711.60f 2/5

The Minister in Czechoslovakia ( Einstein ) to the Secretary of State

No. 505

Sir: With further reference to my telegraphic despatch No. 39 of August 30th, I have the honor to state that the ordinary provisions regarding the most favored nation clause will not be sufficient for the protection of our commerce in Czechoslovakia.

The view of the Czechoslovak authorities is that the most favored nation clause refers only to the amount of import duty to be collected but has no bearing on the actual goods which are subject to import [Page 869] licenses. This view, I have been informed, was accepted by the Genoa Conference. The import license system which was originally adopted with a view to preventing German dumping and to assist in controlling the currency exchange is considered as a temporary expedient of indefinite duration. The present Minister of Commerce when he assumed office two years ago announced himself in favor of abolishing it, but it still goes on and no one can say when it will be terminated.

The result of this system is that the nations which have lately negotiated commercial conventions with Czechoslovakia have been obliged to draw up extensive lists of contingents providing both for specific duties on definite articles and the amount of such articles which can be imported. Thus the French Treaty which has gone into effect on September 1st., stipulates for a contingent of 400 motorcars with a 45% duty, established on an invoice declaration, instead of the arbitrary and grossly exaggerated valuation previously imposed. England, Italy, Germany, Austria, Spain and Switzerland which have concluded treaties with Czechoslovakia on the basis of the most favored nation will benefit by this reduction in the duty although the contingent of motors, the importation of which is authorized, varies in each case. Under the English treaty, for instance, the number allowed is 150. The British Minister told me that as England had practically no tariff, his Government had been invited to prepare a list of contingents.

The same day as I received the draft of the treaty contained in your instruction No. 131 of August 3rd, Dr. Girse, the Acting Minister for Foreign Affairs called my attention to the fact that in view of the new French treaty our commerce would be at a disadvantage unless some arrangement could be entered into, which he suggested should be by an exchange of notes. I therefore called on Mr. Novak, the Minister of Commerce, and showed him the draft of such a note which was forwarded for your approval in my telegraphic despatch No. 39. The specialist at the Ministry of Commerce, Dr. Peroutka, who was called in by the Minister, remarked to me that the only likely source of difficulty lay over the number of motor cars. In the draft of the note which I wrote I had placed this number at 400, the same as in the French Treaty. Dr. Peroutka assented to this but when it was shown to the Minister he remarked that it would only be a hornet’s nest to them without corresponding benefit to us, and that the present quota of our motor cars is 180 and has not been exhausted. Should it become so he was quite disposed to grant more, but to put this into an agreement would only expose him to attack.

The same afternoon I called on Dr. Girse where Dr. Peroutka informed him that the draft of my note met with their assent and as [Page 870] soon as they would receive it from the Legation the most favored nation treatment would be accorded us. The note was sent to the Department for approval the same evening. I now await the receipt of your instructions. Meanwhile I have advised Mr. Consul Winans to suggest to the motor car agents to withhold importations until the most favored nation treatment is assured, which I trust will be in the course of the next few days. The Consul is also preparing an extensive list of our contingent requirements for later consideration.

The actual negotiations of the Treaty cannot proceed until the return of Dr. Beneš, who is now in Geneva and of Dr. Dvořaček, the specialist at the Foreign Office in charge of commercial conventions. He is now in Some where a treaty is being concluded. From there he is expected to go to Brussels to settle the controversy with Belgium so he is unlikely to return before some time.

I have [etc.]

Lewis Einstein