointed out, furthermore, that the Belgian manufacturers who would be producing on a small scale could not profitably compete with large-scale producers in the United States.

The American representatives stated emphatically that they objected to the requirement of licenses for the importation of certain parts, because of the uncertainty which this system caused.

Discussion then hinged around the maximum amount of Belgian materials and labor which the smaller American assemblers could use. Mr. Camu proposed 3,500 francs of materials alone, which the assemblers insisted was too high and impossible. A further meeting was arranged for a later date.

In conclusion, Mr. Sussdorff repeated that the Embassy “insisted on specific performance of the United States-Belgian Trade Agreement.”

On October 14, Mr. Camu, of the Ministry of Economic Affairs, called at the Embassy at Mr. Sussdorff’s request for a further discussion of the automobile case. In a conversation of nearly two hours, Mr. Sussdorff went over the whole case with Mr. Camu and urged the complete abolition of the license system. Mr. Sussdorff pointed out how unfortunate it would be if the good work done by the American and Belgian delegations at Washington were undone on account of the desire to afford special measures of protection to a few Belgian manufacturers of automobile parts. He referred particularly to the marked increase of Belgian exports to the United States in the last few months and expressed the earnest hope that Mr. Camu, as one of the negotiators of the United States-Belgian Trade Agreement, would use his full influence to prevent its being torpedoed by a few selfish interests.

Mr. Camu stated that Mr. van Langenhove, Secretary-General of the Foreign Office, had communicated twice with the Ministry of Economic Affairs and had urged that a satisfactory solution of the automobile case be reached. Mr. Camu said in conclusion that he felt absolutely certain that he would succeed in solving the case to the satisfaction of the American assemblers within two or three days. A memorandum of this conversation is enclosed.

On October 15, Mr. Sussdorff called on Mr. Leurquin, Assistant Chief at the Division of Commercial Agreements at the Foreign Office to discuss another case. In the course of the conversation, Mr. Leurquin brought up the automobile case and said that he had had a long conference with Messrs. Colson and Camu, of the Ministry of Economic Affairs, the afternoon before, and that it had been decided definitely that an agreement could be reached with the American assemblers (with the exception of General Motors and Ford, with whom an agreement had already been reached) on the basis of the inclusion of 4,000 francs of Belgian labor and materials purchased in Belgium for each car assembled here. Mr. Leurquin added that Belgium will follow a very lenient policy from now on in granting licenses to assemblers of American automobiles.

. . . . . . . . . . . . . .

On October 16, a meeting of the American assemblers and the competent officials of the Ministry of Economic Affairs was held at the Ministry. No member of the Embassy was present on this occasion. An agreement was reached which it was decided would be embodied in a new Ministerial Circular to be addressed to the American assemblers (other than General Motors and Ford) by the Ministry of Economic Affairs.

On October 17, Mr. Camu called at the Embassy and handed Mr. Sussdorff a copy of the proposed Ministerial Circular, which, he said, probably will not be published, together with a covering letter, dated October 17, 1935, addressed to Mr. Sussdorff by Mr. Goris, Chef de Cabinet of the Minister of Economic Affairs. A copy and translation of the letter and a copy and translation of the Ministerial Circular are enclosed.

Mr. Camu referred to the terms of the Ministerial Circular and summarized them as follows:

(1) The Minister of Economic Affairs is asking the American assemblers to use an average of 4,000 francs worth of Belgian labor and materials purchased in Belgium in each passenger car assembled here.

(2) There are no such requirements of labor and materials for trucks or chassis, but the labor and materials used for trucks and chassis may be counted in the average of labor and materials used in the assembling of passenger cars.

(3) There will be a “control” every six months to determine whether the requisite amount of labor and materials have been used in the case of passenger cars, but this “control” will be applied in a very easy and liberal way as far as American assemblers are concerned and every effort will be made to divest it of irritating technical requirements or “red tape”. The first “control” will take place on December 15, 1935.

Mr. Camu again expressed the hope that the agreement between the Belgian Ministry of Economic Affairs and the American assemblers in Belgium (other than General Motors and Ford) embodied in the Ministerial Circular would be satisfactory to the Embassy and to the United States Government. He said that the American assemblers were perfectly satisfied with the terms of the agreement and that for the time being the Belgian Government could not abolish the license system because of the fact that it is necessary to control importations from France.

Mr. Sussdorff replied that the Embassy considered the agreement between the Ministry of Economic Affairs and the American assemblers, like the Belgian arrangement with General Motors and Ford, as a private “gentlemen’s agreement”; that the American assemblers had also informed him that they were satisfied with the agreement provided that in its application it worked smoothly; but that the Embassy had not altered its position that the system of import licenses on some automobile parts was contrary to the spirit of the United States-Belgian Trade Agreement and made full reservations on this point.

Mr. Camu replied that he understood the Embassy’s point of view perfectly and that he took due note of the reservations made.

It was decided that in answer to Mr. Goris’ communication of October 17, 1935, Mr. Sussdorff should send a personal reply stating in substance that the whole matter had been referred to the United States Government. A copy of this letter, which was approved by me, is enclosed for the Department’s information.

In the course of a conversation with Mr. Suetens at the Ministry of Economic Affairs on October 24, Mr. Sussdorff outlined his last conversation with Mr. Camu and laid special emphasis on the fact that he had informed Mr. Camu that the Embassy had not altered its position that the licensing system is a violation of the spirit of the United States-Belgian Trade Agreement. Mr. Suetens said that he was very much interested to take note of this point, because the Ministry of Economic Affairs had informed him that Mr. Sussdorff, who had conducted the negotiations for the Embassy, had accepted the agreement between the Ministry of Economic Affairs and the American assemblers. Mr. Suetens suggested that Mr. Sussdorff send him a brief note regarding the reservations made by the Embassy. A copy of an informal letter from Mr. Sussdorff to Mr. Suetens is enclosed.

In transmitting the above information to the Department for its careful consideration, the Embassy would like to invite the Department’s attention to the fact that the Belgian Ministry of Foreign Affairs has shown throughout the case a desire to carry out the spirit of the United States-Belgian Trade Agreement.

. . . . . . . . . . . . . .

The developments in this case will of course be carefully watched and the Embassy will keep in close touch with the American firms in order to ascertain how the ministerial circular is enforced, and whether or not the promises in regard to the facilitation of the importation of American automobile parts are kept.

It is believed that it is impossible to persuade the Belgian Government or more particularly the Ministry of Economic Affairs, to recede further at this time from the position taken by it. In view of all the facts I am of the opinion that the system agreed to should be given a trial, especially as the American assemblers in question have expressed their willingness to comply with the regulations if reasonably applied and to test the practicability of the arrangement.

It is urgently requested, however, that the Department instruct me with regard to its wishes in the matter. I should appreciate information especially with regard to whether or not there are any points in addition to those stressed by the Embassy which the Department wishes to have brought to the attention of the Belgian Government.

Respectfully yours,

Dave H. Morris

33. None printed.
34. The enclosures mentioned in this despatch are not printed.