662.6331/171: Telegram
The Ambassador in France (Edge) to the Secretary of State
[Received 10:25 a.m.]
255. My 242, May 8, 3 p.m.13 An official of the French Foreign Office yesterday afternoon gave to a member of the Embassy staff a confidential memorandum which is represented to contain the French plans for opposing the Austro-German Customs Union and which also gives interesting information regarding the French attitude to the most-favored-nation clause. The French text of this memorandum was forwarded to the Department in despatch No. 1515 of May 12.13 A copy of it has also been given to Mr. Hugh Wilson who is now in Paris so that he may have it before the Geneva meeting on Friday. It follows the general lines foreshadowed in my telegram under reference and may be summarized as follows:
The Austro-German agreement is of a political character, a preface to the Anschluss, and therefore contrary to the treaties. It is contrary to Austria’s undertaking in the 1922 protocol and tends to weaken the security for the 1922 loan to Austria guaranteed by France with other countries. The French Government therefore expects the plan will be condemned by the Council of the League of Nations and abandoned.
[Page 584]France will present at Geneva a constructive plan which it believes will solve the most urgent European problems and give Germany and Austria the relief they claim to obtain from the Customs Union.
- 1.
- Danube Cereal Surplus. France will support a system of preferences for the exporting states, being convinced now that the sacrifice which this measure would represent for overseas countries and the infringement of the most-favored-nation clause involved would be insignificant. If these exporting states should offer some benefits in return these benefits would not have a preferential character but must be extended unconditionally to all states receiving most-favored-nation treatment. Only thus can the scheme gain the support of overseas countries or at least avoid formal opposition from them. Precautions must be taken to prevent these measures increasing the production of Eastern Europe and to insure that the whole benefit provided for goes to the producers. It is proposed that the exporting countries should organize a body authorized to make contracts in their name and that the importing countries should agree among themselves as to the preferential system to be offered.
- 2.
- Industrial Cartels. General formulas applied to commerce have failed (conventions against prohibitions of imports, customs truce, Geneva commercial convention). On the other hand, plans for organizing markets and restricting competition have succeeded when they dealt with clearly determined categories of products (rails, steel, rolling stock, electric appliances, chemical products and sugar). The French Government will advocate similar plans for other products especially certain textiles, glassware, coal, wheat, corn and wood.
- It will be proposed that when the European market for a commodity is organized each country shall agree to receive at a reduced rate of duty a specified quantity of the commodity from each producing country. The amounts to be received from each country at this reduced rate must be equal. This last provision is probably to comply with the most-favored-nation clause. France has already commenced negotiations on this basis with Germany, Belgium, Czechoslovakia and Italy as regards automobiles.
- 3.
- Need for Credits in Eastern and Central Europe. This is to be (merely an?) organization of land credit already proposed at Geneva to be completed with an organization for short-term land credit under the auspices of the League of Nations. France is also prepared to introduce new European securities on the Paris Bourse and is discussing with the British Treasury the financing of production.
- 4.
- Special Needs of Austria. The principal clients of Austria would be invited to conclude agreements offering a preferential tariff for specified quantities of certain Austrian products, any advantage [Page 585] offered in return by Austria to benefit equally all states entitled to most-favored-nation treatment.
The French Government accepts the two infringements of the most-favored-nation clause in paragraphs 1 and 4 in each case to meet a crisis of an essentially temporary character. It does not believe that the special advantages accruing to Central European or Austrian products should constitute a permanent system.
The memorandum concludes:
“These considerations are of capital importance in the eyes of the French Government which is anxious to indicate in what spirit and under what conditions it regards the exceptions to the most-favored-nation clause which are foreshadowed. The French Government is faithfully attached to the principles of this clause and considers its maintenance and its application as a guarantee of peace, its abandonment as a danger which might bring Europe not to a more perfect form of organization but to chaos.”