This, the
original
basis of French hostility to the
Soviet Union, was a business matter.
Soviet Union, was a business matter.
Soviet Union - 1931 - Fighting the Red Trade Menace
net/2027/uc1.
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hathitrust.
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? FIGHTING THE RED TRADE MENACE 47
dependent sources of oil, struggled for years with
the American and British stockholders to try to in-
duce them to consent to do something effective about
moving the Mosul production. Balked at every turn,
the French Government has finally found what it
believes is a way out.
On April 4 of this year the French Government
published a decree revolutionizing the petroleum in-
dustry in France. It is a complicated document, much
too long even for summary, but the important pro-
visions are: all imports of other than crude petroleum
into France must cease for three years; after those
three years all petroleum products used in France
must be refined in France; all imports of crude
petroleum are contingented among French and
foreign companies, Standard, Vacuum, Royal Dutch
and Anglo-Persian getting 51. 8 per cent of the im-
port licenses, the Cie. Francaise des Petroles getting
19. 8 per cent and independent French producers
getting 28. 4 per cent.
Lastly, but most important, the Cie. Francaise is
given the right during twenty years to import, treat
and distribute one-fourth of the total amount of
petroleum products consumed in France. This oil
may come from Mosul or from any other source that
is approved by the Government, Soviet oil not ex-
cluded. Here is the crux of the battle for the French
oil market. Soviet oil is the threat, Soviet oil the
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? 48 FIGHTING THE RED TRADE MENACE
weapon used by the French to force the American and
British interests to consent to the building of the
Irak pipe line, an enterprise that it is estimated
will cost around $50,000,000, may or may not be
profitable to the French, certainly will be unprofit-
able to the British and Americans.
But faced with the alternative of Mosul oil, in
France, or an increase of the Soviet's share in the
Market to 25 per cent, France's partners in the Irak
Company have gone at least far enough to have
enabled an announcement in the Chamber of Deputies
that an agreement had been reached whereby a trunk
line would be built part of the way from Mosul, with
a branch line to the French port of Tripoli and a
branch line to the British port of Haifa. The French
apparently had triumphed, but the line is not yet
built, and, until it is, there is no likelihood that they
will let drop the weapon that brought about the
victory.
Nobody knows exactly how large Soviet oil ex-
ports to France are, for nobody outside the con-
fidence of the French Government knows exactly
how much Soviet oil the French military and naval
establishment takes. For civil consumption there is
listed an import of 375,748 tons of Soviet oil out
of a total oil import of 3,525,000 tons, or a little
over 10 per cent. It is believed, however, that the
navy uses not less than 260,000 tons of Soviet fuel
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? FIGHTING THE RED TRADE MENACE 49
oil and oil products yearly, while the army is said to
use around 40,000 tons, making a total of 300,000
tons for the two services.
This large quantity, about 2,000,000 barrels, not
included in the foreign trade statistics and intended
exclusively for the French military and naval es-
tablishments, amounts to more than one-half of the
total imports by Italy of petroleum and petroleum
products.
Both the Italian and French navies nurse at the
oil reservoirs of the Soviet Union, the Italian navy
to strengthen itself against France, the French to
strengthen itself against whom? Only the French, or
time, perhaps can say. But as far as oil politics are
concerned, Soviet oil serves France as its best arma-
ment against American and British oil interests. And
"disarmament" is an unpopular cry in France today.
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? CHAPTER VI
Paris :
If the Soviet Union has nothing more to fear than
the present French efforts at "defense against the
Bolshevik menace" the future is rosy for Red
economic expansion. With more reasons than any
other nation to resent and fear the Five-Year Plan,
France, whom Moscow perpetually charges with
leadership of the anti-Soviet front in Europe, is to-
day actually thinking of nothing more aggressive
than a method to improve its trade relations with
the Five-Year planners.
Tight-lipped and determined, France announced
October, 1930 that she had found the way to curb
Russian "dumping. " It was in the month when more
than one-third of all the wheat, more than three-
fourths of all the rye, more than half of all the bar-
ley, and a third of all the oats coming on the world
market were pouring from the holds of Soviet and
Soviet chartered steamships.
In that month alone the Soviet Union sent abroad
eleven million bushels of wheat, nineteen million
bushels of rye, four million bushels of barley, twelve
million bushels of oats.
The Little Entente, Rumania, Czecko- Slovakia,
50
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? FIGHTING THE RED TRADE MENACE 51
Poland, France's allies, and Bulgaria and Hungary,
most of them heavy grain exporters, were stricken
with alarm, had met, passed protests, appealed to
France to help them, at Geneva, unite the nations to
dam the avalanche of Russian grain. At the League
in September, Fascist Italy, Republican Germany
refused to cooperate. Sympathetic, the others shared
the general regret, remembered their industrialists'
contracts to sell to the Soviet Union, asked France to
show what ought to be done.
France did. By decree under article 17 of her
customs laws, authorizing the Government to take
urgent measures in case foreign governments behave
in a way calculated to impede French commerce, the
Cabinet of Andre Tardieu, the man of the strong
line, on October 4 announced an edict subordinating
the importation of Soviet merchandise in fifteen
categories to special authorization of the Minister
of the Budget.
Applause was not only national but international.
The rest of the world saw France, defender of
Europe against the Red, as one time against the Ger-
man tide, taking the lead to check the Soviet march
toward industrialization, toward power, toward a
future heavy with portent for this continent and the
world. Moscow painted pictures of Briand, Poin-
car? , Weygand, plotting war.
High point of world reaction to the alarm over
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? 52 FIGHTING THE RED TRADE MENACE
Soviet "dumping," the French license system turned
out to be, however, not a measure for the defense of
Europe, not one for the defense of the capitalist
principle in France, but a measure for the defense
of the French balance of trade--of trade with the
state that avows eternal war with capitalism, pre-
dicts the eventual fall of all capitalist Governments.
Seven months after the license system was in-
augurated, the French Government admitted that it
had failed of even this modest goal.
The then Minister of Commerce, M. Flandin, in
October declared that French trade with the Soviet
Union was extremely adverse, that France in the
first six months of the year had bought $14,000,000
worth of products from the Soviet Union, and sold
but $4,000,000 worth, that this could not continue,
and that the license system should be the remedy.
He reckoned without Moscow. For despite all the
fanfare, and because of various somewhat intricate
reasons, having something to do with the attractive-
ness of low prices, Soviet or otherwise, and having
something to do also with the strong commercial
antagonism felt in France toward other countries
than the Soviet Union, the French Government could
not bring itself actually to refuse licenses to many
categories of Soviet products. Yet the Soviet Govern-
ment canceled contracts right and left, retaliating
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? FIGHTING THE RED TRADE MENACE 53
with a brusque effectiveness that evoked pain in
French industrial and official circles.
France's trade balance with the Soviet Union is
now worse than ever. In the five months, October 1,
1929, to March 1, 1930, the Soviet Union exported
to France goods to the value of $14,300,000; in the
same five months, 1930-31, after the license system,
Soviet exports to France fell off to $12,300,000. But
in the five months October 1929 to March 1930,
France exported to the Soviet Union goods to the
value of $5,700,000, while in the same five months,
1930-31, French exports to the Soviet Union fell off
to $1,300,000. The Soviet Union lost $2,000,000;
France lost $4,400,000. The Soviet Union's exports
to France fell off by 14 per cent; France's exports to
the Soviet Union fell off by 80 per cent.
If the purpose of the license system had been to
sacrifice French trade in order to hurt the Soviet
Union, it might have been said to have achieved a
meager success, but nevertheless a success. For the
Soviet Union was hit. If the purpose had been to help
French trade and only incidentally to hurt the Soviet
Union, the license system must be said to have failed.
For France was hit harder.
Proof that the French Government did really only
intend to protect French industries and agriculture,
and only incidentally to hurt the Soviet Union is
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? 54 FIGHTING THE RED TRADE MENACE
provided by an examination of the articles subjected
to the license system, and of those omitted and of the
way it has been applied. It is at the same time of
particular interest to the United States to note the
degree to which the French Government has been
embarrassed in its possibly sincere, if incidental, de-
sire to strike a blow at Bolshevism by its unwilling-
ness to deprive the French people of the advantages
of low priced Soviet commodities if the competing
commodities are of other than French or of French-
allied origin.
The decree listed as requiring special authoriza-
tion for import: cereals and their derivatives, sugar,
molasses, common woods, flax, live poultry, refriger-
ated pork, killed poultry, eggs, isinglass and glue,
gelatine, oleine, stearine, and oleic and stearic acid.
Omitted was the largest item of Soviet export to
France, petroleum and petroleum products, an item
that made up nearly 30 per cent of Soviet sales to
France in 1930, one of the items of Soviet exports
with which the United States products compete in-
tensely in this country.
After the license system was invoked, France in-
creased her purchases of petroleum from the Soviet
Union, buying more than twice as much in the first
two months of 1931 as in the first two months of
1930, or 108,900 tons as against 42,300 tons. The
fact that France has no petroleum production of her
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? FIGHTING THE RED TRADE MENACE 55
own was certainly decisive for the omission of
petroleum from the list of Soviet goods requiring
licenses, and was an indication of the absence of any
French intent merely to block Soviet trade. But the
part played in this omission by the French attitude
toward American and other foreign oil importers re-
quires more detailed treatment in a further chapter.
The feeling of France toward America also played
a role in her attitude toward Soviet wheat. It was
joyfully expected by the wheat exporting countries
of the world, including the United States, that the
French license system would mean a flat embargo
on Soviet wheat. Had the license system not come
partly as a result of the protest that Soviet wheat,
selling in October at 73 to 75 cents a bushel, ca. f.
ports, before customs, as compared with Manitoba
and American wheat at 91 cents a bushel, was ruin-
ing the French wheat grower even when protected
by a tariff of 90 cents a bushel? Even today the im-
pression prevails that the French did embargo Soviet
wheat, but the foreign trade statistics of the Min-
istry of France tell a different story.
According to these statistics, France in the fivr>>
months after passing the license decree, from October
4,1930, to March 1,1931, imported a total of 1,764. -
000 bushels of Russian wheat, in October 788,000
bushels, in November 637,000, in December 235,000,
in January 83,000, and in February 21,000 bushels.
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? 56 FIGHTING THE RED TRADE MENACE
The Soviet Union's total exports of wheat to all
countries in January and February fell off to 2,900,-
000 bushels, so that it is difficult to say whether the
decline in French imports of Soviet wheat in January
and February was due to the license system or due to
the diminished supply of Soviet wheat.
A part but not all of the October imports may
have been due to the clause exempting from the
operation of the license decree "merchandise which
it can be shown was shipped directly for France be-
fore October 4. " In other words, while it is certain
that Soviet wheat entered the country in smaller
volume after the license decree than would have been
the case had there been no license decree, it is equally
clear from the French official statistics that the Gov-
ernment issued licenses for the import of a consider-
able quantity of Soviet wheat.
To have forbidden it entry after the French grow-
ers had disposed of their crop would have been to
benefit whom? The principal competitors of the
Soviet Union for the French wheat markets are
America, Canada, Australia.
A similar picture is provided in the records of
timber imports from the Soviet Union, another item
placed on the list of commodities requiring licenses.
After the license system had been established, in the
five months from October, 1930, to the end of March,
1931, France imported 128,080 metric tons of timber
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? 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 47
dependent sources of oil, struggled for years with
the American and British stockholders to try to in-
duce them to consent to do something effective about
moving the Mosul production. Balked at every turn,
the French Government has finally found what it
believes is a way out.
On April 4 of this year the French Government
published a decree revolutionizing the petroleum in-
dustry in France. It is a complicated document, much
too long even for summary, but the important pro-
visions are: all imports of other than crude petroleum
into France must cease for three years; after those
three years all petroleum products used in France
must be refined in France; all imports of crude
petroleum are contingented among French and
foreign companies, Standard, Vacuum, Royal Dutch
and Anglo-Persian getting 51. 8 per cent of the im-
port licenses, the Cie. Francaise des Petroles getting
19. 8 per cent and independent French producers
getting 28. 4 per cent.
Lastly, but most important, the Cie. Francaise is
given the right during twenty years to import, treat
and distribute one-fourth of the total amount of
petroleum products consumed in France. This oil
may come from Mosul or from any other source that
is approved by the Government, Soviet oil not ex-
cluded. Here is the crux of the battle for the French
oil market. Soviet oil is the threat, Soviet oil the
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? 48 FIGHTING THE RED TRADE MENACE
weapon used by the French to force the American and
British interests to consent to the building of the
Irak pipe line, an enterprise that it is estimated
will cost around $50,000,000, may or may not be
profitable to the French, certainly will be unprofit-
able to the British and Americans.
But faced with the alternative of Mosul oil, in
France, or an increase of the Soviet's share in the
Market to 25 per cent, France's partners in the Irak
Company have gone at least far enough to have
enabled an announcement in the Chamber of Deputies
that an agreement had been reached whereby a trunk
line would be built part of the way from Mosul, with
a branch line to the French port of Tripoli and a
branch line to the British port of Haifa. The French
apparently had triumphed, but the line is not yet
built, and, until it is, there is no likelihood that they
will let drop the weapon that brought about the
victory.
Nobody knows exactly how large Soviet oil ex-
ports to France are, for nobody outside the con-
fidence of the French Government knows exactly
how much Soviet oil the French military and naval
establishment takes. For civil consumption there is
listed an import of 375,748 tons of Soviet oil out
of a total oil import of 3,525,000 tons, or a little
over 10 per cent. It is believed, however, that the
navy uses not less than 260,000 tons of Soviet fuel
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? FIGHTING THE RED TRADE MENACE 49
oil and oil products yearly, while the army is said to
use around 40,000 tons, making a total of 300,000
tons for the two services.
This large quantity, about 2,000,000 barrels, not
included in the foreign trade statistics and intended
exclusively for the French military and naval es-
tablishments, amounts to more than one-half of the
total imports by Italy of petroleum and petroleum
products.
Both the Italian and French navies nurse at the
oil reservoirs of the Soviet Union, the Italian navy
to strengthen itself against France, the French to
strengthen itself against whom? Only the French, or
time, perhaps can say. But as far as oil politics are
concerned, Soviet oil serves France as its best arma-
ment against American and British oil interests. And
"disarmament" is an unpopular cry in France today.
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? CHAPTER VI
Paris :
If the Soviet Union has nothing more to fear than
the present French efforts at "defense against the
Bolshevik menace" the future is rosy for Red
economic expansion. With more reasons than any
other nation to resent and fear the Five-Year Plan,
France, whom Moscow perpetually charges with
leadership of the anti-Soviet front in Europe, is to-
day actually thinking of nothing more aggressive
than a method to improve its trade relations with
the Five-Year planners.
Tight-lipped and determined, France announced
October, 1930 that she had found the way to curb
Russian "dumping. " It was in the month when more
than one-third of all the wheat, more than three-
fourths of all the rye, more than half of all the bar-
ley, and a third of all the oats coming on the world
market were pouring from the holds of Soviet and
Soviet chartered steamships.
In that month alone the Soviet Union sent abroad
eleven million bushels of wheat, nineteen million
bushels of rye, four million bushels of barley, twelve
million bushels of oats.
The Little Entente, Rumania, Czecko- Slovakia,
50
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? FIGHTING THE RED TRADE MENACE 51
Poland, France's allies, and Bulgaria and Hungary,
most of them heavy grain exporters, were stricken
with alarm, had met, passed protests, appealed to
France to help them, at Geneva, unite the nations to
dam the avalanche of Russian grain. At the League
in September, Fascist Italy, Republican Germany
refused to cooperate. Sympathetic, the others shared
the general regret, remembered their industrialists'
contracts to sell to the Soviet Union, asked France to
show what ought to be done.
France did. By decree under article 17 of her
customs laws, authorizing the Government to take
urgent measures in case foreign governments behave
in a way calculated to impede French commerce, the
Cabinet of Andre Tardieu, the man of the strong
line, on October 4 announced an edict subordinating
the importation of Soviet merchandise in fifteen
categories to special authorization of the Minister
of the Budget.
Applause was not only national but international.
The rest of the world saw France, defender of
Europe against the Red, as one time against the Ger-
man tide, taking the lead to check the Soviet march
toward industrialization, toward power, toward a
future heavy with portent for this continent and the
world. Moscow painted pictures of Briand, Poin-
car? , Weygand, plotting war.
High point of world reaction to the alarm over
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? 52 FIGHTING THE RED TRADE MENACE
Soviet "dumping," the French license system turned
out to be, however, not a measure for the defense of
Europe, not one for the defense of the capitalist
principle in France, but a measure for the defense
of the French balance of trade--of trade with the
state that avows eternal war with capitalism, pre-
dicts the eventual fall of all capitalist Governments.
Seven months after the license system was in-
augurated, the French Government admitted that it
had failed of even this modest goal.
The then Minister of Commerce, M. Flandin, in
October declared that French trade with the Soviet
Union was extremely adverse, that France in the
first six months of the year had bought $14,000,000
worth of products from the Soviet Union, and sold
but $4,000,000 worth, that this could not continue,
and that the license system should be the remedy.
He reckoned without Moscow. For despite all the
fanfare, and because of various somewhat intricate
reasons, having something to do with the attractive-
ness of low prices, Soviet or otherwise, and having
something to do also with the strong commercial
antagonism felt in France toward other countries
than the Soviet Union, the French Government could
not bring itself actually to refuse licenses to many
categories of Soviet products. Yet the Soviet Govern-
ment canceled contracts right and left, retaliating
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? FIGHTING THE RED TRADE MENACE 53
with a brusque effectiveness that evoked pain in
French industrial and official circles.
France's trade balance with the Soviet Union is
now worse than ever. In the five months, October 1,
1929, to March 1, 1930, the Soviet Union exported
to France goods to the value of $14,300,000; in the
same five months, 1930-31, after the license system,
Soviet exports to France fell off to $12,300,000. But
in the five months October 1929 to March 1930,
France exported to the Soviet Union goods to the
value of $5,700,000, while in the same five months,
1930-31, French exports to the Soviet Union fell off
to $1,300,000. The Soviet Union lost $2,000,000;
France lost $4,400,000. The Soviet Union's exports
to France fell off by 14 per cent; France's exports to
the Soviet Union fell off by 80 per cent.
If the purpose of the license system had been to
sacrifice French trade in order to hurt the Soviet
Union, it might have been said to have achieved a
meager success, but nevertheless a success. For the
Soviet Union was hit. If the purpose had been to help
French trade and only incidentally to hurt the Soviet
Union, the license system must be said to have failed.
For France was hit harder.
Proof that the French Government did really only
intend to protect French industries and agriculture,
and only incidentally to hurt the Soviet Union is
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? 54 FIGHTING THE RED TRADE MENACE
provided by an examination of the articles subjected
to the license system, and of those omitted and of the
way it has been applied. It is at the same time of
particular interest to the United States to note the
degree to which the French Government has been
embarrassed in its possibly sincere, if incidental, de-
sire to strike a blow at Bolshevism by its unwilling-
ness to deprive the French people of the advantages
of low priced Soviet commodities if the competing
commodities are of other than French or of French-
allied origin.
The decree listed as requiring special authoriza-
tion for import: cereals and their derivatives, sugar,
molasses, common woods, flax, live poultry, refriger-
ated pork, killed poultry, eggs, isinglass and glue,
gelatine, oleine, stearine, and oleic and stearic acid.
Omitted was the largest item of Soviet export to
France, petroleum and petroleum products, an item
that made up nearly 30 per cent of Soviet sales to
France in 1930, one of the items of Soviet exports
with which the United States products compete in-
tensely in this country.
After the license system was invoked, France in-
creased her purchases of petroleum from the Soviet
Union, buying more than twice as much in the first
two months of 1931 as in the first two months of
1930, or 108,900 tons as against 42,300 tons. The
fact that France has no petroleum production of her
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? FIGHTING THE RED TRADE MENACE 55
own was certainly decisive for the omission of
petroleum from the list of Soviet goods requiring
licenses, and was an indication of the absence of any
French intent merely to block Soviet trade. But the
part played in this omission by the French attitude
toward American and other foreign oil importers re-
quires more detailed treatment in a further chapter.
The feeling of France toward America also played
a role in her attitude toward Soviet wheat. It was
joyfully expected by the wheat exporting countries
of the world, including the United States, that the
French license system would mean a flat embargo
on Soviet wheat. Had the license system not come
partly as a result of the protest that Soviet wheat,
selling in October at 73 to 75 cents a bushel, ca. f.
ports, before customs, as compared with Manitoba
and American wheat at 91 cents a bushel, was ruin-
ing the French wheat grower even when protected
by a tariff of 90 cents a bushel? Even today the im-
pression prevails that the French did embargo Soviet
wheat, but the foreign trade statistics of the Min-
istry of France tell a different story.
According to these statistics, France in the fivr>>
months after passing the license decree, from October
4,1930, to March 1,1931, imported a total of 1,764. -
000 bushels of Russian wheat, in October 788,000
bushels, in November 637,000, in December 235,000,
in January 83,000, and in February 21,000 bushels.
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? 56 FIGHTING THE RED TRADE MENACE
The Soviet Union's total exports of wheat to all
countries in January and February fell off to 2,900,-
000 bushels, so that it is difficult to say whether the
decline in French imports of Soviet wheat in January
and February was due to the license system or due to
the diminished supply of Soviet wheat.
A part but not all of the October imports may
have been due to the clause exempting from the
operation of the license decree "merchandise which
it can be shown was shipped directly for France be-
fore October 4. " In other words, while it is certain
that Soviet wheat entered the country in smaller
volume after the license decree than would have been
the case had there been no license decree, it is equally
clear from the French official statistics that the Gov-
ernment issued licenses for the import of a consider-
able quantity of Soviet wheat.
To have forbidden it entry after the French grow-
ers had disposed of their crop would have been to
benefit whom? The principal competitors of the
Soviet Union for the French wheat markets are
America, Canada, Australia.
A similar picture is provided in the records of
timber imports from the Soviet Union, another item
placed on the list of commodities requiring licenses.
After the license system had been established, in the
five months from October, 1930, to the end of March,
1931, France imported 128,080 metric tons of timber
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? 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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