No More Learning

FIGHTING THE RED TRADE MENACE 57
from the Soviet Union, compared to 125,250 metric
tons in the same period 1929-30. To have forbidden
its entry, in any case, after the artificially stimulated
French timber industry had taken its share of the
market would have been to benefit whom? The prin-
cipal competitors of the Soviet Union for the French
timber market are America, Germany, Austria, Fin-
land, Sweden and, to a less extent Poland.
These three commodities, oil, wheat, timber, with
flax constitute the most important Soviet exports to
France. But the French Government's treatment of
flax provides an instructive comparison. It, too, was
put on the license list.
French flax growers complained they were over-
whelmed by Russian flax. In this case the Govern-
ment acted energetically, so energetically, in fact,
that, whereas Soviet imports of flax into France in
the five months October to April in 1929-30 had
been 13,086 metric tons, they amounted to only
3,003 metric tons in the five months after the license
system was passed. To prohibit its introduction
would benefit whom ? Belgium, firmest ally of France,
large flax producer, has heretofore shared with the
Soviet Union the privilege of supplying France with
the seventy to eighty thousand tons of flax France
needs to import yearly.
America and other countries compete with the
Soviet Union for the French oil market. Oil is omitted
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? 58 FIGHTING THE RED TRADE MENACE
from the license system decree against Soviet prod-
ucts. America and other countries compete with the
Soviet Union for the French wheat and timber
market. Soviet wheat and timber are put on the
license system, but considerable quantities permitted
admission. Not America, nor Germany, nor Great
Britain, but only Belgium competes with the Soviet
Union for the French flax market. Flax is put on
the license system, and the Soviet imports choked
down to nearly nothing.
Illuminating were the remarks of M. Louis Rollin,
successor in the Laval Cabinet to M. Flandin as
Minister of Commerce, at an official celebration of
the Lille Fair, on April 12, 1931, after six months
of experience with the license system on Soviet im-
ports. With regard to Russia, he said, France had
no intention of breaking off trade relations and was
far from desiring the economic isolation of that
country! It would be better for all, he declared, if
Russia could take her place in the international ex-
changes and improve both her economic situation
and the well being of her people. But commercial ex-
changes, he emphasized, must be based on equality
and reciprocity, at present completely absent.
The Minister went on, however, to observe that
"certain overseas countries" were disregarding the
facilities accorded them in the French market and
were confronting French goods with insurmountable
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? FIGHTING THE RED TRADE MENACE 59
tariff walls. The French Government, he said could
not tolerate this and would take appropriate meas-
ures of retaliation.
It has become evident that the French attitude
toward the Soviet Union, though it may have a dif-
ferent affective tone, is in its concrete application
not much different from her attitude toward all other
nations not bound to her by ties of national selfinter-
est, by common fear of a common enemy. In par-
ticular the resentment now lessened but still keen felt
in all circles against America's refusal to cancel the
French debt, is so strong that it is not an exaggera-
tion to compare it with the resentment felt against
the Soviet Union for having repudiated the Czarist
pre-war debt to France that amounted on April 30,
1926, to 6,738,000,000 gold francs ($1,347,000,-
000).
This, the original basis of French hostility to the
Soviet Union, was a business matter. Today the
French, whatever their sentiments may be and con-
trary to widespread opinion abroad, regard their
relationship with the Soviet Union as a business mat-
ter. The Roland of the capitalist world against the
"Red Trade Menace" must be sought elsewhere.
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? CHAPTER Vn
Paris:
A new sect of Russian racketeers had grown up in
Paris, and their motor cars and villas, their mis-
tresses and champagne parties have pre-empted a
place of their own in the life of this pleasure capital
of the world. They enjoy one of the oddest of advan-
tages. They live on assassination, insurrection, bomb
assaults and mutinies. Every time Joseph Stalin is
killed, every time the Kremlin is blown to bits, every
time Trotsky returns to the Soviet Union at the head
of an army to throw out the rascals and every time
the peasants of Mother Russia rise as one man to
destroy their oppressors, the Parisian money lenders,
men of the "Black Bourse," knot their ties more hur-
riedly in the morning, get down to business earlier,
for that day there will be fat pickings.
Into their offices come streams of business men, or
their agents, bearing Soviet notes--Soviet promises
to pay to American, French, Austrian manufac-
turers.
"But you promised to take this bill and charge me
only 22 per cent," exclaims one.
"My friend, love you as I do! Have you not seen
the morning paper. What? Yes, I see you have, but
60
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? FIGHTING THE RED TRADE MENACE 61
you didn't think I had. What? Twenty per cent and
the paper says the Red Army has mutinied, Kron-
stadt rebelled, peasant uprisings in the Ukraine!
Why here it is, from Bucharest. The correspondent
says that drum fire was heard in the distance across
the Bessarabian border all night last night. Twenty
per cent! I wouldn't take a piece of Soviet paper for
100 per cent. "
The customer pleads, offers 25, 30, 35 per cent.
"No--not for any price. "
He turns to go. The broker waits until the lagging
feet cross the threshold and calls.
"See, here, you are an old customer, I am an old
Russian. I know I shouldn't do it, but I feel that now
those things are happening in Russia and my dear
fatherland is about to throw off the Bolshevik yoke,
it will be worth the money to me. I'll take your note;
45 per cent! "
Which is to say that for a note drawn by the
Soviet Trade Delegation for $100,000 payable in
full with 6 per cent interest in one year to the French
or American or other manufacturer who has sold
electrical machines to the Soviet Government, the
"Black broker" pays $55,000. He tucks the note
away in his safety deposit box, and at the end of the
year, if the Soviet Government has not resigned and
fled to Sweden disguised in green spectacles, the
patriotic Emigre" will collect. He has been collecting
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? 62 FIGHTING THE RED TRADE MENACE
for many years, and the profits from the chronic
collapse of his fatherland's tottering Government
have filled out the frame that was meager when he
left Russia in 1919.
It was one of the most curious and instructive
events of this trip to learn here that most of the
business of discounting Soviet bills is done by Rus-
sian emigres. The majority are men of the merchant
class willing to turn an honest penny at anything,
who started on a shoe string and, by constantly re-
investing their winnings in the same business, have
acquired fortunes. While Russian princes tend bar,
drive taxicabs, play the balalaika in dance halls, the
lowly merchant turns his penny so swiftly that al-
ready he has become a minor power in the financial
world.
To these worthies of the Bourse, the "Red Trade
Menace" is an abominable idea. Their dialectics are
interesting. "Menace! Of course they are a menace.
They don't pay their bills," exclaims the broker of
Soviet notes. "Five-Year Plan? Already completely
failed. They will never be able to export enough to
meet their obligations. Anyway, they spend all their
money on propaganda. "
Any argument that the Five-Year Plan is succeed-
ing, that the Soviet Government is more powerful
than ever, that its future growth has become a matter
of a great deal more concern to European Govern-
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? FIGHTING THE RED TRADE MENACE 63
ments than the mostly imaginary sums spent by the
Third International for foreign Communist parties,
is met by the glance of suspicion, the sure and ready
word, "Bolshevik. "
A real Bolshevik, an official of the Government,
remarked once that the Soviet Union's enemies were
her best friends; they were so in love with Soviet
collapse that they refused to pay attention to Soviet
power.
An official of a great Government, anxious however
that neither his identity nor that of his Government
should be cited, told me that after a world-wide check-
up by his department in the attempt to determine
the total amount of outstanding Soviet obligations
of every variety, they had just arrived at the esti-
mate of $240,000,000 to $400,000,000, a very wide
discrepancy, it is true, but interesting minimum and
maximum limits. The Soviet Union exported last
year to the value of $500,000,000. With a decent
crop this year the total exports are expected to in-
crease considerably, as timber and oil will certainly
go out in larger quantities, and if the weather is
favorable, the grain crop, European grain merchants
anticipate, will be still larger than last season when
the Soviet Union threw the outside world into a panic
over its grain exports. A total export for 1931 of
$600,000,000 to $750,000,000 is considered not im-
possible, barring the usual reservations against the
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? 64 FIGHTING THE RED TRADE MENACE
possibilities of foreign war, economic boycott or crop
failure.
The rate on Soviet bills in Paris is down now.
Nothing worse is happening in the Soviet Union
than the interminable bankruptcy of the Five-Year
Plan, and the usual starvation, so when I visited an
American banker and asked him to ascertain the
day's quotation for me, the answer came after a tele-
phone call, "27 per cent. "
"Twenty-seven? " I exclaimed, "Why? "
"I don't know," he answered. "It's seldom much
lower. But you understand that is for privately dis-
counted bills that have not gone through a Soviet
Bank. "
"How long will it last? " I asked. "Two years more,
three? "
Not so very long ago that question put to an
American banker would have been taken as a request
for his opinion on the probable duration of the Soviet
regime. Today the banker friend, European director
of one of the oldest, most conservative houses in
America, replied: "One year," snorting. "One year,
I give them, one year, and they'll be getting nearly
normal discounts. "
The views of this American banker, shared by a
few of the better informed French Government ex-
perts, must also be taken into account in judging the
French attitude toward the problem of Soviet
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? FIGHTING THE RED TRADE MENACE 65
economic expansion. The ranks of the old guard of
observers of the Soviet problem, who persist sin-
cerely in the opinions held for commercial reasons by
the brokers of Soviet bills, are rapidly thinning. The
current attitude of the French Government and its
plans for the future are based on the assumption
that there is a better than even chance that the Five-
Year Plan will succeed. But whatever time may hold
for Europe as a consequence of the success of the
Five-Year Plan and of its successors, the French
business man holds to the opinion that a present
profit in the hand is worth two threats in the bush
of the future. The loss of Soviet orders injured him
at this moment out of proportion to the actual mag-
nitude of the business done with the Soviet Union,
for France is now feeling keenly the pinch of the
economic depression, and, as one Frenchman re-
marked :
"When you have got 1,000 francs in your pocket,
you don't miss the loss of ten, but when you've only
got 100 francs in your pocket, you don't overlook
the loss of ten. "
The French Government has studied its trade
balance with the Soviet Union before and after the
license system. When M. Flandin spoke in October
the ratio of French sales in the Soviet Union to
Soviet sales in France was one to three. Today the
ratio is one to twelve. And that, say the entire Cab-
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? 66 FIGHTING THE RED TRADE MENACE
inet and members of all political parties, has to be
remedied.
Four remedies are proposed. The first, aired by
Stephen Lauzanne, editor of L'Echo de Paris,
fathered by Senator Joseph Caillaux, famous former
Premier, sponsored by Senator Henri Berenger, one
time French Ambassador to Washington, and others,
is most ingenious. It proposes the erection of a cen-
tral governmental organization to be known as the
"Office National for Trade with the Soviet Union. "
This office shall be a counterpart of the Soviet
Monopoly of Foreign Trade, with the distinction
that it is to handle only trade with the Soviet Union.
The committee will be glad to accept sales from
the Soviet Union at any price the Soviets want to
make, the heavier the cut the better. For the com-
mittee will buy Russian commodities as cheaply as
possible, limiting in theory their purchases to the
amount of Soviet purchases in France, then sell to the
French public at the prevailing French market price.
The profits are to be turned into a fund for com-
pensation of holders of Russian Imperial bonds.
Thus at one stroke a whole flock of harassing
problems, the debt question, the dumping question,
the balance of trade question, are solved. There may
be many objections to this proposal, but one is per-
haps sufficient. Three years ago Germany tried a
modified form of it. The German National Associa-
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? FIGHTING THE RED TRADE MENACE 67
tion of Manufacturers, anxious to obtain for them-
selves the same advantages of concentrated sales-
manship and elimination of competition enjoyed by
the Soviet Foreign Trade Monopoly, set up a "Rus-
sian Committee" through which were to pass all
Soviet orders for German industrial products. The
Soviet Government anxiously but resolutely declared
it would buy absolutely nothing of German manu-
facturers who submitted their bids through the Rus-
sian committee.
Charged with bad logic, inconsistency, since the
Soviet Union itself had a Foreign Trade Monopoly,
the Soviet Government replied that it would not
object if Germany or any other country set up a
Foreign Trade Monopoly for trade with all coun-
tries, but would consider such a monopoly for trade
with the Soviet Union alone as an intolerable dis-
crimination. The Germans' "Russian Committee"
still exists, but exclusively as an organ of informa-
tion.
In view of this Soviet attitude, adoption by the
French of the Caillaux-Berenger scheme would re-
sult effectively in complete cessation of trade with
the Soviets, for experience has shown that Moscow
will no more consent to such an arrangement than
she would consent to abandon her own Foreign Trade
Monopoly, keystone of her structure of state capital-
ism. The French Government is aware of this objec-
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? 68 FIGHTING THE RED TRADE MENACE
tion, and a high official, eminently authoritative on
matters of Franco-Soviet trade, in a conversation
with me, alluded to the scheme as an opportunity
for the Senate and possibly the Chamber to ventilate
their views on Russia.
Nevertheless, those students of the problem of
Soviet foreign trade not inclined to advocate boy-
cott, but interested in the working out of a more ac-
ceptable relationship than now exists between the
huge, unified organ of state-capitalistic trade repre-
sented by the Soviet Foreign Trade Monopoly, on
the one hand, and competitive private-capitalist trad-
ing corporations of the non-Soviet world on the other
hand, are convinced that in the Caillaux-Berenger
scheme exists the germ of a solution. It seems to them
to be one method that would be effective even against
Soviet rejection if all nations were to adopt it, and
that it might be much easier to persuade at least a
good many nations to adopt it than to induce them
to cut off their trade with the Soviet Union entirely,
if that were the goal desired.
The great obstacle to the erection of a state
monopoly for trade with the Soviet Union, is to be
found in most countries in the opposition of private
business men who do not want the Government in-
terfering in their affairs. The German attempt was
made under the direction of the Government which
through its state guarantee for the payment of Rus-
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? FIGHTING THE RED TRADE MENACE 69
sian bills, had a means of exercising pressure upon
those business men who would have preferred to
operate independently. The only other step in this
direction essayed by a non-Soviet state was taken by
Persia which on March 11, 1931, installed a system
of state monopoly of foreign trade. But Persia is an
absolute monarchy and when Mirza Reza Pahlevi,
impressed by the trade methods of the Russians, de-
cided to emulate them, he simply decreed the law.
Its prime intention, like that of the Italo-Soviet trade
agreement, and the present French plans for remedy-
ing their commercial relations with the Soviet Union,
was to balance the foreign trade account.
Meanwhile M. Briand is credited with one of the
four plans under discussion here for solution of the
Soviet trade problem. As might have been expected
from the Nestor of European politicians, the plan
is original. The germ of its idea was at one time
ascribed to Montague Norman, governor of the Bank
of England, but he denied paternity, and M. Briand
is popularly credited with its authorship.
The plan, still very vague, but perceptible in its
outlines, is to set up an international credit institute
in Europe for the rediscounting of all Russian bills,
through which every member of the League of Na-
tions would pass its trade with the Soviet Union. It
would be, in other words, an International Institute
for Trade with the Soviet Union. Participation of
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? 70 FIGHTING THE RED TRADE MENACE
all members of the League of Nations in the In-
ternational Institute would make it necessary either
for the Soviet Union to submit to its authority, or
cease virtually all trade with the outside world.
It is suggested that if it were difficult or impos-
sible to induce all nations to pass laws requiring
their nationals to do business with the Soviet Union
only through the International Institute, it would be
possible to accomplish the same end by financial pres-
sure. That is to say, the Institute, by offering to dis-
count Soviet bills at a rate approaching the usual
bank rate for non-Soviet bills, would destroy the
private market, the "Black Bourse," and make it
necessary for the seller of goods to the Soviet Union
either to carry the entire burden of financing the
Soviet one-year, two-year or even longer notes him-
self, or to do his business through the Institute and
submit to its control. Thus, with all Soviet credit in
its hands, the Institute, it is conceived, could also
regulate Soviet sales, curb "dumping," by limiting
or refusing credit unless the Soviet Foreign Trade
Monopoly conformed to the ideas of the Institute.
The subject is not, however, considered ripe for
serious discussion, for without capital it could not
be realized and whatever may be private opinions,
the international banking world has not yet been
willing openly to espouse Soviet solvency.
The third proposal for the remedy of Franco-
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? FIGHTING THE RED TRADE MENACE 71
Soviet relations is suggested among others by Gaston
Bergery, secretary of the so-called Russo-French
Parliamentary Group in the Chamber, a loose organi-
zation composed of deputies from various parties who
believe that the Russian problem is perhaps the most
important one facing Europe today, but who are not
at all unanimous in their views as to its solution.
This proposal, apparently simple but in reality full
of thorns, is to resume the Franco-Soviet negotia-
tions over the debt question where they were left off
five years ago.
Chief objection to this proposal is the fact that
the Soviet Government has grown not less, but more
hard in its attitude since 1926 when the negotiations
were broken off upon Moscow's insistence that before
it pay a cent on the Czarist bonds, the Soviet Union
would have to have a considerable money credit. The
debt at that time was reckoned at 6,738,000,000 gold
francs, $1,347,000,000. The average Frenchman has
not yet entirely abandoned hope of getting something
back on this huge sum and the bonds are occasion-
ally traded in at a fraction of 1 per cent to 4 or 5
per cent on days when assassinations in the Kremlin
are particularly numerous.
But another prime difficulty in the way of solu-
tion of the debt question is the lack of a Soviet
representative here whom the French can under-
stand and who understands the French. In this re-
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? 72 FIGHTING THE RED TRADE MENACE
spect the Trotzky-Stalin controversy in the Russian
Communist Party is still making its effects felt, for
Christian RakovsLy, stanch friend of Trotzky and
one of the few who have held out without capitula-
tion for four years in the exile to which he was sent
by Stalin, was perhaps the one Soviet representative
who could match French diplomacy.
But it is the French this time who are anxious to
remedy the stagnation in Franco-Russian relations.
The fourth and last proposal to this end, most sweep-
ing of all, is made by Senator Anatole de Monzie.
He, one of the original proponents of French recog-
nition of the Soviet Union, and in this sense com-
parable to our own Senator Borah, is in favor of
negotiating a trade agreement with the Soviet Union
and postponing consideration of the debt question
to a "more convenient time. "
It is difficult to forecast what will be the solution
finally evolved. Perhaps it will be one different from
any of those listed, but these are all that are being
discussed at present. Important for the outside world
is the observation that of all the solutions suggested
the outer limit of aggressiveness is represented by the
Caillaux-Berenger project for control, but not ces-
sation of trade with the Soviet Union. This is from
the country that suffered most heavily from the
Bolshevik revolution. For France that revolution
meant not only the loss of the huge amount of money
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? FIGHTING THE RED TRADE MENACE 73
in Czarist bonds distributed almost literally among
every French family. It meant prolongation of the
war with Germany and might have meant its loss had
not America intervened. It meant after the war that
Germany, friendly to the Soviet Union for its own
reasons, could be much more independent than if she
had been bordered by Czarist Russia. Nevertheless
France recognized the Soviet Union in October,
1924, nine months after the British Labor Govern-
ment showed the way.
Today France views with distrust and a vague
growing uneasiness, the climb to power of the Soviet
Union, friend from expedience, but nevertheless
friend of Germany and Italy. French courts make
trouble for the Soviet trade representatives, her
press fumes at the disappearance of a General Kutie-
poff, the flight of a Bolshevik diplomat from the
"Claws of the Cheka. " But the French business man
is making trouble for the French Foreign Office, and
through the rattle of persistent popular agitation
against the Soviet Union penetrates to governmental
chambers only the clear cold voice of business: "We
want our Soviet orders back. "
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? CHAPTER VIII
Brussels:
It was in Antwerp. I asked a newspaper vendor:
"Ou se trouve-t-il le consul Am? ricain? "
No answer. A sullen look.
"Wo ist der amerikanische Konsul? "
Instantly came the reply, shot back in Flemish so
like German it was easy to understand.
"Don't you speak French? " I asked the Antwerp
citizen.
"Oh, yes," he replied, "but we prefer German if
we have to speak a foreign tongue. "
French a foreign tongue in Belgium! German pre-
ferred in the land that suffered the yoke of German
military rule the whole long length of the war!
But Antwerp is Flemish, Brussels Walloon, and
their differences, so easily forgotten by the outside
world, are playing a curious role today in the rela-
tion of Belgium to the Soviet Union. The Walloon-
Flemish, Brussels-Antwerp conflict, interminable and
never settled, has helped make it impossible for Bel-
gium to achieve any satisfactory results in its efforts
to protect itself against Soviet imports, has helped
make this sector of the "anti-Soviet front" illusory.
In this country, in miniature, for convenient in-
spection, as on a small-scale model of a Continental
74
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? FIGHTING THE RED TRADE MENACE 75
map, may be observed in classic form the nationalis-
tic, local patriotic, commercial reasons why Europe,
though partly convinced that the economic expan-
sion of the Soviet Union means trouble, and wholly if
vaguely convinced that it is undesirable, has done
nothing effective to check that expansion.
Seldom can one find conflicting interests in such
profusion as exist here, and each has its bearing on
Belgo-Soviet relations. The traditional conflicts ex-
istent everywhere are here between industry and ag-
riculture; between producer and consumer; between
those who want to buy Soviet goods because they
are cheaper, and those who want to keep Soviet
goods out because they compete with their own prod-
ucts; between those industrials who long for Soviet
orders and those who fear Soviet industrial competi-
tion. And to these conflicts are added the uniquely
Belgian conflict between the Walloons and the Flem-
ish. Looming over all is the Belgian national rivalry
with the old antagonist, Holland.
The Walloon-Flemish controversy must surprise
any observer coming in from the outside with the
war-time American picture in his mind of the hotly
patriotic nation of Belgians, united as a monolith
under the aegis of Albert.
To learn that radicals in the Flemish party agi-
tate for separation from Belgium, that moderates in
the same party, in very considerable numbers demand
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? 76 FIGHTING THE RED TRADE MENACE
a revision of the constitution and organization of a
sort of dual, federal state, and that the police fre-
quently have to use their clubs to quell the treason-
able public demonstrations of the secessionists, is to
realize that the Walloon-Flemish conflict has more
serious aspects than the mere fact that it requires
knowledge of two languages to get a place in the pub-
lic service.
This is an aspect of Belgium that has more sig-
nificance as an illustration of one of Europe's most
acute post-war ailments than for its importance in
itself. And particularly in any study of the relation-
ship of Europe to the Soviet Union is it desirable
correctly to estimate the part played by the astonish-
ing growth since the war of the spirit of nationalism,
of sectional patriotism. Upon these centrifugal
forces the Soviet Union is depending in large part
for the undisturbed execution of its ambition to erect
an economically independent, militarily potent Com-
munist state, in a world of capitalist enemies too
busy hating each other to band against a common foe.
Hardly a nation in Europe is free from the dis-
integrating element of national minorities, bent on
having their independence even if they have to tear
up the Continent into scraps of States. Poland has its
Ukrainians, its Germans and its Jews; Germany has
its Poles; Czecho-Slovakia has its Slovaks; Jugo-
slavia its Croats; Rumania its Hungarians; Italy its
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? FIGHTING THE RED TRADE MENACE 77
Austrians; France its Germans, and the Spanish rev-
olution has shown what the Basques and the Cata-
lonians thought of Spain.
These are by no means all. There are many more
groups of peoples dissatisfied and bitter against
their Governments. It may be remarked that of the
examples named, all except the Spanish dissenters
blame their troubles on the Versailles peace treaty
that rearranged Europe's boundaries with awkward
hand. For that very reason it was interesting to find
in Belgium a "national minority" problem that had
nothing to do with the Versailles peace treaty.
The Belgians have had 100 years since the founda-
tion of their present nation in 1830 in which to
reconcile the differences between the Flemish inhabit-
ants of the coast and the Walloon inhabitants of the
interior. The conflict still exists; the Flemish lan-
guage was given equal official rights with the French
in 1898; in 1923 the formerly French speaking uni-
versity at Ghent was converted to the Flemish tongue,
and today in Antwerp it is easier to get a civil an-
swer from a man on the street by speaking German
than by speaking French.
The Flemish, proud masters of the Port of Ant-
werp, claim that the Walloons pre-empt the plums
of government. The Walloons propose to continue the
pre-empting. Thus when Brussels takes a step toward
checking Soviet imports, Antwerp is urged by no
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? 78 FIGHTING THE RED TRADE MENACE
exaggerated feelings of friendliness toward the capi-
tal to refrain from pressing its local claims to con-
sideration. Brussels is forced to compromise; Mos-
cow profits.
How Antwerp actually behaved when Brussels tried
to curb Soviet imports, and the role played by Rot-
terdam, and the dramatic circumstances of the rift in
Belgo-Soviet trade will be discussed in another chap-
ter. Here it is necessary to record the formal course
of events.
Belgium has no diplomatic relations with the So-
viet Union. This is one of the few important in-
stances in which Brussels has failed to follow the lead
of Paris. Belgium industrial investments in Czarist
Russia are estimated to have been worth around
$800,000,000. This was all lost when the Soviet
Government nationalized property and not a penny
has been recovered.
Feeling over this loss is still strong and the pre-
dominance in politics here of the clerical Catholic ele-
ment has made the assumption of diplomatic relations
with the Soviet Union an academic question. So far
Belgo-Soviet diplomatic relations consist of an agree-
ment for the return of citizens, signed April 20,1920.
Despite the lack of diplomatic relations, Belgium
and the Soviet Union by last year had developed a
trade that, though small in itself, made Belgium
seventh largest taker of Soviet goods. In 1930 Bel-
gium imported Soviet grain, flax, oil, lumber and a
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? FIGHTING THE RED TRADE MENACE 79
few other products to the value of $12,800,000. She
exported to the Soviet Union, however, only $3,750,-
000 worth of machines, tools and boilers.
The Belgo-Russian balance of trade was distinctly
unfavorable to Belgium but not large enough in itself,
out of a total Belgian foreign trade of $1,700,000,-
000, to worry about so long as prosperity was abroad
in the land. Last autumn the flood of Soviet grain
disturbed Belgian farmers, the general economic de-
pression made even the small unfavorable trade bal-
ance with Russia irritating and the action of the
French in establishing their license system for Soviet
imports convinced Belgium she should do the same.
The license system, it was hoped, would throttle Rus-
sian "dumping" and improve the trade balance.
France decreed its license system October 4, 1930.
Belgium followed on October 26. Less extensive even
than the French, the Belgian list of Soviet products
requiring a license for import included only cereals
and cereal products, wine, glue and oleic and stearic
acid. The results of the French experiment have been
described. The Belgian findings have been if any-
thing even more discouraging.
Although Soviet grain has ceased to come into the
country legally, it is conceded by the Government
that it comes in in large quantities illegally, smuggled
by Belgian, Dutch and French traders. Petroleum
and timber were not put on the license list because
they are products not produced in Belgium, and, as
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? 80 FIGHTING THE RED TRADE MENACE
in France, the Government had no interest in pro-
tecting American, Canadian or Scandinavian oil and
timber interests. Flax was not put on the list for
reasons given later.
Leaving grain entirely out of account, official Bel-
gium statistics show that in the first two months of
this year, after two months of operation of the license
system, Belgian imports of Soviet petroleum, lumber
and flax have averaged a little over a million dollars
a month, almost precisely as much as last year, while
Soviet imports of Belgian goods had fallen off from
a monthly average in 1930 of $300,000 to a monthly
average in 1931 of $100,000.
As in France the trade balance is now considerably
worse. As in France, Moscow had peremptorily cut
off orders from Belgium while Belgian desire for
cheap Soviet goods not competing with their own had
induced her traders to continue buying nearly as
much as they had before the license system.
As in France the Soviet export trade had suffered
very little, while that of America and the other great
producers of the Soviet staples, oil and lumber, con-
tinues to meet the pressure of Soviet competition
here. In both these products America competes di-
rectly with the Soviet Union for the Belgian mar-
ket, the United States having sold to Belgium in 1929
more than $15,000,000 of petroleum and petroleum
products, and $3,200,000 of timber.
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