662.6331/141

The Chargé in the Netherlands (Johnson) to the Secretary of State

No. 577

Sir: With reference to my despatch No. 564, of March 31, 1931,9 I have the honor to report that I have had further conversations with members of the Foreign Office regarding the proposed Austrian-German customs union. Although the remarks made to me were casual, fragmentary and vague and dealt in part with remote eventualities, I am giving them below as of possible interest to the Department.

The German-Austrian action has acted as a tonic to Europe and has opened up new lines of thought. While German lawyers inserted the clause in the proposed agreement affirming the readiness of Germany and Austria to enter into similar negotiations with every other state so desiring, with the primary object in view of lessening the [Page 581] force of the objections which would surely be raised by France, this clause may have far-reaching results.

It is quite possible that Hungary will wish to join the customs union and will be permitted to do so. Italy’s attitude is ambiguous and it is not inconceivable that she as well may consider membership. If other countries join the proposed economic union it would have less political significance than a purely Austrian-German agreement. My informant’s opinion differs here from the French point of view expressed in the current issue of the “Revue des Deux Mondes”, which envisages the entry of Hungary and Rumania into the customs union and thus the construction of an economic and political mid-European block.

The Dutch Legations in Berlin and Paris have reported that nothing is known as to what may prove the final attitude or action of France in the premises. I have been informed from another confidential source, however, that Briand is of the opinion that it is not unlikely that the whole matter will come before the International Court.

The Netherlands could not for political reasons join in any customs union dominated by Germany. Such action would result in the loss of Dutch independence of action and make of Holland an appendage of the central powers. This country cannot in fact affiliate itself in any way with either the German or French group, for to do so would involve her in difficulties with the other group. She must therefore stand alone. Holland would view the situation differently, however, in the not impossible eventuality that France should in the future become a member of a middle European customs union. In that case political considerations would not deter Holland but the economic side of the question would require lengthy study. If this country joined any such customs union, her whole free trade policy would have to be given up in favor of the higher tariffs of the larger members of the union. While Holland would then possess the great advantage of selling her agricultural products in Germany without the present tariff obstacles, she would have to pay far more for anything bought outside the countries belonging to such a union.

Belgium now realizes that she is bound too closely to France and therefore desires a closer friendship with Holland and for the same reason asked to be allowed to adhere to the Oslo Commercial Convention.9a Several months ago a movement was started by the Belgian Catholic Party in favor of a customs union with Holland. Certain Belgian Socialists are now supporting this idea as a direct answer [Page 582] to the Austro-German plan. There are almost insuperable practical objections, however, to any such union taking place.

I have also had a conversation with Dr. Joost A. van Hamel who, as well as having been High Commissioner at Danzig, has served on the Legal Secretariat of the League of Nations and was one of the advisers of the Council when the 1922 Protocol was drawn up. He states that the wording of the Protocol was intended to prevent Austria from forming a customs union with any country and that this fact was clearly recognized by the Council at the time.

As regards the violation of the most-favored-nation clause by the proposed customs union, it is believed in official circles here that the so-called European case law on this subject proves that no such violation exists.

Respectfully yours,

Hallett Johnson
  1. Not printed.
  2. Convention of Economic Rapprochement between the Economic Union of Belgium and Luxembourg, Denmark, Norway, the Netherlands and Sweden, signed at Oslo, December 22, 1930, League of Nations Treaty Series, vol. cxxvi, p. 341.