On October 14 a new agreement of friendship, commerce and consular rights will become effective between the United States and Germany. This pact replaces the existing treaty which, among other things, contains an unconditional most-favored nation clause that has not been written into the new agreement.
It was Germany which last October served notice on the United States that the unconditional most-favored nation clause would have to be abandoned. This step was taken by the Hitler government because of Germany’s inability to obtain foreign exchange, which necessitated pacts for special concessions and barter agreements with countries willing to supply the Reich with necessary raw materials largely in exchange for German-made goods.
In granting concessions to other countries, Germany disregarded the unconditional most-favored clause which required that similar concessions be granted the United States. The effectiveness of the boycott in the United States against German-made goods, greatly added to the difficulties of the Hitler government. At the same time, Germany discriminated against American holders of Dawes loan notes, an act which was contrary to treaty provisions and brought forth several strong protests from Secretary of State Hull.
Those who are opposed to the administration’s foreign trade policy read into Secretary Hull’s approval of the new agreement with Germany lines which forecast an abandonment of this country’s leadership in efforts to break down foreign trade barriers. They hold Secretary Hull’s acceptance of the new agreement to be the first step away from reciprocal trade agreements and a departure from the principle embodied in the most-favored nation clause.
An examination of the facts will readily show that such is not the case. Secretary Hull acted to meet a practical situation. The new agreement was signed to protect American nationals and trade interests in Germany. Without a clear-cut understanding of the status of international relationships between the two countries, chaos would result after the existing treaty expires.
Because the new agreement does not contain the most-favored nation clause, the United States will no longer have to extend in Germany trade concessions which are being extended to other countries with whom the United States has treaties containing such a provision. And in all likelihood, trade concessions granted to Germany under the existing treaty will be withdrawn when the new agreement takes the place of the present pact next October. All of this means that German goods may have increasing difficulty in entering American markets.
Germany’s economic life slowly is being stifled as a result of loss of her export markets. Information reaching Washington from United States government observers in Germany reveals that the export situation remains one of the weakest spots in German national economy. This is evidenced not only by the shrinkage of exports but also by the rapid decline in the ratio of exports to the total industrial production. The reports show that while in 1928 and 1929 about thirty-three per cent of total German industrial production was exported, the percentage has now declined to about twelve per cent.
The reports to Washington officials point out that the German government realizes that the absorption of the remaining 2,250,000 unemployed can come only from a substantial recovery of exports through a fresh impetus, and it also realizes that the former methods of export subsidies is no longer practicable. In view of this, the Hitler government has appealed to all manufacturers urging them to push export business for the national interest at all costs in order to produce the amount of foreign exchange for the purchase of indispensible raw materials.