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United States Department of State / Foreign relations of the United States diplomatic papers, 1937. The British Commonwealth, Europe, Near East and Africa

Italy,   pp. 435-506 PDF (27.1 MB)

Page 490

711.652/135: Telegram
  The Secretary of State to the Ambassador in Italy (Phillips)
                           WASHINGTON, December 14,1937-1 p. m.
  192. Your 509, December 10. We do not desire to conclude the
temporary arrangement until complete agreement has been reached
with respect to the interpretation of certain provisions of Article
VIII. If the treaty is signed and transmitted to the Senate for advice
and consent to ratification, it will be necessary also to transmit to the
Senate the Precis which contains the interpretation in reference.
Hence, the best procedure from the standpoint of this Government is
to have the language of the Precis express in itself the interpretative
  It is understood that the language of the first two paragraphs of
the Precis is satisfactory to Italy.
  As regards the Italian comment with respect to "representative
period", we do not agree to a specification in the Precis that the phrase
means that a particular year shall be representative of past trade in
all products. Paragraph 3 of Article VIII deals with quantitative
limitations on the importation of individual products and the formula
laid down in the Article is based upon that past period of trade in any
individual product which was in fact representative. Thus the
language of the paragraph anticipates that a period of trade which
might be representative in respect of one product may not be repre-
sentative in respect of another product. Moreover, it is often neces-
sary to consider the trade over a period of more than 1 year in order
to determine a period which is representative. In view of the fore-
going, this Government does not agree to any change in the language
of the third paragraph of the Precis.
  It is understood that all of the language of paragraph 4 of the
Precis is satisfactory to Italy.
  Italy has accepted the language of the first sentence of paragraph 5
of the Precis. It appears, however, that the Italians have miscon-
strued the thought which we intended to convey by the term "cross
rates of exchange". By this term is meant the relative value of two
currencies calculated from their values in terms of some third cur-
rency as expressed in their rates of exchange on that third currency.
Hence, the Embassy should explain further that under the terms of
the first sentence in paragraph 5, an Italian importer would not be re-
quired to produce more lire to pay for an article imported from the
United States than he would have to produce should he buy exchange
of any third country and exchange it for dollars. To illustrate: the
lira was worth 5.261/2 cents and the Reichsmark 40.33 cents in New
York on December 10. Hence, the cross rate of exchange of the
Reichsmark on the lira was approximately 7.66 lire per Reichsmark.

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