The developing situation is described in the attached memorandum, which
also makes it clear that the chief commercial powers of Europe have
freed themselves from obligation under the tariff truce.
[Enclosure]
Decline of the Tariff Truce
[Washington,] November 16,
1933.
Of the 60 original signatories to the tariff truce, Venezuela, Irish
Free State, The Netherlands, Sweden, Switzerland and, as announced
November 7, Great Britain, have formally withdrawn.
France and Italy have practically withdrawn. The text of the Italian
action announced in the newspapers November 13 is not available, but
its substance is as follows:
“Following denunciation by certain powers of the tariff
truce, Italy reserves entire liberty of action in adopting
whatever measures may be considered necessary.
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- “(1) To safeguard vital interests of the country and
to modify customs duties affecting certain important
branches of domestic industry;
- “(2) To make technical changes in tariffs;
- “(3) To determine her attitude whenever she may be
free from certain obligations by total or partial
replacement of present commercial agreements by new
ones.”
The French action was communicated on October 12 to the Secretary
General of the Monetary and Economic Conference “that the French
Government, while still acceding to the truce, is obliged, for
constitutional reasons, to reserve Parliament’s right of initiative
in tariff matters. It is also obliged, like various other
Governments, to reserve its right to make any arrangements which the
protection of the vital interests of the country may render
necessary.”
Germany’s original accession to the tariff truce was hedged by a
reservation that in view of its peculiar situation Germany might
take any action it deemed necessary in the tariff field. Thus the
great commercial powers of Western Europe have freed their
hands.
The United States has not reserved from the tariff truce the right to
exercise the import regulation powers granted the President under
the Industrial Recovery Act.33 It would be difficult to argue that a tariff increase
or import restriction imposed under those powers would not violate
the tariff truce.
The Imports Division of the National Recovery Administration
announced a day or two ago that requests for tariff action had been
received in regard to cotton rugs, cotton Oriental rugs,
wood-encased lead pencils, matches, wool felt hat bodies, watches
and watch movements. Action has also been requested on quick-silver
and antimony metal.
Another possible source of acts which may be hard to reconcile with
the tariff truce is the imposition of compensatory taxes on articles
regarded as competitive with articles subjected to processing taxes
under the Agricultural Adjustment Act.34 The Agricultural Adjustment Administration
on November 2 held hearings to discuss whether compensatory taxes
should not be imposed on malt, barley and rye, as products
competitive with corn, and on cattle and calves, sheep and lambs,
vegetable oils including cottonseed oil, palm oil and cocoanut oil,
fish and seafoods, and poultry and eggs, as articles competitive
with hogs. On November 9 hearings were held on compensatory taxes on
rayon or other synthetic yarns, silk, flax, wool and mohair, as
competitive with cotton. It is probably in this field of
compensatory taxation that reports have originated of possible
increased taxes on imported canned beef.
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In our adhesion to the tariff truce, this Government expressly will
reserve the right to impose compensatory duties on commodities
subjected to processing taxation, when the duties are applied to the
same identical commodities. The further question of whether the
reservation might be construed to cover taxes on commodities only
indirectly competitive is lost in the obscurity of the discussion
that took place. We might be able to make a defense of our action
especially as regards agricultural products, but the action would be
likely nevertheless to leave the impression abroad that the
restricting force of the tariff truce on this Government had little
value.
There are also possibilities that code authorities may influence
import restrictions under their general powers. For example,
domestic oil producers continue to urge a definite restriction on
imports of oil in view of the definite restrictions on domestic
production.
If the United States is likely to violate the truce, it might be
better to withdraw with dignity from it on some appropriate
occasion. The recent French, British and Italian actions might
afford such occasion.
It has been suggested that while withdrawing from the general truce
the United States might propose a Pan American truce35 restricted to assurances regarding products of which the
signatory countries were principal sources. A pledge of this kind
might be regarded as a promise by the United States not to increase
duties on or restrict imports of petroleum, canned beef, wool and
other Latin American products which may come under regulation under
existing Executive powers. There would be some risk in this. Also it
is to be noted that compensatory exchange agreements becoming
prevalent in Latin America restrict American exports to those
countries and would probably not be prevented by the tariff truce
while the negotiating possibilities of the United States might be
restricted by the truce.
