dustries of these countries would have concentrated on exports so as to take full advantage of the devaluation. The less profitable home markets and therefore, the re-rollers, would have been neglected. The other countries would have taken defensive measures and increased competition and further protection would probably have aggravated the general situation. These disturbances have been avoided. Difficulties have of course arisen but they have been settled in a friendly spirit and within the framework of statutory regulations. CONCLUSION We have followed the history of the E. I. A. and its subsidiary agreements and shown how they have maintained control in spite of ever increasing difficulties. Such maintenance of discipline is not only welcome but essential. The world needs economic peace as well as political peace and if in the future the struggle between steel producers should be renewed it would have much graver consequences than that of 1930/1931. General economic conditions have changed completely since that time. To-day trade is less and less subject to the laws of offer and demand: the circulation of capital is no longer free: government intervention is exercised almost from day to day and currency manipulation has become a common occurrence. In the same way, the iron and steel market itself has been profoundly or completely modified in recent years. Certain markets are closed, partially or completely either that home industries may have developed or are better protected, or for other reasons. Such is the case in Great Britain, Japan, Manchuria, Canada, India and Russia. Some countries, such as Japan and Canada which formerly exported little or no steel are now exporters to be reckoned with. The normal volume of exports is therefore limited: there may for various reasons be a shortage of steel at a given time but this will not constitute a permanent expansion in normal demand. The necessity for maintaining the existence of the Comptoirs does not mean that the present organisation cannot be modified. There must be no rigid system and constant adaptation to circumstances is essential, as conditions of competition, the terms of import on to the chief markets, and the particular circumstances and capacity of each Group are always changing. Membership on appropriate terms of other countries is eminently desirable. This would be a further step in the rationalisation of world markets and in the development of economic cooperation, which is gradually taking the place of the old theory of free competition and struggle. SUPPLEMENTARY NOTE DATED APRIL 1937 Since this memorandum was prepared market conditions have changed substantially. The improvement, noted towards the end of 1936, has continued, accompanied by an improvement in prices. On home as well as export markets, demand has expanded to an extraordinary degree. Production has been unable to keep pace, particularly in view of the difficulties encountered by certain Groups with regard to raw materials and labour (including strikes and the introduction of the forty-hour week). A severe shortage of steel therefore developed. While taking steps to facilitate deliveries and fulfil standing engagements (among the measures taken was the exceptional abolition of fines and compensation for excesses and deficits during the current agreement-year) the Comptoirs attempted to adapt releases on the various markets to the real needs of consumers, thus discouraging speculation. Delivery periods remained fairly normal considering the enforced limitation of production. Although official prices have been considerably increased-merchant bars are at present about £5.0.0 gold per ton-they are below the level that would have been reached without the limitation of the Comptoirs. Moreover, costs of production are much increased in consequence of heavier social charges and higher raw material and transport costs. In order to assure supplies to the British home market the Government reduced to 10% ad valorem the duties chargeable on products covered by the arrangement between the British Group and the E. I. A. The E. I. A. decided for the time being to subsidise all sales of semis to the United Kingdom, to the extent of £1 gold per ton, as the prices obtainable on that market are below the general export rates. The difference is particularly marked in the case of semis. In the same way Japan, being unable to increase home production sufficiently to cover the steel scarcity, has temporarily suspended import duties on iron and steel products. It is not unlikely that other countries, in particular the United States, may take similar steps. As regards the extension of the Agreements it must be noted that the negotiations opened in the later months of 1936 with the Czechoslovakian Group with a view to its full membership in the Comptoirs (merchant bars, joists and channels, hoops, thin sheets, galvanised sheets) came to a successful conclusion. It is now proposed to reopen negotiations with the Austrian and Hungarian works. Conversations are also being held with the United States producers, and an agreement in principle has been concluded regarding exports, but the detailed application of that agreement has yet to be settled. End of April 1937. EXHIBIT S-94 STEEL UNION COMPANY, Director ERNST POENSGEN, Düsseldorf. DEAR MR. POENSGEN: I have been waiting for some word from Mr. Bastian or from yourself in response to my letter to him under date of Sepembter 1st, but as yet nothing has been forthcoming. Mr. Thomas came in to see me a few days ago and told me that he had been pursuing the matter of an international understanding a little farther and recently had a talk with Judge Miller, who is general counsel for the United States Steel Corporation, to get his views as to the feasibility and legality of some such understanding. After giving the matter some study, Judge Miller reported to him that he felt that under present conditions and the attitude of the administration, it would be possible for them to go along with the development of the idea, and further stated that he thought it could be arranged that a committee from the Board of Directors of the Iron and Steel Institute could be appointed to work on the scheme. Mr. Thomas seemed to feel that this was a very definite step forward, as it meant the acquiesence on the part of the Steel Corporation to negotiations, and asked me if I would not take the matter up with you immediately. He asked me if I would care to suggest to you the possibility of one or two representatives being sent over from your side to negotiate with the committee of the Iron & Steel Institute if the matter progressed to that stage. I told him I would lay the subject before you, but that as far as I was concerned, I was unwilling to go along with the idea unless a decision was arrived at in regard to the control of selling in this country. It would be a pure waste of time for all concerned to initiate negotiations looking to quotas, price control, and other definite conditions which would have to be agreed upon, until the underlying question of control of distribution in this country was settled. Unless the international syndicates abroad would agree to cut out selling through the irresponsible sources that virtually wrecked the business over here during the year past, nothing could be accomplished, for the simple reason that the American group would not pursue the matter until they had assurance that what was agreed upon would be lived up to to the letter. Selling directly by the Mills to any Tom, Dick, and Harry on this side, or through exporters such as Coutinho Caro, would absolutely preclude any chance of success in this direction. Judge Miller mentioned that if the suggestion of having a committee of the Iron & Steel Institute handle the negotiations were accepted, a way could be found by which the importers could be placed under a code under the National Recovery Act, but this in itself would necessitate an air-tight control both abroad and here, so that the agreements under the code would be adhered to and if necessary enforced by penalties the same as are provided for in the code of the iron and steel industry. From the foregoing you can therefore see that the success of a plan such as we have been discussing rests on the recommendations made by Mr. Léon to Mr. Dieudonné and by me to Mr. Bastian. If it is impossible for you to bring this about, and continental steel makers do not recognize the seriousness of the situation as far as the future of imports is concerned, then we might as well close our files on this particular effort. On the other hand, if you recognize the possibilities that are involved in this whole plan, both for the immediate future and for the long pull, the sooner we can get to work on it the better. Before closing I would like to touch again on the position of Mr. Thomas in this picture. I feel that in any set-up that may result in case you decide favorably on this whole plan, Mr. Thomas will be a valuable liaison officer and that your consideration of this subject should include a retainer for him for the very valuable contribution he can make to the perfecting of the details, because of his intimate relations with all of the executives of the large domestic companies. I hope to hear from you at an early date in regard to your decision in this matter, and with kind regards, remain Yours very truly, GEO. E. DIX, President. EXHIBIT S-951 [Translation, French-Strictly confidential] E. I. A. MEETING HELD IN ROME, 26TH MAY 1938.-AGREEMENTS WITH THE AMERICAN GROUP Present: German Group: MM. Poensgen, Klotzbach, Heimann-Kreuser, Scheer-Hennings, Leist American Group: MM. Greenwood, Bash, Mundle, Outwater, Todd Belgian Group: M. d'Heur British Group: Sir William Firth, Mr. Elliot, Mr. Malcolm French Group: M. de Wendel Luxemburg Group: MM. Meyer, Roger, Dieudonne Polish Group: M. Dangel IWECO: M. Muller E. I. A.: M. Conrot Chairman: M. Meyer Mr. ELLIOT Summarised the difficulties which had led the American Group to request exemption from responsibility for all exports effected by outsiders. He pointed out that since prices had been adjusted these exports had been greatly reduced, and he considered that if a suitable price policy were maintained, no further aggravation of the position need be expected. The agreements which had been negotiated expressly stated that exports by outsiders would be included and the European Groups were of the opinion that this principle should be maintained. Moreover, before entering into any discussions whatever, it was necessary to have the complete figures: no statistics had been submitted up to the present for Sheets. Mr. GREENWOOD affirmed the good will of the American Group, and their desire to collaborate with the European Groups, and completely to observe the agreed principles. The agreements with the Cartel had been discussed upon the basis of experience acquired in Rails and Tinplates. Unfortunately, since these agreements had been negotiated, business had become so bad that a large number of outsiders who in normal times effected no exports, were now becoming interested in the export market. Although their previous performance had been comparatively small, their capacity for production was very large. Great progress had been effected in the organisation of the American Group, but this matter of outsiders had become so urgent that no final agreement was possible if the principle of responsibility for outside tonnages were rigorously maintained. All possible methods had been considered, but in view of the extent of these exports the situation had become impossible. During the period 1st December to 31st March, outside tonnages (excluding deliveries to Canada) represented: 1 Exhibits S-95 through S-107 are the complete minutes of the London Committee on E. I. A./U. K./U. S. A. Agreement. The average for all products was 42%, whilst normally it was only 5% to 10%. This was the first time they had experienced such a position, and it was evident that during the previous discussions the negotiators had not fully understood the obligations they were undertaking. They had not foreseen this development. The American Group desired just as much as the European Groups to arrange effective control and collaboration, but in view of the position in which they now found themselves, a solution would have to be found which made allowance for their difficulties, for an agreement which could not be respected by all parties could not be put into practice without creating an extremely dangerous situation. M. MEYER observed that up to the present the figures submitted by the American Group had been most incomplete. Mr. GREENWOOD replied that complete figures would be submitted. It was possible to form an estimate of outside deliveries by comparing the exports of associated firms with the Government statistical figures which appeared five weeks later. M. POENSGEN pointed out that outside exports had been favoured by the differences between prices in the home market and the export market, also by speculation on the part of merchants who were quite free. Mr. GREEN WOOD said that a certain number of American associated firms had no export organisation of their own, and were consequently obliged to utilise the services of the merchants. In this respect no control was possible. With regard to the difference in prices, this was today nothing but a speculation, although still of interest to some firms. Mr. ELLIOT referred to the opinion expressed by Sir Andrew Duncan during an informatory meeting held in London. Sir Andrew Duncan considered that the arrangements made would lose all value if the American Group were freed from their responsibility with regard to outside tonnages. On the other hand, they could not reasonably expect the Steel Export Association to do more than was possible. Theoretically, they should refrain from all exports if deliveries by the outsiders completely absorbed the American quota, whilst if these deliveries exceeded the quota the Americans should pay the agreed penalties. This, however, would hardly be just, and if, for instance, it so happened that the American quota were not only absorbed but exceeded by the outsiders, the Steel Export Association having refrained from all exports, they might consider releasing them from payment of penalties on the excess tonnage. They should also consider the time factor, as with the development of the mechanism for the working of the agreements, progress would be effected. In any case, without abandoning the principles, it appeared reasonable to allow the American Group a certain amount of time to adapt themselves to the new conditions. M. MEYER was also of the opinion that the principle could in no way be abandoned. Mr. GREENWOOD was convinced that in time, and with an adequate organisation, they could achieve smooth working of the agreements. But he again stressed the extraordinary character of the present position, and the impossibility of making the American Group responsible for their outsiders at the present time. As an example, he mentioned Cold Rolled Sheets, in which product the capacity of the outsiders was 500,000 tons, whilst that of the associated works was only 250,000 tons. M. DE WENDEL remarked that he could not understand why the American associated works had themselves greatly exceeded the fixed quotas. Mr. GREENWOOD pointed out, first of all, that the American Group's quota for Semis was very small, whilst their output capacity was very high. The American excesses were due to their deliveries to Japan, whose requirements were very large owing to the war. The American firms had several times drawn the Cartel's attention to the fact that its prices were too high. The Cartel had declined to modify them. Under the circumstances the American Works had been unable to prevent the Japanese from giving them their orders. A similar position existed with regard to Plates: since the month of December the American Group had endeavoured to convince the Cartel of the absolute necessity for reducing its prices. Here their suggestion was not adopted, and the orders were placed with the U. S. A. The American producers, however, had no intention of exceeding their quota, but at the same time they certainly could not refuse orders which no one else would accept. Mr. ELLIOT thought that in future a closer collaboration would avoid a recurrence of these difficulties. The problem to be solved that day was that of finding a way to ease the situation caused by the outsiders. Mr. GREENWOOD stated that the American Group in no way questioned the principles, but requested them to find practical means for remedying an intolerable position, and for facilitating the smooth working of the agreements, whilst measures should be considered to enable the American Group gradually to obtain control of their outsiders. Up to the present he had done his utmost to achieve this, but without success, and the agreements could only be signed if a formula could be found which was suitable to the circumstances. The American Group did not wish to enter into commitments which they could not fulfill. The outsiders' tonnages were considerable, especially in Sheets, in which product their output capacity amounted to 4 million tons, or 22% of the total. This did not take into account Cold Rolled Sheets. M. MEYER thought it would be interesting to determine exactly the export percentage for which the outsiders were responsible during the period of reference. Mr. GREENWOOD stated that these figures could be ascertained, although they would only be approximate in view of the variation in nomenclature. M. POENSGEN realised the American Group's difficulties, but he considered, above all, it was important to establish a close and constant price collaboration and to constitute the London Committee. Mr. ELLIOTT reminded the meeting that it was at the request of Mr. Todd himself that the constitution of the Committee had been postponed. With regard to procedure, he understood that they were all in agreement with the memorandum which had been drawn up a few weeks previously. Mr. GREENWOOD stated that the American Group desired the London ComImittee to be constituted at the earliest possible moment. He pointed out that if this Committee were to commence operations the agreement should be signed in the United States. This could only take place if a compromise were found in the question regarding the outsiders. If the European Groups could give a certain assurance to the American Group in this respect, this Group could also enter into more definite commitments. He insisted that they could succeed only if they adapt themselves to circumstances. It was finally agreed that a further meeting would be held in Paris on 15th June. In the meantime, a small Commission composed of the Directors of the Comptoirs would consider the position and seek some means of helping the American Group without abandoning the principles. This Commission would submit its findings to the Group Leaders on 15th instant in Paris. M. MULLER mentioned the matter of IWECO products, and requested them to consider the possibility of incorporating these products in the arrangements with the American Group, as the present position was far from satisfactory. Mr. GREEN WOOD thought that an agreement was possible, but as no domestic arrangements existed with regard to these products, he could give no definite reply before his return to the United States. (He leaves for America in the second half of June.) EXHIBIT S-96 [Translation French.―strictly confidential] MEETING HELD IN LONDON, 7TH JUNE 1938.-AGREEMENTS WITH THE Present: AMERICAN GROUP For the American Group: Messrs. Todd, Greenwood, Bellamore, Bash, Mundle, Outwater For the Entente Group: Messrs. Dieudonne, Brichant, Elliot, Maulick, Pucheu, Hirt, Henrard, Malcolm, Conrot, Lascelles Chairman: Mr. Elliot The meeting was preceded by a preliminary discussion between the Continental and British delegates, during which was discussed the attitude to be adopted towards the American Group, which requests exemption from responsibility for the exports of their outsiders. Mr. ELLIOT explained first of all that from an official discussion between Sir Andrew Duncan and Mr. Todd on that same morning, it appeared that contrary to what they had thought, the American claim was not limited to the present period but also was to apply to the future; they wished to accept no responsibil ity for their outsiders. This attitude was contrary to what had been formally |