Papers Relating to the Foreign Relations of the United States, Transmitted to Congress with the Annual Message of the President, December 2, 1872, Part I
No. 284.
Mr. Nelson to Mr. Fish.
Mexico, January 29, 1872. (Received February 16.)
Sir: Referring to my dispatch No. 505, I have the honor to inclose a copy and translation (A and B) of another article by Mr. Emilio Velaso. published in the Siglo XIX of the 10th instant, upon the subject of the Free Zone,
I am, &c.,
our relations with the united states—the free zone.
Article by Don Emilio Velasco, in the Siglo XIX, of January 10, 1872.
The second point embraced in the message of President Grant, in the part relating to Mexico, is the Free Zone. When this question arose in congress, we defended the Free Zone, and some American papers gave to our words a very different signification from that intended. We believed that upon the maintenance of the zone depended the prosperity of the Mexican frontier, but at the same time we had carefully studied the question whether the evils of which the American Government complains arise from it, in order to find out, in that case, some means of harmonizing the interests of both frontiers. In itself, this question belongs to internal and domestic policy, and it is consequently outside the sphere of diplomacy and of any action of a foreign government; but if in this measure is involved an act of hostility from which direct prejudice would result in the United States, we should not hesitate to grant that the American Government is in the right. By what we have read in the American press, we note that the Free Zone is not at all understood, which is not strange, as in our own country the same mistake has been made as in the United States, and it even found an echo in the Mexican congress, among the opponents of the Zone. This error consists in supposing the existence of a strip of territory along the Rio Bravo through which all kinds of merchandise are allowed free transit, and, as a necessary consequence, an almost unlimited facility for smuggling into both countries.
It is unquestionable that for four years past such smuggling has been practiced in both directions, though not on so great a scale as has been supposed. We will confine ourselves at present to an explanation of the causes of the smuggling carried on from our frontier to that of the United States, with a view to the corrections needed by both countries.
The fiscal institution in question is improperly called a “Free Zone,” and ought rather to be called a “region of free consumption.” The law provides that all the merchandise imported at Matamoras, and at five other towns along the Rio Bravo, shall pay no import duties, so that such merchandise, in order to enjoy this privilege, must necessarily be entered at one of six custom-houses, under pain of confiscation as contraband. All the customary formalities of introduction must be performed, and the exemption is merely from the payment of duties.
When once the goods have been introduced into one of these six towns, they cannot be freely extracted, thence, either to the interior of the republic, to another town of the same zone, or to the American frontier. In the first case, the goods must pay the usual duties and present a safe-conduct to one of the officers of the counter-guard, which are now established at a great distance from the line of the Rio Bravo. In the second case, the goods pay no duties, but must be dispatched with all the customary formalities and safeguards against fraud.
In the third case, the goods dispatched for the United States must pay a transit duty amounting to 25 percent, of the importation duty, and must be sent by certain specified passes of the Rio Bravo, all situated in front of American towns, and watched by Mexican customs employes, under penalty of contraband traffic.
Our legislation consequently tends to protect the American revenues from fraud. The Free Zone cannot, therefore, be considered as a direct cause of smuggling from our frontier to that of the United States. This fact is proved by statistics. The Free Zone was established in 1858. Since that time it has passed through two periods, by the comparison of which our conclusion is justified.
[Page 382]From 1858 to 1861, i. e., before the American civil war, there was no smuggling from Mexico into Texas. It was only in 1867, when the re-establishment of peace in both countries restored the normal condition of things, that smuggling commenced. In both these periods the “Free Zone” has existed, and in the first of them the American revenues were not defrauded; which fact proves that the true cause of the smuggling of which the American Government complains, has arisen since 1861. And, in fact, this cause is no other than the high American tariff established during the civil war; consequently, the question of smuggling on the American frontier is reduced to a tariff question. Merchandise has, on the American frontier, so high a price that the Texans are driven to seek in our towns what they need, obtaining it at low prices, and smuggling it across the river. This circumstance also explains the fact that the merchants of Brownsville are, in general, engaged in this illicit traffic, as the only means of competing with Mexican commerce on the frontier.
The opponents of the Free Zone find, in this fact, the point of contact between that zone and the smuggling carried on with the United States. Smuggling, say they, will be carried on in proportion to the profits it affords, and according to the relative cheapness of goods on the Mexican frontier will be the extent and the profit of smuggling. From this it follows that the exemption from duties and consequent cheapness of foreign goods along the Mexican frontier gives occasion to smuggling into the United States. This is the argument of the American opponents of the zone; but a similar argument proves our own assertion, namely, that the Free Zone is not the direct cause of smuggling into the United States, and that the direct cause is to be found in the high American tariff.
If the American Congress should reduce the tariff, the chief motive for smuggling would disappear; while if the Free Zone should be abolished, under the present circumstances, there would still remain in the difference of the two tariffs a sufficient incentive for the continuance of smuggling.
The proximity of the principal Mexican and American towns on the frontier is so immediate that only an absolute equality of duties could destroy the temptation to defraud the customs. Matamoras and Brownsville are so closely linked together in situation and in business interests that, without exaggeration, they may be considered as wards of the same city. It follows that every fiscal measure adopted in either of them directly affects the prosperity of the other. The establishment of a line of steamers between Brownsville and New Orleans would divert into that channel a great part of the foreign commerce of Matamoras; and this simple circumstance, if combined with the abolition of the zone, would cause an immense amount of smuggling into our country.
Careful observers may satisfy themselves of the exactness of these observations by studying the history of the frontier since 1848. The evil effects of the high American tariff is now felt throughout the United States; but those effects are more perceptible on the frontier, through the contrast with the Mexican system. At various periods since 1848 the contrary has been the case. High protective duties in Mexico have had to struggle against a low American tariff, and the system of drawbacks in the American ports, which brought about an active contraband traffic from Texas into Mexico. These considerations prove that the total extinction of such alternate fluctuations could only be effected by an absolute, and, consequently, impossible identity of political, topographical, and fiscal circumstances on the two frontiers. The mere enunciation of this fact suffices to show that the remedy for present evils must be sought in a different order of ideas. The American Government imagines that the only remedy is the abolition of the zone. The above considerations show how far we are from admitting that opinion; and, furthermore, we do not hesitate to affirm that such a measure, instead of solving, would but complicate the difficulty, as it would cause a double contraband traffic; first from the American frontier to ours, and afterward vice versa.
Moreover, our government, in seeking an amicable solution of this question as a mark of deference to the Government of the United States, should not forget to befriend the commercial interests of the frontier and the fiscal interests of Mexico. Some indications on this subject will be given by us in a future article.