The Acting Secretary of State (Castle) to the Ambassador in Chile (Collier)
37. Embassy’s telegrams: No. 109, August 22, 11 a.m.; No. 111, August 25, 4 p.m.; No. 115, August 30, 3 p.m.
1. It is the feeling of the Department that objection may properly be raised by the Government of the United States with respect to point 3 in Embassy’s synopsis of proposed law and also with respect to preferential export duties or bounties of similar effect should measures such as those contemplated in point 2 be brought up again.
You should try in every proper way to dissuade the Government of Chile from applying the above discriminatory measures, pointing out that Chilean ships and their cargoes pay the same duties and charges in American ports as American ships and their cargoes, and that the failure of Chile to accord reciprocal treatment to American ships would be viewed by the Government of the United States with the greatest regret. You may say also the policy of national treatment of shipping has become almost universal and that according to available information only two nations at the present time depart therefrom. Almost invariably such discriminatory policies lead to controversies with other states.
2. The following is for your information and guidance. The two nations to which reference is made above are Mexico and Portugal. In the case of the latter, representatives of maritime nations have made strong representations.14
3. As to point 1, while the Government of the United States does not question the legal right of nations to subsidize shipping, yet it must point out that the granting of subsidies to ships using the Panama [Page 529] Canal, with the avowed object of relieving such ships of the burden of tolls which competing ships are obliged to pay, would change the present status whereby the Canal is used by vessels of all countries on an equal footing. The Government of the United States would view with concern any step which would tend to substitute for the present regime of equality in the use of the Canal one of special advantage. You may discuss this matter in the above sense with the appropriate authorities. If these authorities should refer to mail payments to the Grace Line by the Government of the United States, you may indicate that these payments have no relation to Canal tolls and that similar payments are made by the Government of the United States to lines operating in other parts of the world.
For your information. The Department understands that payments to the Grace Line for carrying United States mail to the west coast of South America during the fiscal year ending June 30, 1927, amounted to $284,801, and to the Chilean Line, the Compañía Sud Americana de Vapores, whose ships it is proposed to subsidize, $50,883. The Grace Line employs four ships and has approximately two sailings a month, while the Chilean Line employs two ships and has one sailing a month. Possibly it was the disparity in such payments which prompted the recommendation of a subsidy to the Chilean Line. It may be useful in this connection to ascertain the payments by the Chilean Government to the two companies for carrying the mail.
On the basis of its present information regarding point 4 the Department perceives no grounds for objection.
It is the desire of the Department to conclude a general commercial treaty with Chile containing provisions for reciprocal national treatment of shipping. On August 19 instructions were mailed to you.15 Kindly employ especial diligence to prevent the adoption of a policy so gravely at variance with United States treaty aims.
Inform Department fully of any action by you. In case you discuss the question with your colleagues, you should be careful to avoid any suggestion of joint action. You should not threaten retaliation in any discussions with Chilean officials.