667N.116/68
The Ambassador in the United Kingdom
(
Kennedy
) to the Secretary of State
No. 5043
London
, April 9,
1940.
[Received April 23.]
Sir: Referring to my telegram No. 883 of
April 9, 194032 reporting the receipt of a note outlining the
British Government’s position with regard to the effect on American
commercial rights of the exchange control and import licence system
in Palestine, in other British mandated territories and in the
British territories within the Congo Basin, I have the honor to
enclose a copy of the note in question which is dated April 8, 1940
(File No. W 5104/280/49).
[Page 859]
There is also enclosed, in order to complete the Department’s files,
a copy of note No. 1716 of December 21, 1939, in which this Mission
brought to the attention of the British Foreign Office the
considerations embodied in the Department’s telegram No. 1638 of
December 19, 7:00 p.m.,33 regarding
the effect on American commercial rights of the exchange control and
import license system established in Palestine.
Previous correspondence referring to questions touched on in the
enclosed note includes the Department’s instruction No. 1134 of
December 26, 193934
(File No. 648T.006/), its telegram No. 38 of January 6, 4:00
p.m.,35 and this Mission’s despatch No. 4392 of
January 17, 1940.35
Respectfully yours,
For the Ambassador:
Herschel V. Johnson
[Enclosure 1]
The British Secretary of State for Foreign
Affairs (
Halifax
) to the
American Ambassador (
Kennedy
)
No. W 5104/280/49
[
London
,] 8 April, 1940.
Your Excellency: In Mr. Herschel
Johnson’s note No. 1716 of the 21st December, 1939,36 he was good enough to draw my attention to the
establishment by the Palestine Government of an import license
system and to state that the United States Government were
unable to recognize the necessity or justification for the
administration of the exchange control and import license system
in a manner to give preference to imports from British Empire
sources, with a resultant discrimination against imports from
the United States of America.
- 2.
- I would ask Your Excellency to assure the United States
Government, first, that His Majesty’s Government in the
United Kingdom are determined to respect the rights of the
United States of America in Palestine to the utmost of their
ability and anxious to justify, or alternatively to rectify,
any situation of fact or law which might seem inconsistent
with those rights; and secondly, that whatever other motives
may have led to the adoption of the measures to which Mr.
Herschel Johnson’s note refers, a desire to increase the
export trade to Palestine of the United Kingdom or any other
part of the British Empire at the expense of other countries
was not among them.
- 3.
- I am confident that the United States Government will
share the view of His Majesty’s Government in the United
Kingdom that the paramount obligation imposed upon the
Mandatory Power by the Mandate for Palestine is to protect
the interests of Palestine and its inhabitants, and that the
rights conferred by the Mandate or by international
instruments concluded within the framework of the Mandate
upon third parties (whether these parties be the Mandatory
Power itself, States Members of the League of Nations,
countries like the United States of America with rights
analogous to those of States Members or non-Members) must in
case of conflict defer to this obligation.
- 4.
- The interests of Palestine and its inhabitants require
first and foremost that Palestine territory should be
protected from foreign aggression and it might well be
argued that so long as the possibility of aggression
continued this would in itself justify the Mandatory Power
in taking any step, even if that step were at variance with
the letter of its obligations under the Mandate to States
Members or States with analogous rights, which might
directly or indirectly increase its ability to protect this
territory. His Majesty’s Government, however, do not wish to
rely unduly upon this general consideration in the present
case, since the measures to which Mr. Herschel Johnson drew
attention can, in their opinion, be justified by the more
particular considerations arising out of the economic and
financial interest of Palestine which are explained below,
but they nevertheless regard it as lying at the basis of the
Mandatory system.
- 5.
- It must be remembered that the export trade of Palestine
has been seriously damaged by the war. As a result the
purchasing power of the country has been greatly diminished
and strict control of the import trade is necessary. In
particular the very limited quantities of non-sterling
currency which are now being received render the utmost
economy in their use essential. The whole basis of the
present system of control is that the best use should be
made of the purchasing power available to Palestine and
licenses are issued solely with that object in view. The
legislation which has been introduced is nondiscriminatory,
the licenses being granted for imports both from the British
Empire and from foreign sources, and although it is no doubt
the case that the Palestine authorities are able to grant
import licenses more freely for goods from most Empire
sources than from foreign countries, since these goods are
paid for in sterling, this does not apply to the whole
British Empire as such, Canadian imports for example being
treated on the same basis as United States imports in view
of the similarity of the exchange position of Canada to that
of the United States.
- 6.
- As regards United States goods in particular, the United
States Government will no doubt realize that the balance of
trade between the United States and Palestine has in the
past been very favourable to the former, imports from the
United States to Palestine in the three years 1936 to 1938
having averaged over £1,000,000 per annum, while the total
exports to the United States from Palestine averaged under
£100,000 per annum and has since fallen much below that
figure. As Palestine currency is based on sterling, the
large excess of imports from the United States during this
and previous periods was in effect being paid for by the
purchase of United States dollars with the proceeds of
Palestine exports to other countries, that is (except to the
extent that dollars were provided by an import of capital
from the United States) mainly with the sterling proceeds of
exports to the United Kingdom, the principal importer of
Palestine products.
- 7.
- If, therefore, the emergency measures in force throughout
the British Empire generally were not to be put into force
in Palestine, the effect would be that the United Kingdom
would have to provide Palestine importers with dollar
exchange to finance Palestine imports from the United States
in excess of those balanced by exports to the United States.
The United States Government are aware that the United
Kingdom is finding great difficulty in providing foreign
exchange to meet her own essential imports, and she cannot
continue to provide unrestricted exchange to meet Palestine
imports of non-essential commodities from the United States
or other countries from which Palestine cannot import
without creating a drain on sterling.
- 8.
- It is not desired, nor would it be possible, to reduce
United States exports to Palestine to the level of the
Palestine exports to the United States and so to remove all
exchange burdens on this account from the United Kingdom,
but I trust that the United States Government will agree
that it is inevitable that the Palestine authorities should
not be able to grant import licenses for all applications
whatsoever for imports from the United States, and
reasonable in the circumstances that they should not be
expected to try to do so.
- 9.
- I trust that these explanations will reassure the United
States Government as to the manner in which His Majesty’s
Government and the Palestine administration intend to use
the powers conferred upon them by the Palestine import and
exchange control legislation, and I would ask Your
Excellency to add, when transmitting them to the United
States Government, that His Majesty’s Government will gladly
furnish any further explanations on points of detail which
the United States Government may desire.
- 10.
- The same considerations apply mutatis
mutandis to the position in other Mandated
Territories administered by His Majesty’s Government in the
United Kingdom, and in the British territories within [Page 862] the Congo Basin,
regarding which an Aide-Mémoire was
received from the United States Embassy on the 16th
January.38
I have [etc.]
(For the Secretary of State)
N. B. Ronald
[Enclosure 2]
The American Chargé (
Johnson
) to the British Secretary of State for Foreign
Affairs (
Halifax
)
No. 1716
London
, December 21,
1939.
My Lord: Under instructions from my
Government, based on information received from the American
Consul General at Jerusalem, I have the honor to invite your
Lordship’s attention to the establishment by the Palestine
Government of an import licence system, effective December 11,
1939, applicable to some 422 items of the total of 760 items of
merchandise in the Palestine Customs classification list,
including almost all articles imported from the United
States.
The Department of State is also informed that in an interview on
December 12, 1939 between a representative of the American
Consulate General and the Economic Adviser of the Palestine
Government, the latter stated that he was unable to give
assurances that American trade will not be subject to
restrictions placing it on a less favorable footing than British
trade with Palestine.
The Economic Adviser is stated to have explained that the policy
of the Palestine Government, in accordance with instructions
from the British Government, is to accord preference to imports
from British Empire sources, such a policy having been justified
by the Economic Adviser on the ground that the British
Government cannot cut Palestine adrift during the war but must
afford its currency and economic interests the protection of
emergency measures applied throughout the British Empire.
Any effort on the part of the Palestine authorities to
discriminate against American imports into Palestine with a view
to reducing the demand for foreign exchange or for exchange from
countries outside the sterling exchange control area would, of
course, be viewed by my Government as violation of American
treaty rights in Palestine and particularly those embodied in
Article 2 of the American British Mandate Convention of December
3, 1924, and the related Article 18 of the Mandate assuring
American trade with Palestine equality of treatment with that of
the mandatory power or of any foreign state.
While the United States Government is not disposed to raise any
question regarding the adoption of measures in Palestine which
may [Page 863] be reasonably
necessary and consistent with the status of Palestine and the
obligations of the British Government as mandatory for that
territory, it cannot overlook illegal and unwarranted
interferences with American treaty rights and it does not find
itself able to recognize either the necessity or justification
for the administration of the exchange control and import
licence system in Palestine in a manner to give preference to
imports from British Empire sources, with a resultant
discrimination against imports from the United States.
The foregoing observations are deemed equally applicable, mutatis mutandis, to British mandated
territories in Africa where a control import licence system is
understood to have been introduced similar to that in
Palestine.
I have the honor to add that the United States Government feels
confident that, in accordance with the obligations under its
mandate conventions with the United States, the British
Government will continue to recognize that American products
must be admitted to Palestine and British mandated territories
in Africa on a basis of full equality in all respects with
British and all other products.
I have [etc.]
