711.652/135: Telegram
The Ambassador in Italy (Phillips) to the Secretary of State
[Received 7:47 p.m.]
509. A meeting of the representatives of Italian Ministries interested in the commercial treaty was held yesterday afternoon at the Foreign Office to discuss the remaining points at issue, the result of which have been communicated to the Embassy as follows:
[Page 485]Article 6. The Italian authorities state that although further efforts have been made to reconcile the Department’s proposal (Department’s No. 189, of December 6, 7 p.m.) with the provisions of Italian law it has not been possible to harmonize the two divergent systems of nationality. They state, however, that they might be prepared to consider separate and subsequent negotiations on this question. In the meanwhile they propose to omit article 6 from the present treaty.
Article 8. The Italian officials accept substantially the Department’s interpretation of article 8. A memorandum to this effect is being forwarded by pouch which reads in part as follows:
“The interpretation of paragraph 3 is accepted and as far as Italy is concerned the ‘representative period’ will be 1934. Paragraph 4, sub-paragraph (a) accepted.
The wording of the first sentence of the interpretation of paragraph 4 (b) is accepted. The official Italian quotation of the dollar is on a par with the unrestricted Italian lira quotation in New York and corresponds thereto, save for negligible variations in lira quotations on various world markets. However, the example which follows said first sentence does not appear to accord with the preceding assumption in view of the fact that since an exchange monopoly exists in Italy private individuals may apply only for the foreign currency in which the debt to be paid has been stipulated, and not a third currency which the interested party may negotiate in a third country to obtain therefrom the exchange actually required for the payment.
It should be further noted that it would be inaccurate in any case to extend this example to compensation currencies inasmuch as in the first place these are definitely restricted for use in payments expressly contemplated in clearing agreements and inasmuch as compensation currencies are as a rule determined with a certain precision by agreement between the two clearing institutes responsible for the operation of the respective accords and may therefore be temporarily more susceptible of a certain appreciable discrepancy in relation to the quotations of unrestricted exchanges”.
Article 19. The Department’s addition concerning “neutrality” is acceptable in principle to the Italian authorities. Inasmuch as Italy has no neutrality law the Italians desire to reserve the right to modify or suspend on a reciprocal basis those provisions which might be affected by the application on the part of the United States of neutrality measures. Accordingly, they propose the following formula to be added at the end of the first paragraph of this article:
“In the event that one of the High Contracting Parties should apply measures relating to neutrality which modify or suspend in whole or in part any of the provisions of this treaty, it is further agreed that the other High Contracting Party upon a reciprocal basis may likewise modify or suspend the obligations assumed in the said provisions”.
With respect to the exception for Austrian preferences the wording of the Department’s suggestion is acceptable to the Italian authorities upon the understanding that the word “now” includes lists A and B contained in my telegram No. 492 of November 29, 6 p.m.47a
In order to prevent any possible subsequent misunderstanding with respect to tariff preferences which have been exempted a memorandum is being prepared by the Foreign Office relating to the wheat revaluation agreement with Hungary which in the opinion of the Italian Government does not constitute a preference. It desires, however, to bring the terms of the agreement to the attention of the American Government before concluding the treaty. It is hoped that this memorandum can be forwarded by telegram tomorrow.
Article 20. The Foreign Office states that the reasons which prevent the extension of the treaty at this time to the Italian colonies relate to the special regime at present existing in the Italian colonies in all matters referring to entry and the exercise of commerce and professions on the part of Italian nationals, as well as to the special regulations and restrictions imposed upon the said nationals in the exercise of maritime trade and other activities. Such regulations involve a special procedure (corporative organization) which is applied to nationals but which cannot be automatically extended to foreign citizens. It is for the foregoing reason that the matter of extension of commercial treaties to the colonies has been the subject of separate agreements with other countries. The Italians state they would be prepared subsequently to enter into negotiation for this separate agreement but I am of the opinion that it would be difficult to envisage any negotiations referring specifically to the colonies which would not raise the question of recognition of Ethiopia.
The Temporary Arrangement. The Italian Government is now prepared to reply accepting the proposal contained in the Department’s telegram No. 183 of November 27 but would greatly appreciate an amendment of form, namely, that the third paragraph of the American note be modified to read as follows: “It is agreed that while on its part the Government of Italy will in fact apply the provisions of article 8 of the proposed new treaty on and after December 15, 1937, the Government of the United States will on its part continue to accord …” If this suggestion is acceptable to the Department the Italian Government would like to proceed to a formal exchange of notes before Wednesday of next week.
With respect to the preamble Count Ciano has been absent from Rome for the last few days in the company of the Yugoslav Prime Minister and it will not be possible to discuss the preamble with him until Monday at the earliest when I have requested an appointment.
[Page 487]In connection with the use of the sovereign’s title in the preamble, may I again recall to the Department the multilateral treaty signed at Montreux for the abolition of capitulations in Egypt, in which document appears the use of the title “King of Italy and Emperor of Ethiopia” which as I understand was not construed at that time to involve recognition by any of the signatories of the Italian conquest of Ethiopia. This treaty has now been promulgated in Italy.
Throughout the recent discussions and in fact during the entire period of negotiations there has been a manifest desire on the part of the Italian authorities to do whatever might be possible to meet the Department’s views with respect to the various articles of the treaty. This is particularly the case with regard to article 8. Where it has not been possible to accept the American suggestions this has in a large measure been due to the fact that these suggestions would be contrary to existing provisions of Italian law which have formed the basis of treaties with other countries on [in] that they might on the most-favored-nation principle extend to countries other than the United States privileges which Italy is not prepared as yet to accord. This is particularly the case with respect to article 6 where it was explained that if the United States alone were involved it might be easier to reach a satisfactory solution.
I should appreciate instructions on as many points as possible prior to next Monday.
- Not printed.↩