651.5531/57
The Chargé in France (Armour) to the Secretary of State
[Received July 7.]
Sir: I have the honor to refer to previous correspondence relating to the increase of the French importation tax and especially to the Embassy’s despatch No. 2045 of December 4, 1931,37 dealing with the protests against the increase which might be based on the commercial treaties now in force.
The French Government has always taken the position that the increase is not an increase of customs duties but a readaptation of the turnover tax. When the turnover tax was instituted, it seemed reasonable to apply an equal tax on imported goods which otherwise would be preferred. The importation tax has been increased, in the case of manufactured goods, to take account of the cumulative effect on French products of the turnover tax applied to the sales of raw materials and semimanufactured products of which the goods are composed. France has, however, agreed with several countries, including Belgium, that internal taxes shall not bear more heavily on the products of those countries than on similar French products (Article 14 of the commercial agreement of February 23, 1928, between Belgium, Luxemburg and France).38 The Belgian legislation on turnover tax is very similar to the French. The Belgian Government [Page 236] obtained authority from the Belgian Parliament to impose an extra duty of 2% or 4% on imports from France and opened negotiations for the mutual waiver of these increases of tax.
It has been agreed, subject to approval by the French Parliament, that the increases shall not be applied in the case of French imports into Belgium and Belgian imports into France. The agreement is represented as a double taxation convention and it has been announced that it was possible to reach an agreement owing to the almost complete similarity between the legislation of the two countries on this matter. Nevertheless, the agreement appears likely to cause difficulties.
It is understood that other countries have protested against the increase, especially Switzerland which has imposed a tax on imports from France in order to provide a fund to compensate its own exporters, and these countries will be encouraged in their protests. Also the fact that manufactured goods imported into France from Belgium will pay 4% less tax than those imported from other countries is likely to bring a claim for reduction from all countries entitled to most-favored-nation treatment. In this connection, however, it may be remarked that the French agreements with Germany and Austria expressly exclude from the scope of the most-favored-nation clause advantages granted to avoid double taxation. That there is no intention to abolish the duty on imports from countries other than Belgium is probably indicated by the reference to the similarity between French and Belgian legislation.
If the agreement comes into force, its effect will be to give Belgium preferential treatment to the detriment of all other countries, including the United States. I see no grounds for claiming that this is contrary to any agreement between France and the United States and it may be difficult to bring it within the wording of Section 338 of the Tariff Act since the importation tax appears not to be a “customs, tonnage or port duty.” Nevertheless, if it is found possible to conclude a commercial treaty with France, it appears desirable that that treaty should insure to the United States the benefit of any such concession. There may be advantages in informing the French Government unofficially before the agreement with Belgium is ratified that the United States will expect to receive the same reductions of importation tax that Belgium does. If the position adopted by the United States is known at once, the French Government may be able to take satisfactory action. I should be glad to have instructions generally as to the attitude to be taken in this matter and in particular whether any representations therein should now be made to the French Government.
Respectfully yours,