Memorandum by the Assistant Secretary of State (Sayre)

Mr. Bianchi was asked to come in yesterday afternoon at four o’clock in order that Mr. Sayre might lay before him in an informal way the various items which this Government would wish to have included in any commercial treaty which may be negotiated with Portugal. Mr. Sayre opened the discussion with an expression of hope that a trade agreement satisfactory to both nations could be concluded. He felt, however, that there may be some obstacles to overcome and preferred that we be perfectly frank and place our cards on the table from the beginning.

Mr. Sayre stated that there were two phases for discussion: (1) that involving the temporary liquor quota, and (2) the permanent trade agreement discussions.

(1) In so far as the temporary liquor quota was concerned it was necessary to see what basis might be arrived at upon which to strike a bargain, it being necessary for this Government to have in exchange for an increased liquor quota some quid pro quo. Mr. Sayre said that as a suggestion from this Government, we would be prepared to increase the present Portuguese quota of 60,000 gallons to a quota of 180,000 gallons in return for an undertaking on the part of the Portuguese Government to extend national treatment to American shipping. Mr. Bianchi explained the Portuguese laws with regard to shipping, and pointed out that it is the policy of his Government gradually to remove these flag discriminations18 and that in a couple of years the present discriminations would have been removed. Shipping between Portugal and Portuguese colonies is, however, considered as coastwise trade and is similar to the coastwise trading regulations of the United States. The Minister also pointed out that the suggestion with regard to the extension of national treatment to American shipping involved a permanent concession in return for a temporary concession to Portuguese wine exporters.

He expressed some doubt as to whether the Portuguese Government would look upon this suggestion with favor, particularly in view of the fact that the amount of wine involved is so small and also in view of the fact that commercial treaty discussions are now in process between Portugal and France, the latter country proposing to take as much as three million gallons of Portuguese wines. Mr. Sayre pointed out that a provision for national treatment of shipping would be included as one of the points to be covered by the regular trade agreement. The Minister doubted whether the extension of national treatment of shipping could [Page 647] be gotten through the Portuguese Government quickly enough to take care of this temporary liquor quota, even though the Portuguese Government might be willing to make a bargain on this basis.

[(2).] Mr. Sayre then turned to a discussion of a permanent trade agreement. He handed to the Minister a list of commodities19 on which we would either wish a reduction in duty or a binding of the existing duty. He then said that in addition to these items we would wish to have included in the trade agreement an unconditional most-favored-nation clause. Mr. Bianchi said that Portugal is at the moment more or less trying to get away from this clause since it was found not to be to Portugal’s advantage. It might, however, be possible in the Minister’s opinion to develop some type of conditional most-favored-nation clause. He also pointed out that in all of her treaties Portugal excepted the treatment which she might accord to Brazil and Spain, since the latter was such a near neighbor and since Brazil was so closely bound by language and otherwise to Portugal. Mr. Sayre further suggested that the trade agreement should contain a provision for national treatment in respect of internal taxes in Portugal on all products originating in the United States, and a provision against any increase in internal taxes on products in the list. Mr. Bianchi did not know the situation in Portugal with regard to this point, but felt that there would be no difficulty in connection with it.

Mr. Sayre further indicated that this Government would wish the trade agreement to provide that there be no quotas or restrictions in Portugal on the American products on which tariff concessions are granted, as set forth in the list handed to the Minister. The Minister felt that this would meet with the approval of Portugal, since Portugal does not look with favor upon quota restrictions.

It was also indicated by Mr. Sayre that this Government would wish to have included in the trade agreement a clause providing for national treatment of shipping which would, of course, be on a reciprocal basis. A brief discussion similar to that mentioned above with regard to the temporary liquor quota followed.

Mr. Sayre then mentioned that we would wish to have certain special provisions included in the treaty for the treatment of American wheat and flour, and that these two items were really the most important ones to be included in the proposed agreement. Mr. Sayre made clear to the Minister that he was aware of the difficulties which our request in this connection might raise, but that it would be necessary, should a trade agreement be concluded, to show that we had obtained substantial trade advantages if we were to hope to get favorable approval of the agreement by the Congress. This Government is interested in obtaining an increase [Page 648] of our exports to Portugal of wheat and flour. We would wish to keep them both on the free list and obtain removal of all restrictions adversely affecting their importation into Portugal. It would appear necessary to modify the Portuguese milling requirements in order to prevent a further cutting down of American exports of these items. In so far as flour is concerned we would wish to have the Portuguese Government reestablish the acidity requirements which were in force prior to 1930, and which, by reason of their being altered had materially affected the importation into the Azores and Madeira of American wheat flour. The Minister stated that the campaign for wheat production to take care of domestic needs in Portugal arose out of the necessity of reducing demands for foreign exchange with which to take care of Portuguese trade. The production of wheat and other flour cereals had now been brought to a point where Portugal was practically self-sufficient. Mr. Sayre suggested that the exchange situation now existing differs from that which gave rise to the wheat development program in Portugal. He also pointed out that in the negotiation of a treaty of this sort it was necessary to arrange for the exchange of goods between the two countries and that it could be presumed that the United States can produce wheat more cheaply than Portugal can produce it, and on the other hand Portugal is in a position to produce wines which American consumers are glad to take.

Mr. Bianchi stated that the main articles of export in which the Portuguese Government would be interested are wines, sardines and cork. The Portuguese Government is not fearful of the competition with regard to these wines, so long as their wines are not obliged to compete with “misbranded” wines. The Portuguese position is that no wines should be marked “Port” or “Madeira” unless those wines originated in Portugal or Madeira. The Portuguese Government would, therefore, seek in this treaty as they have sought in other treaties, to obtain protection for the names “Port” and “Madeira”. It was pointed out that there would in all likelihood be considerable difficulty in obtaining protection of this sort against the use of such appellations as “Port type” or “California Port”, “Australian Port”, et cetera. The Minister threw out the suggestion that perhaps we might be in a position to give complete protection against the misuse of the names Port and Madeira on imported wines only.

Mr. Bianchi then returned to the question of the temporary liquor quota, and reiterated that he did not feel that the shipping request was on the same basis as the temporary quota. Some discussion followed this with regard to the recent Portuguese-British arrangement and a portion of the text of the agreement between those two countries. Mr. Sayre pointed out again to the Minister that we would not necessarily hold to [Page 649] our request for this national treatment of shipping as a quid pro quo for an increased liquor quota, but that we had put that out as a suggestion for his and his Government’s consideration. If some other quid pro quo could be found we would be glad to give it consideration, but that we were under obligation to make some showing in return for the granting of an additional quota to any particular country.

In concluding the conversation, Mr. Sayre said that what he had presented to the Minister represented that [what] we would like to obtain in any treaty to be negotiated and that we would, of course, be prepared to give consideration to the requests which Portugal would no doubt wish to submit to this Government. The Minister seemed to be surprised that Mr. Sayre was not handing to him some sort of memorandum and asked whether it would not be possible to have in writing the points discussed. Mr. Sayre explained that he was most anxious to keep this initial discussion on a most informal basis and that he preferred not to hand the Minister any written communication. The Minister, however, asked that some very informal memorandum be given to him so that he would have all the points straight and would not misinterpret these points. Mr. Sayre said that such a memorandum would be drawn up and given to the Minister, it being understood of course that it was entirely informal and should not be considered as a communication from this Government to him.*

  1. See correspondence regarding discriminatory charges in Portuguese ports, pp. 649 ff.
  2. Not printed.
  3. Mr. Hawkins prepared a memorandum of this nature, the blue carbon of which is attached hereto. Mr. Culbertson handed the white copy to Mr. Bianchi, Wednesday afternoon, December 13. [Footnote in the original. The memorandum referred to is not printed.]