Your Excellency: I have the honor to acknowledge receipt of your note of the 28th of December. It is being carefully examined and the points raised in it are receiving consideration, as the result of which a reply shall be addressed to your Excellency dealing in detail with the issues raised and the points to which the United States Government have drawn attention. This consideration and the preparation of the reply will necessarily require some time, and I therefore desire to send without further delay some preliminary observations which will, I trust, help to clear the ground and remove some misconceptions that seem to exist.
Let me say at once that we entirely recognize the most friendly spirit referred to by your Excellency and that we desire to reply in the same spirit and in the belief that, as your Excellency states, frankness will best serve the continuance of cordial relations between the two countries.
His Majesty's Government cordially concur in the principle enunciated by the Government of the United States that a belligerent, in dealing with trade between neutrals, should not interfere unless such interference is necessary to protect the belligerent's national safety, and then only to the extent to which this is necessary. We shall endeavor to keep our action within the limits of this principle on the understanding that it admits our right to interfere when such interference is not with "bona-fide" trade between the United States and another neutral country, but with trade in contraband destined for the enemy's country; and we are ready, whenever our action may unintentionally exceed this principle, to make redress.
We think that much misconception exists as to the extent to which we have, in practice, interfered with trade. Your Excellency's note seems to hold his Majesty's Government responsible for the present condition of trade with neutral countries, and it is stated that, through the action of his Majesty's Government, the products of the great industries of the United States have been denied long-established markets in European countries which, though neutral, are contiguous to the seat of war. Such a result is far from being the intention of his Majesty's Government, and they would exceedingly regret that it should be due to their action.
I have been unable to obtain complete or conclusive figures showing what the state of trade with these neutral countries has been recently, and I can, therefore, only ask that some further consideration should be given to the question whether United States trade with these neutral countries has been so seriously affected. The only figures as to the total volume of trade that I have seen are those for the exports from New York for the month of November, 1914, and they are as follows, compared with the month of November, 1913:
Exports from New York for November, 1913, and November, 1914, respectively: Denmark, $558,000, $7,101,000; Sweden, $377,000, $2,858,000; Norway, $477,000, $2,318,000; Italy, $2,971,000, $4,781,000; Holland, $4,389,000, $3,960,000.
It is true that there may have been a falling off in cotton exports, as to which New York figures would be no guide, but his Majesty's Government have been most careful not to interfere with cotton, and its place on the free list has been scrupulously maintained.
We do not wish to lay too much stress upon incomplete statistics; the figures above are not put forward as conclusive, and we are prepared to examine any further evidence with regard to the state of trade with these neutral countries, which may point to a different conclusion or show that it is the action of his Majesty's Government in particular and not the existence of a state of war and consequent diminution of purchasing power and shrinkage of trade, which is responsible for adverse effects upon trade with the neutral countries.
That the existence of a state of war on such a scale has had a very adverse effect upon certain great industries, such as cotton, is obvious, but it is submitted that this is due to the general cause of diminished purchasing power of such countries as France, Germany, and the United Kingdom rather than to interference with trade with neutral countries. In the matter of cotton it may be recalled that the British Government gave special assistance through the Liverpool Cotton Exchange to the renewal of transactions in the cotton trade of not only the United Kingdom, but of many neutral countries.
Your Excellency's note refers in particular to the detention of copper. The figures taken from official returns for the export of copper from the United States for Italy for the months during which the war has been in progress up to the end of the first three weeks of December are as follows: