[Enclosure—Memorandum]
[Washington,] June 5,
1929.
An analysis of the studies prepared by the Geographic Divisions on
the probable foreign reaction to the rates proposed in the Tariff
Bill now before Congress suggests that, if the Bill becomes law, it
will confront this Department with serious political problems and
may work substantial injury to American economic interests, entirely
out of proportion to the incidence of the proposed rates and to the
possible foreign acts of direct retaliation which they may
provoke.
In general, the most considerable effects are anticipated with
respect to Western Europe and France, in particular: in the British
Empire, especially Canada; and in Latin America, principally in
Cuba, Argentina and Uruguay. No very serious repercussions are
forecast with respect to the countries whose relations with the
United States are handled in the Eastern European, Near Eastern,
Mexican and Far Eastern Divisions.
Western Europe
- (1)
- Commercial Treaties. The negotiation of
commercial treaties on an unconditional most-favored-nation
basis will be rendered more difficult in the case of France and
Holland. In Spain a strong impetus will be given to the current
tendency to denounce the modus
vivendi.
- (2)
- Geneva Convention.35 There is an
indication, voiced by Czechoslovakia and France, to make the new
rates an excuse for failure to
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ratify or apply fully the Geneva
Convention ending import and export restrictions. This would
imply the renewal or extension of the quota or contingent system
from which certain typical American products—notably
automobiles—have suffered in the past.
- (3)
- Films. The State Department’s protest
to France,36 Germany,37 Spain, Italy,
Czechoslovakia, Austria and Hungary against existing or
contemplated film quotas may be merged with the general subject
of tariff retaliation and accordingly may be rendered
ineffective or be politely ignored.
- (4)
- European Economic Solidarity. Powerful
impetus will be given to the present tendency to build up in
Europe, through a system of international cartels and tariff
concessions, a solid economic front on a definitely
anti-American basis. The League of Nations may be used as a
center of idealistic criticism of the United States to justify
economic action along Pan-European lines.
- (5)
- British Imperial Preference. A similar
and very powerful impetus will be given to strengthening the
present system of preference in tariff rates between the
component parts of the British Empire. Canada, in particular,
may be driven away from her neighborly and natural commercial
intercourse with the United States into an attitude of economic
hostility and of corresponding British political solidarity.
Other British American possessions may be driven into closer
economic relations with Canada. Similar forces may orientate New
Zealand, the Commonwealth of Australia and the Union of South
Africa into closer preferential relations with the United
Kingdom.
- (6)
- Anti-American Commercial Propaganda.
Opportunity will be created in the British Dominions, the Latin
American, the Far Eastern and other Asiatic markets to exploit
local resentment against the new rates so as to enable our
competitors to recapture lost markets. Anti-American commercial
propaganda may be stimulated from European competitive sources,
principally British. It is interesting to note that at this time
the British Government is sending a trade mission to the
Argentine Republic and to Brazil.
- (7)
- Debts and Loans. Some difficulty may be
experienced by American financiers in the negotiation of foreign
loans, both through local resentment and through the argument
that by putting high duties on imports we render it impossible
for our debtors to repay us. The effect of this situation would
be to make London, Amsterdam and Paris the appropriate agencies
for international finance and to compel our financiers to
transact their foreign loans through competitive banking
agencies.
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Latin America
The Chief of the Division of Latin American Affairs observes:
“If the proposed increases in the tariff are adopted the
political effect on our relations with Latin America will be
out of all proportion to any probable effect on our actual
importations from the countries involved. The feeling in the
majority of the Latin American countries towards the United
States is more unfriendly now than at any time for many
years past. It has been skillfully fomented by our
commercial competitors and by those elements which from
conviction or for political reasons have been active in
magnifying the bogie of American imperialism. Any action
which can be represented, reasonably or not, as an injury to
the interests of a Latin American country will play into the
hands of these unfriendly elements and will afford them a
pretext for a new campaign against us. The seriousness of
this possibly can not be appreciated unless one has followed
the violent and almost hysterical press comment in such
countries as Argentina, Uruguay and Cuba during the past few
months.
“In Argentina and Uruguay the threatened increase in the
tariff on certain agricultural products has taken the place
of the Nicaraguan question as the chief weapon of propaganda
against the United States. The sensational campaign of the
Sociedad Rural Argentina with its
slogan “Buy from those who buy from us” is an example of the
use which foreign, and particularly British, commercial
interests have made of this weapon. Although this campaign
has been carried to a point where it seems to have produced
some measure of opposition in the Argentine itself, it will
receive a new impetus when duties on such products as meat,
poultry and flax seed are actually increased. The reaction
in Uruguay will be very similar to that in Argentina.
“In Cuba the entire community seems to have reached a state
of mind where it regards the proposal for an increase in the
American sugar tariff as a matter of life and death for the
Cuban Republic.
“The feeling in other Latin American countries will be
unfavorably affected to a less extent. The increase in the
duty on corn, for example, will injure if not kill a new and
very promising industry in the Dominican Republic. Brazil
will be hit by the increase on Brazil nuts. Fortunately the
proposal for an increase in the duty on bananas, which would
have hurt nearly all of our closest neighbors, seems to have
been abandoned.”
Eastern Europe
It does not appear that the proposed changes in the tariff will have
on the exports to the United States of Finland, Poland, Estonia,
Latvia or Lithuania, an effect sufficient to evoke protest or to
give rise to a feeling of ill will.
Near East
Owing to the fact that our commercial rights are guaranteed in the
Near Eastern countries held under mandate and by the Capitulatory
regime in Egypt, while Greece for financial and Turkey for
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political reasons does
not desire to offend us, no special reaction is anticipated in this
area. However, the Prime Minister of Egypt stated to the American
Minister in Cairo that the imposition of a customs duty on cotton by
the United States would depress the prices of cotton in Egypt, thus
causing a financial crisis in that country and might result in an
anti-American feeling which would no doubt seriously affect the sale
of American goods in Egypt.
Mexican
No serious reaction is anticipated.
Far East
No serious reaction to the proposed rates is anticipated in China,
Japan or Siam. It is pointed out that the duties substantially
affect only $12,000,000 out of $47,000,000 dutiable products
imported from China in 1927, as against $104,000,000 non-dutiable;
and $17,000,000 out of $47,000,000 dutiable products imported from
Japan in 1927, as against $354,000,000 non-dutiable.
