Foreign Relations of the United States Diplomatic Papers, 1933, The American Republics, Volume IV

611.3531/199

The Argentine Embassy to the Department of State

[Washington, October 5, 1933.]

Memorandum re Argentine-American Trade and Reciprocity

The Government of the Republic of Argentina is happy to hold informal conversations with the Government of the United States, at the latter’s invitation, for the purpose of exploring the possibilities of arriving at some reciprocal understanding which might restore and stimulate the commerce of their countries, and thus also foster and promote the cordial amity and good-will so long existing between the two nations.

It is recalled that the treaty of friendship, commerce, and navigation of 1853, between the United States and Argentina,²⁰ mutually assuring conditional most-favored-nation treatment, has been in force for more than three-fourths of a century, and that during that time there have been many interesting developments. There were, for example, the efforts to arrive at especially favorable mutual tariff treatment in the 1880’s and again under the provisions of the United States Tariff Act of 1890;²¹ and the renewal of these endeavors under the Act of 1897²² resulted in an agreement but this was not ratified. Meanwhile the United States has found in its export trade with Argentina an actually, and still further potentially, increasing market for many of the products of the industries which it has so successfully developed, these sales in recent times amounting to a much greater total than the purchases from Argentina. In addition Argentina has welcomed many American enterprises which have thrived within her borders. In turn, Argentina has offered her own products to the American market.

Indeed such imports into the United States in certain fairly recent times, tended to flourish along natural and mutually beneficial lines, particularly until 1921. Unfortunately, however, the series of progressively increasing tariff rates adopted during the post-war regime, under the United States Tariff Acts of 1921²³ and 1922,²⁴ the proclamations under Section 315 of the latter, and under the Act of 1930,²⁵ in addition to certain other restrictions, have served to place peculiar burdens upon this trade; burdens apparently falling with at least equal force upon American as upon Argentine citizens. In some instances these barriers have become nearly or wholly insurmountable. To a noteworthy extent this has caused a diversion of the trade to other countries, and if this has in turn led to some reorientation of Argentine commercial policy in other directions such economic rapprochements can scarcely occasion surprise.

However, in view of certain inherent economic forces, and with restoration of a regime similar to that of an earlier, more favorable era, there would appear to be prospects for a mitigation of the commercial impediments and for a revival and still greater future growth of the Argentine-American trade along the natural lines previously, and subsequently more fully, indicated. With these factors in mind, and looking toward the goal of reciprocal exchange of truly equitable and favorable treatment, not alone in technical adjustments but in spirit as well, Argentina contemplates the possibilities of mutually pleasant and profitable conversations, and submits the following preliminary remarks.

I. American Pronouncements

Attention should first be called to certain pronouncements of the distinguished statesmen at present happily guiding the policies of the American Government.

It is assumed that it will be in the temper of the ideals and objectives thus so ably and eloquently expressed, that the present conversations will be held.

The President of the United States, even before taking office, expressed opposition to the high United States tariff and to its further raising under the so-called cost-equalization formula of 1922 and 1930, and definitely indicated his desire for reciprocal agreements. He has stated:^*

In the past the proposition has been laid down with great boldness that high tariffs interfere only slightly, if at all, with our export or our import trade; that they are necessary to the success of agriculture and afford essential farm relief; that they do not interfere with the payments of debts to us—that they are absolutely necessary to the economic formula for the abolition of poverty.

The experience of the last four years has unhappily demonstrated the error of every single one of these propositions; that every one of them has been one of the effective causes of the present depression, and finally that no substantial progress of recovery from the depression, either here or abroad, can be had without forthright recognition of these errors.

I ask effective action to reserve [reverse] these disastrous policies, (p. 178).

Ostensibly for the purpose of enacting legislation for the relief of agriculture, the Congress was called into special session. The disastrous fruit of that session was the notorious and indefensible Grundy-Smoot-Hawley Tariff. The net result was a barbed wire entanglement against our economic contests [contacts] with the world at large, (pp. 179–180).

Almost immediately international commerce began to languish, and especially the export markets for our industrial and agricultural surpluses began to disappear. The Grundy Bill was passed in June, 1930; in that month our exports were three hundred and ninety-four million dollars in value and our imports two hundred and fifty millions. In an almost uninterrupted decline, this foreign trade dropped away so that, two years later, in June, 1932, our exports were worth one hundred and fifteen millions and our imports seventy-eight millions. These facts speak for themselves, (p. 182).

There was a secondary and perhaps even more disastrous effect of this tariff. Billions of dollars of debts are due to this country from abroad. If the debtor nations cannot export goods and services, they must try to pay gold. We started such a drain on the gold reserves of the principal commercial countries as to force practically all of them off the gold standard. What has happened? The value of the money of each of these countries, relative to the value of the dollar, declined alarmingly. It took more Argentine pesos to buy an American plow. It took more English shillings to buy an American bushel of wheat or bale of cotton, (p. 184).

To avoid this, as well as other evils in tariff making, a Democratic [Congress in 1916 passed and a Democratic] President approved a bill creating the bi-partisan tariff commission,²⁶ charged with the duty of supplying the Congress with accurate, and full information upon which to base tariff rates. It functioned as a scientific body until 1922, when by the incorporation of the so-called flexible provisions of the act of that year, it was transferred into a political body.

Under these provisions, reenacted in the Grundy Tariff of 1930, the Commission reports not to the Congress but to the President, who is empowered upon its recommendation to raise or lower the tariff rates by as much as fifty percent. How ineffective this method of removing from the tariff some of its inequities—a wag said, “its iniquities”—I need not detail, (pp. 188–189).

The ink on the Grundy Bill was hardly dry before the foreign markets commenced their program of retaliation. Brick against brick they built their walls against us. They learned their lesson from us. “The villainy you teach me I shall practice.”

While the Grundy Bill was before the Congress, our State Department received one hundred and sixty protests from thirty-three nations,²⁷ many of whom after the passage of the bill erected their own tariff walls to the detriment or destruction of much of our export trade, (p. 183).

How is this reduction to be accomplished?

By international negotiation as the first and most desirable method. In view of present world conditions; by consenting to reduce to some extent some of our duties in order to secure a lowering of foreign walls that a larger surplus may be admitted from abroad.

It is worth remembering that President McKinley, in his last public address in 1901, said: “The period of exclusion is past. The period of expansion of our trade and commerce is the present problem. Reciprocal treaties are in harmony with the spirit of the time; measures of retaliation are not.”

I have none of the fear that possesses some timorous minds that we should get the worst of it in such reciprocal arrangements. I ask if you have lost faith in our Yankee tradition of good old-fashioned trading? Do you believe that our early instincts for successful barter have atrophied or degenerated? I do not think so. (pp. 187–188).

The Secretary of State, while a member of the United States Senate, expressed the following opinions:^†

First. The Republican administration would continue to build our tariff and commercial policy around the sole idea of safeguarding the home market, in the face of our actual or potential annual overproduction capacity of 20 to 25 billion dollars. The opposing view recognizes the patent fact that such surplus producing capacity has become so great as to constitute an additional and dominant factor in determining our tariff and commercial policy.

Second. The Republican administration would adopt as a permanent policy virtually embargo tariffs, designed to eliminate not only direct foreign competition, but that which is indirect or remote as well, despite the fact that we are exporting $2,000,000,000 of finished manufactures compared with like dutiable imports of $560,000,000. The opposing view recognizes that the tariff is a tax and can only bestow full benefits on some, less on others, and none at all on still others, besides seriously obstructing surplus exports. This country, therefore, in lieu of the Republican policy of superprotection, should gradually embrace a policy of moderate tariffs, reasonably competitive, with liberal trade policies, designed to increase healthy production, maintain wages, and find world markets for our ever-increasing surpluses.

Third. Under its policy of concededly excessive or prohibitive tariffs, the Republican administration would make the trend of tariff revision always upward as to the measure of benefits bestowed, although our abnormal tariff level is now the highest in the world save that of Spain and Russia. Two-thirds of the present rates and classifications are prohibitive of direct competition. Yet it is seriously proposed that, as this country increases its superiority in productive efficiency and output, tariffs shall be correspondingly raised rather than lowered. The opposing view, deeming this issue most vital, would work in the direction of a tariff and commercial policy calculated to avoid retaliation, promote a sounder domestic structure, augment our exports, now hopelessly falling behind those of Europe, and secure more equitable taxation. To this end there should at once be substituted a policy by which the trend of tariff revision would be downward to a level of moderate or competitive rates—rates which would guard against domestic monopoly on the one hand and abnormal imports against an efficient industry on the other. Naturally, as domestic industries become self-sustaining, tariffs should be correspondingly reduced, with the view to their ultimate removal, especially when there arises substantial exports and no material competitive imports. In the meantime, many will plausibly insist that rates on commodities not on a parity with the general tariff structure may be made so, if the facts so warrant.

. . . . . . . . . . . . . .

Fifth. The Republican administration would not only retain section 315, the flexible tariff provisions, but would considerably enlarge and expand it for purposes of broader tariff legislation by the executive department. The President would thereby be enabled to change the whole objects and purposes of the tariff law enacted by Congress. The opposing view insists that, as administered thus far, the flexible provision has been utterly disappointing and failed to [of] its professed purposes. It has only been used unfairly to revise tariffs upward in most all instances. Its operation has been productive of national scandal. It is clearly unsound, unwise, impracticable, subversive of the plain functions of Congress, and should be speedily repealed.

. . . . . . . . . . . . . .

Seventh. The Republican administration falsely pretends that in addition to the tariff benefits already secured by agriculture, there yet remains still other possible tariff benefits substantial enough to afford an important basis for present farm relief. The pretense is that their enactment, and it would be most desirable if feasible, will place agriculture on an economic equality with industry. This barefaced and belated suggestion ignores the fact that crops planted to near 90 per cent of all tillable lands, derive and can derive either no apprecial tariff benefits or none at all.

… The farmer could again be reminded that the demonstrated failure of the farm tariffs of both 1921 and 1922 to bestow benefits upon agriculture at all proportionate to those enjoyed by industry, is now beyond the pale of controversy. This lengthy test of actual tariff experience consigns any new and third farm tariff proposal to a minor place in any sound and comprehensive program for farm relief.

. . . . . . . . . . . . . .

This country could have utilized, as it could yet, the bargaining method, along with the unconditional favored-nation doctrine; but the former only as a present means of checking and gradually lowering many abnormally high tariff and trade barriers. Our country could also lend its moral influence, as it heretofore should, in the direction of gradual readjustment downward of excessive tariffs by all nations, and so participate, separately and independently, in such downward movement.

II. The Trade of the Two Countries as Affected by United States Tariffs and Restrictions, and Possibilities on Its Development Under Favorable Arrangements

That the United States may well be interested in closer economic relations with Argentina, especially in view of the definite trend of the United States national economy toward greater imports of food stuffs and raw materials, and therefore in the large ultimate potentialities of the trade with Argentina, is broadly indicated both by the high place of Argentina in world commerce and by the specific nature of that trade. A standard book published and well-known in the United States reads in parts: “Argentine trade developments during the last fifty years have attracted the attention of the commercial world and have raised Argentina from a secondary position among the republics of South America to undisputed first rank, far ahead of all former rivals. These developments have also placed it among the first ten commercial nations of the world. … Argentina supplies bread and meat in ever increasing quantities [amounts] to the hungry millions toiling in the densely populated centers of industry, and ships larger and larger quantities of raw materials used in the industries to the factories of northwestern Europe and east-central North America. It constitutes the largest single surplus food-producing area in the world.”^‡ And it must be especially noted that Argentine production is becoming steadily more diversified, so that, aside from the well-known staples, it yields increasing varieties of supplies, many of them of much actual as well as potential importance to the import trade of the United States. Argentina is also a large purchaser of manufactured and other articles of the type exported by the United States; and if the United States expects to increase its markets there, it may logically hope to do so only through reciprocal trade and agreements reciprocally favorable to such trade.

The lack of such reciprocity, in the commerce and in the United States policy, is revealed in many ways in a study of the trade between the two countries. Such a study may begin with an examination of the trade of Argentina and the proportion of it which is carried on with the United States. A statistical table, given below,²⁸ covers this. The proportion of Argentine exports going to the United States was 4.7% in 1913. In 1919 it was 18.9%, which was larger than in any subsequent year. In 1919 the United States Tariff Act was still in effect. By 1924, after the Act of 1922 had become fully effective, the proportion had fallen to 7.1%. After minor fluctuations it stood at 9.7% in 1930, and declined to 6.1% in 1931, after the Tariff Act of 1930 had become law. In 1932 it was merely 3.4%, which was even less than in 1913 and less than one-fifth of what the proportion had been in 1913. Whatever may have been the general influences affecting Argentine total trade from time to time, such as the early post war stimulation, the depression of 1920–21, and the great recent depression (which lowered the prices of raw materials with peculiar severity), these influences had no effect upon the facts just mentioned; since these percentages are ratios of a total, whatever were the ups and downs on the total itself.

Obviously, then, whether the total exports of Argentina were increasing or decreasing, a goodly share of them were moving to the United States under the relatively favorable treatment of the United States Tariff of 1913,²⁹ while the Emergency Tariff Act of 1921, the Act of 1922, the application of Section 315 thereof, and finally the Act of 1930, were diverting Argentine exports to other countries. Unable to flow over the barrier, they flowed around it.

If the percentage of total Argentine imports coming from the United States also was greater in 1919 than in 1913 and declined considerably from 1930 to 1932, the decline was proportionately far less rapid. Nor could Argentina persist in an exchange which was decreasingly reciprocal, nor entirely refrain from defensive measures which followed (as, say, in 1931), rather than preceded, the progressively mounting barriers in the United States, barriers which moved upward toward a prohibitive level; and even yet the proportion of her imports coming from the United States was several times greater than the proportion of her exports going to the United States.

In sharp contrast to this, the position of other leading countries in Argentina’s foreign trade moved chiefly in the opposite direction. As is shown in the following table²⁸ of Argentina’s trade with principal countries and of Argentina’s imports for consumption, the proportion from Italy was 9.3% in 1930, and 9.2% in 1931, and increased to 10.7% in 1932; the proportions from France and Germany did not change very greatly from 1927 to 1932; and the proportion from the United Kingdom was 19.8% in 1930, and moved up to 21.0% in 1931 and 21.5% in 1932, thus easily passing the dwindling percentage from the United States. As for Argentina’s exports, the proportion from Germany declined from 1927 to 1932, but those from Italy and France increased somewhat, and that from the United Kingdom rose from 28.3% in 1927 to 36.5% in 1930, 39.0% in 1931, and was still 35.5% in 1932, as against 3.4% for the United States.

Such statistical evidence of the deterring effects of the commercial “Chinese Wall” built up in post-war United States tariffs, and of lack of reciprocity in commercial policy, upon a trade which had just previously flourished and shown signs of further mutually profitable growth, is striking. Conversely, the opportunities for revival and expansion are equally indicated, once a more favorable treatment be accorded.

Turning to an analysis of the Argentine-United States trade, upon the basis of United States statistics, substantially the same points as some of those mentioned above appear. Below are tables³¹ showing United States total exports and proportions to Argentina for 1913, and 1919 to 1932 inclusive; and United States total imports and proportion from Argentina for those years as well as by months from January 1927 to June 1932 inclusive.

In 1919 the United States was shipping 1.98% of its exports to Argentina, in 1929 this was 4.00%, in 1932 it was 1.92%. But the ratio of imports from Argentina was 1.48% in 1913, as high as 6.85% in 1919, and never again so great, being 1.85% for 1932 and 1.45% for June 1933. These facts speak for themselves.

Under appropriate arrangements there would seem to be no reason why Argentina’s share should not again increase, in a market which she could supply to the benefit of the market itself should policy permit it.

The trade balance between the two nations is of interest. It is consistently “in favor of” the United States, by a large margin. A table following³¹ shows that Argentina’s exports to the United States were only 45% of her imports from the United States in 1928, and 39%, or a little over a third, in 1932. Knowledge of the trade itself indicates that natural conditions, unhampered by the United States tariff, would produce a closer approach to parity. In the case of the four other principal countries in Argentine trade, as shown in a further table below,³¹ the balance is “favorable” to Italy only, whereas it is nearly always favorable to Argentina in the cases of France, Germany, and the United Kingdom. In 1932 Argentina’s exports to Germany were 145% of her imports from that country, and the similar percentage was 248 in the case of France and 255 in the case of the United Kingdom.

It is, of course, fully recognized that the merchandise transactions between two countries need not equalize each other in total value, that in “pure theory” no attempt should be made to make them so equalize, and that, regardless of “theory” there is such a thing as “triangulation”. On the other hand, the practical conditions of present-day international economic relationships must be taken into account, with the nearly universal existence of artificial restrictions upon the natural flow of international commerce. Indeed, it is upon the basis of the fundamental principles referred to, that this problem must be viewed. Such principles assume an absence of restrictions, and they cannot operate in the face of the impediments of prohibitive tariffs and the further special exclusions which sometimes accompany them. It is, in a fundamental sense, the very moderation of such impediments and the restoration of the natural flow of her commerce, that Argentina looks toward in contemplating reciprocity. These concepts have already been ably stated, with reference to the United States tariff and commercial policy, by the President of the United States and by the Secretary of State.

The matter of the trade balance between the United States and Argentina suggests also the more comprehensive question of the total balance of payments between the two countries. While estimates of the total balance of payments of the United States in recent years have been compiled by the United States Department of Commerce, and while somewhat similar estimates have been made for Argentina by Señor Carlos A. Tornquist,^§ there is no known estimate of the balance of payments as between the United States and Argentina, alone. Nevertheless, one or two observations may be made in this connection. In the Argentine total balance of payments, aside from the merchandise trade, much the largest items have to do with capital movements and services upon them. So far as the United States is concerned, a significant fact is that it has a very appreciable share in the capital and enterprise situation, i. e. with respect to both “portfolio” and “direct” investments. Its citizens and corporations normally receive a yield on both public and private instruments in Argentina, some of them involving large scale United States enterprise in the fields of utilities, meat packing, and machinery. When this is added to the fact that the trade between the two countries is of such a ratio that Argentina is under the necessity of paying the United States far more for its purchases than the United States pays for imports of Argentine products, the peculiar and distinctive need of a more favorable United States trade policy toward Argentina is given heightened emphasis. Argentina has welcomed United States enterprise, but in her balance of international payments has practically no appreciable “invisible exports”, and consequently must rely upon her sales of merchandise. If these merchandise sales are accorded reasonable trade policy treatment in the countries whose migrating enterprises she has sheltered, the natural economic processes can bring in large measure her needed adjustments, as indeed is true, as seen above, in her trade with a number of leading countries. The United States, even from a strictly “business viewpoint,” should be willing, for these reasons as for others, not to impede such Argentine exports.

Before proceeding to a more detailed consideration of the Argentine commodity trade as affected by the United States tariff, there may be presented a further general view of that trade, classified according to representative periods under a number of the modern tariff acts of the United States. In an average period from 1898 to 1905, purchases from Argentina comprised 1.04% of the total import trade of the United States by value. In an average period from 1910 to 1913 the ratio rose slightly to 1.8%. In the average period from 1914 to 1918 inclusive, the percentage increased strikingly to 5.13%. Aside from any other influence that may have operated in this period, there can be little question that this noteworthy development of Argentine exports to the United States, a development arising out of natural economic conditions in both countries, was permitted by the reasonable treatment of products typical of the Argentine export trade under the United States Tariff Act of 1913. In 1921, the Emergency Tariff Act was passed, and in 1922 the Fordney-McCumber Act. In the ensuing period of 1923 to 1929, average, the percentage of imports from Argentina declined to approximately half the proportion just mentioned, namely, to 2.34%. In 1930 the Hawley-Smoot Bill became a law and for the average period from 1930 to 1932 inclusive, the percentage of United States imports from Argentina still further declined to 1.78%.

There follows a table³³ showing these changes.

It should be especially emphasized in this connection, not only that the general tariff rate level of the United States progressively increased through the Act of 1921, the Act of 1922, the increases of the flexible provision under the Act of 1922, and the Act of 1930, but that these increases were of such a nature that they had a peculiar effect upon Argentine shipments to the United States, since throughout these periods of heightening of the tariff, some of the most striking increases of individual rates, and indeed some of the most noteworthy transfers from the non-dutiable category to the dutiable schedules at increasingly high rates, had to do with the very products which were of outstanding importance in the total composition of the import trade from Argentina. Nothing could show more definitively the directly adverse effect of those postwar tariff changes of the United States upon Argentina, and the obvious need for the extension by the United States of the reasonable treatment which it had previously accorded, as for example, under the Act of 1913, to Argentina.

Viewing the trade of the two countries as a whole and the trade between them, therefore, the needs and possibilities of a more natural development of that trade are indicated in more than one way; they are indicated by the greater purchase by Argentina of United States products than the United States purchases of Argentine products which are permitted by the United States tariff; by a similar further situation in the balance of payments relations between the two countries; and by the obviously unfavorable effects of the United States tariff since 1921 as compared with the tariff of 1913.

III. The United States Tariff Rates on Argentine Products

Closer examination of individual commodities of significance in this import trade of the United States trade from Argentina reflect the conclusions stated above in still more specific and detailed manner. The height of United States rates upon certain commodities exported by Argentine, and the degree and rapidity of the post-war increase in such rates, is most striking.

Below is a series of statistical tables³⁴ concerning selected commodities imported into the United States from Argentina. They cover: items of major present importance; items of relatively minor total value but of potential significance; some non-dutiable items; rates of duty under the various United States Acts; the ad valorem equivalent of specific duty rates; the wool rates (because of the complex nature of their classification); and the post-war increases in ad valorem equivalents of specific rates.

It goes without saying that the United States should accord far more favorable treatment to the items of present major importance than it now does. But the items here designated as “of potential importance” demand equal consideration, for various reasons: some of them (e. g. butter, fruits of various kinds, turkeys, and eggs) are seasonably noncompetitive with United States products; some of them (e. g. fresh meats and alfalfa seed) are now discriminated against by special United States regulations and restrictions; and some (e. g. butter) were formerly of much more importance but have been practically debarred from the United States as a result of increases in tariff rates to truly prohibitive levels, that is, by what amount to disguised embargoes. The United States, if it wishes to accomplish the purposes of the conversations, and to expect substantial favors from Argentina, should be prepared to deal liberally with at least these items, as enumerated in the table entitled “Commodity List”.

The table on “Some Argentine Commodities Entering United States Free of Duty” indicates the last vestiges of what was once (under the Act of 1913) a reasonably favorable treatment of Argentine products. The United States should undertake that these be continued in the non-dutiable category,^ǁ when coming from Argentina, during the period the proposed agreement remains in force.

The tables on “Some Argentine Products Imported by United States: (1) Rates of Duty under Various Tariff Acts; and (2) Ad Valorem Equivalent of Specific Rates of Duty”, show the great recent height of the duties on significant commodities, and the enormous post-war increase in many of the specific duties’ ad valorem equivalent—which, after all, is one of the truest indices of their present burden. The United States Senate, in connection with the question of reciprocity and as expressed in a resolution, has recently indicated interest in possible reductions where the duty is over 50%. Yet, disguised by specific rates, which do not adjust themselves to prices, the 1932 computed ad valorem equivalents of the rates on many Argentine products, were far beyond 50%. They were, for example: 53.0% on cheese: 63.3% on corn: 68.5% on canary seed: 75.4% on canned meats: 101.5% on flaxseed: 110.0% on dried beans and on “dead poultry” (e. g. turkeys): 142.5% on combing wool: 22–.0% on carpet wool: 225.0% on clothing wool: and 310.0% on casein!

To say, therefore, that some of these rates are prohibitive puts it mildly. Obviously the trade with Argentina cannot flourish unless the most comprehensive and complete readjustments be assured to Argentina in the proposed agreement in matters of this sort.

It is highly significant, moreover, that this is a situation, to a very considerable extent, which has developed in the past fifteen years; that not so long ago the treatment of Argentine products was far more reasonable. In the table “United States Tariff Rates: Post-War Increases” the steep and rapid rise in the rate level is shown. The ratio of ad valorem equivalents in 1932 to that of an earlier (indicated) year was: over 150% for clothing wool (in the grease) and combing wool (in the grease) (as against 1921): between 200% and 300% for clothing wool (scoured) (as against 1921), canary seed (1922), grapes (1922), and cheese (1922): 337% for corn (1920): 390% for butter (using 1929 as against 1920, as 1929 was the last year any entered); 301% for canned meats (against 1921): 366% for carpet wool (in the grease) (1922); 400% for pickled and cured beef and veal; 450% for dead poultry (1924); 1,560% for flaxseed (1919); and 1,570% for casein (as against 1922)! Moreover, many of these commodities had once been non-dutiable entirely. Such enormous increases, in this period, surely justify the opinions which have been so forcibly expressed by those statesmen now at the head of the United States Government in their public pronouncements upon tariff and commercial treaty policy. If the proposed agreement with Argentina is to yield logical results it must offer a restoration of truly reasonable treatment of the type enjoyed during the similar wise statesmanship of that earlier American regime. No small adjustments can lighten the yoke and ease the burden of these rates which have been imposed by the post-war regime upon her trade with the United States. No fractional reductions can divert the trend of her trade from its growth in the direction of other countries nor allay the indifference thus engendered in policy relationships. Only comprehensive substantial reformation of the United States tariff and trade restriction policy toward Argentina’s products can fully refresh the mutually profitable flow of commerce between these two countries.

At the conclusion of this memorandum, there will be presented a series of special analyses of commodities in the United States import trade from Argentina. At this point, however, there may be offered a summary of the conclusions to which such commodity analyses point.

On the basis of such analyses of individual commodities exported from Argentina to the United States and of the apparent effects of the tariff rates levied upon them, regardless of other general influences which may have been operative in world commerce, it is obvious that one or more of the following facts exist and that one or more of the following results, unfavorable to either the United States or Argentine producers, traders, and consumers, or in many instances both, have occurred. Nor is it to be forgotten that many of the commodities, while of some actual or potential importance to Argentina in finding natural export markets, are often of far greater importance to the United States in its import position, being vitally needed there by ultimate consumers, or by manufacturers for the domestic market, or by manufacturers for the United States export market, or by all of them; indeed this is likely to become even more true in the future.

In most, if not all, instances the supposed competition between the imported Argentine and the domestic product is either not apparent, or if apparent, not real. This is due to differentiation in the type of the product (e. g. casein for certain manufactures, and carpet wool), to the specialization and freight rates of the market area within the United States, which is served by the import, (e. g. flaxseed, wool, corn, butter, etc.), or to the negligible proportional relation to United States production (e. g. corn, butter, canned meats, turkeys). There are of course also the cases of insufficient United States production (e. g. sausage casings, flaxseed, wool, hides and skins.)

This is also true, in many instances, because of the seasonal nature of the production and trade, (e. g. grapes, peaches and other fruits, eggs.) That is, in such cases, the Argentine production and export occurs at a time of the year when there is no United States production. In a few of these cases it might be contended that the United States output can be carried over by packing or by cold storage, but in few if any cases is this practicable, as particularly in cases where the product is highly perishable and must be consumed during the season of production and where storage or packing is too expensive or reduces the quality of the product. Indeed, it is understood that certain producing interests in the United States would welcome such a seasonal supplementing of their product, in order to insure a steady, year-round domestic demand for the commodity.

As for the United States tariff rates, in some cases they have been so high as to cause a very great decline in, or a practical disappearance of, the otherwise natural importation of the Argentine product, to the detriment of both countries. Under the nearly or completely prohibitive increases in tariff rates, a very heavy decline has occurred in United States imports of Argentine casein and canned meats, clothing and combing wool have almost disappeared, and the butter and alfalfa seed trades have been completely eliminated.

The withering or killing of some of the commodity trades is shown in the following table.³⁵

In some cases, even if it be supposed that the rate has benefited a limited number of United States Agriculturalists, it has proved a burden to other, sometimes vast, numbers of United States farmers, who produce some other product, but who, directly (e. g. at times corn for feeding poultry in certain seaboard areas) or indirectly (e. g. paint containing linseed oil) are unfavorably affected, in costs, by the duty on the Argentine product.

In certain instances, it is apparent that the producing and marketing conditions are such that the United States tariff duty has been shifted in its incidence to the Argentine producer, to his detriment, and often at the same time, without benefiting the United States producer. (This is obvious at least in the cases of disappearance of trade mentioned above, that is, until the disappearance was completed, and doubtless in other cases.)

In other cases there is evidence that part or all of the incidence of the import tax has been borne by the United States ultimate consumer, thus increasing his cost of living. (E. G., quebracho extract and flaxseed).

Again there are cases where it is quite apparent that the United States tariff rate was intended to create and foster the growth of an “Infant Industry”, but that this purpose was not accomplished. (E. G. canary seed).

There are cases where the incidence may have been borne partly by the ultimate consumer in the United States and partly by a United States manufacturing industry, or in some instances, entirely by the latter, thus increasing that industry’s cost, decreasing its profits, and reducing its employment of domestic labor, or perhaps at the same time passing the burden of the tax on to the domestic ultimate consumer. (E. G. flaxseed for paint and linoleum, quebracho extract for leather, and the Argentine type of casein for use in manufacturing galalith and products, special glues, cotton print, and paper).

Indeed, in some instances this effect upon the United States manufacturing industry, using the raw material imported from Argentina, would appear to have been so great as to cause it to lose foreign markets in third countries for its output. (E. G. casein for galalith.)

Moreover, in at least one instance these consequences seem to have been so far reaching that the manufacturing industry utilizing the Argentine raw material has lost in part, or in whole, even its domestic market, to manufacturing industries exporting from third countries. A case in point would be the industry manufacturing imitation ivory objects of galalith from the particular type of casein which without tariff restriction could be obtained, and formerly was obtained from Argentina, but which is not of the type available in the United States. It is in just such cases, as well as others, where it becomes particularly obvious that the United States tariff rate has not benefited United States interests, while, of course, not benefiting Argentine interests.

Again, in certain somewhat similar cases, as for example, linseed and linseed oil, the unduly high United States tariff rate has apparently served simply to divert the Argentine exports of a raw material to third countries, which in turn process or manufacture it and, to greater or less extent, ship the semi-finished or finished product to the United States. (E. G. galalith objects from Japan and Germany, linseed oil from Holland.) In such cases the injury to Argentina is more difficult to discover, while that to the United States is apparent including a further rise in consumer price (paint) due to a further tariff rate increase on the processed article (linseed oil). The United States, therefore, suffers both alone and doubly the consequences of its duty upon the Argentine product.

Examples might be multiplied, but the principles are clear.

Added to many of the above undesirable consequences, is the fact that in a considerable number of cases, the United States duty takes the form of a specific, rather than ad valorem rate, with all the usual results by way of lack of synchronization of the tariff with the changes which are constantly occurring in world prices and trade, at times providing the United States interests with far more protection than they themselves requested at the time the rate was determined, and at other times greatly multiplying beyond even any original intent, the burden placed upon the import trade. As so many of Argentina’s products are raw materials, and as it is well known that raw material prices on the whole have suffered even greater declines during the present world depression than has been true of other categories of products, the effects of this interrelationship between duty and prices have been most striking in the United States import trade from Argentina. There are many cases of most surprising increase in ad valorem equivalent, as has been shown so clearly in facts cited above.

It may be remarked incidentally at this point that despite the above mentioned facts, showing so great a burden upon producers and consumers in both the United States and Argentina, the revenue obtained by the United States Government from the import duties levied upon imported Argentine articles is not of any appreciable importance in the budget of that Government, which incidentally, is very different from the budgetary aspect of the tariff in Argentina, where the Government must necessarily depend more upon customs as a source of revenue. The total revenue collected by the United States Government by import duty upon Argentine products was only 2.2% of the total customs and tonnage revenue in 1927 and only 2.4% in 1932. Indeed, when this revenue is considered from the viewpoint of the total budget of the Federal Government of the United States, it becomes almost completely negligible. In the years 1927 to 1932 the total of revenues from duties on Argentine products ranged from 0.33% to 0.42% of the grand total of revenue of the Federal Government of the United States and for 1932 was 0.37%.

Two tables follow,³⁶ covering this matter. Moreover, it may be observed that to the extent that the increasingly high duties on the Argentine products have served to shrivel the import trade from Argentina, and this has occurred in many instances, even the possible revenue objective of the United States tariff has not been attained with regard to this trade, for the simple reason that when the duty has reduced the trade, the revenue has increasingly declined. Thus the United States Government has accomplished no appreciable gain, even from the fiscal viewpoint, while at the same time, as pointed out above, in so many particulars, the net effect of the rates has been to impose a burden upon Argentine economic interests and probably to an even greater extent upon various consumers and certain types of producers, or both, in the United States, and at the same time, has failed to yield the too often illusory benefit to still other United States producers. If, therefore, in the case of the Argentine trade, the United States tariff has accomplished neither wise nor true protection, nor worthwhile fiscal results, the excuse for its existence in the Argentine case is difficult to discover, while its evils in the domestic order and in the relationship with Argentina, are only too apparent.

A special aspect of the post-war increases in United States tariff rates which has had peculiarly unfavorable significance for Argentina has been the so-called flexible provision of the Tariff Act of 1922 (Section 315) (which is repeated, legislatively, as Section 336 of the 1930 Act’s [sic] and 1930 (Section 336), and its application. No description of the nature of this provision nor of its failure to operate in a balanced or truly ultimate scientific fashion is needed here, nor is it necessary to supplement the existing literature in the United States which shows the lack of such attainment of the competitive tariff principle, nor of the admitted difficulty—indeed impossibility—of any satisfactory utilization of the so-called cost equalization formula.

It is of interest, however, to note here certain statements which have been made by officials of the United States Government.

The following quotation is from the Annual Report of the United States Secretary of Agriculture to the President, 1926:

The experiences of recent years have convinced me that the system of basing tariff rates on differences in production costs is inapplicable to agricultural products. It is quite impossible to obtain trustworthy production costs, weighted either for the total crop or for the bulk of it. A certain cost of cultivation and overhead, a certain agricultural effort, may in one year be rewarded with twice the crop that is obtained in another year. Therefore costs of cultivation can not be relied upon to indicate costs of crop units in a particular year.

The following is a comment by the Vice-Chairman, (Mr. Dennis) of the United States Tariff Commission, in Report on Flax Seed 1929, pages 38, 42:

The ascertainment of correct agricultural costs is beset with difficulties. … Costs as ascertained by interrogating farmers as to their expenses are bound to be inflated. In 1923 this commission, with painstaking and conscientious efforts, set about to obtain the domestic costs of producing butter. The costs so obtained pointed to the disconcerting conclusion that our dairy farmers were consistently marketing their butter below its cost of production, whereas we know that our dairy industry was actually expanding in the year 1923 and was regarded by experts as the most importantly remunerative branch of American Agriculture. In other words, the presumptively high coefficient of error which inheres in farm cost accounting is corroborated by actual experience in obtaining costs.

The futility of the enterprise … How the production cost formula breaks down when applied to farm products is abundantly illustrated by the flaxseed case.

… attention of the constituted authorities may be drawn to the baffling limitations which hamper the commission in the administration of the flexible provision of the tariff act. It is a case of making bricks without straw. With the best efforts and best intentions accompanied by an inordinate expenditure of time and money we find ourselves compelled to accept inferences for actualities, suppositions for certitude.

Thus viewed in these various respects, it is obvious that the present rates on Argentine products are indispensable, and that the relief which should be accorded by the United States to Argentina would be mutually profitable to the two countries, whether considered from the governmental viewpoint or, particularly, from the viewpoint of the welfare of producing and consuming interests, for which governments exist.

Not only is it true, therefore, that the so-called cost equalization principle has both imposed a peculiar burden upon the Argentine import trade and proved impracticable from the United States viewpoint, but it may be remarked that the narrow criteria implied in some of the recent documents published by the United States Government (for example that less than 5% of the article is imported, or that the present duty is more than 50%) might serve too greatly to delimit the possible elimination of the favors which should be accorded as a result of the present conversations. Only a broad and liberal approach to the problem is likely to yield such benefits that the results of the conversations may prove to be substantial and helpful.

Finally, it may be added that, entirely aside from the immediate and direct economic benefit of any such changes which might be accorded by the United States to Argentine, the general effects would be psychologically favorable, and that indirectly, as well as directly, this could well produce still more profitable, as well as friendly relations between the two nations.

A reasonable, fair, and mutually profitable arrangement for the elimination of the rate difficulties and the accomplishment of the benefits mentioned above, would be a restoration of the Argentine import trade into the United States, to the sensible treatment which in most respects was accorded to it, and under which it flourished in a largely natural manner, not so many years ago, namely under the Act of 1913.

IV. United States Special Regulations and Restrictions

Entirely aside from the ordinary tariff schedules and other provisions of tariff acts, there exist certain special legislative and administrative regulations and restrictions in the United States which have an unduly adverse effect upon certain Argentine products, and which have been arbitrarily applied in such a manner as to be in fact both discriminatory and prohibitive customs measures, under disguise. One of these restrictions is the “hoof and mouth disease” meat quarantine which affects shipments from Argentina. Yet, even if no other contention be made at this point, it is well-known that mutton from Patagonia is in no sense affected by this disease, particularly as that region is geographically entirely distinct. Another is the law of 1927 regarding imports of alfalfa seed and the administrative regulations for its enforcement, which have affected exports of Argentine alfalfa seed. Yet the grade produced in one section of the United States itself and yet not subject to the discriminatory coloring regulation, is at least not superior to that exported from Argentina. These regulations, in their application, are both unnecessary and unfair, being in fact, if not in theory, discriminatory against the commerce of Argentina. Detailed analyses of these regulations and restrictions will be presented in the subsequent, individual commodity studies. These restrictions should be removed, and there should be assurance that they, nor any similar ones, will not be imposed in future.

That sanitary quarantine on animal and vegetable products should apply by zones rather than by entire countries was agreed at the Fourth Pan-American Commercial Conference in Resolution XXVIII. The Conference resolved that in the application of all restrictions of a sanitary nature in the inter-American traffic in animal and vegetable products, the term “infected zones” be used instead of “infected countries”. It is to be noted that the United States delegate to that conference subscribed to and signed the resolutions.

The text of Resolution XXVIII follows:

1. To acknowledge as fundamental principles that sanitary police regulations effective at the present time, or enacted in the future to regulate the inter-American traffic of vegetable and animal products, must not have in their practical application the character of protective customs measures.

2. That in the application of all restrictions of sanitary nature in the inter-American traffic of animal and vegetable products in order to determine the origin of the product, the term “infected zones” be used instead of “infected countries”; upon condition that the country of origin give all necessary facilities to determine its sanitary condition.

3. To recommend to the American countries the negotiations of agreements for the regulation of the foregoing principles.^¶

In the matter of special regulations impeding trade, it may be remarked that when the United States complained of the effect of certain Argentine wrapping requirements upon United States shipments of apples some months ago, an Argentine commission visited the United States and as a result the restrictions were removed, as has been indicated by the United States Department of Agriculture.^**

V. United States Emergency Laws, Proclamations and Rulings

Argentina notes that since March 4, 1933, many new emergency laws have been passed, administrations created, and proclamations and rulings issued, having to do with economic recovery in the United States. Notable among them are the National Industrial Recovery Act³⁷ and the Agricultural Adjustment Act,³⁸ which contain sweeping authorizations for special measures in respect, not only of domestic matters, but also of quotas, licensing systems, etc., applicable to the import trade, and also with regard to nominally internal taxes upon imported commodities.

Argentina is in full sympathy with the general purpose of the United States to bring about economic recovery. But it also believes that this should not be done at the expense of other countries, for the economic recovery cannot be a real one if it rests upon a purely nationalistic basis. It is noted especially, that the various laws and rulings above-mentioned might be employed in a manner both highly arbitrary and discriminatory, and most deleterious to Argentina’s imports. Such imports could be controlled, reduced, or presumably debarred, and, even if they were duty-free in the tariff, could be taxed in any desired amount, even to the extent of a prohibitive effect.

It is obvious that if any such steps should be taken with respect to the Argentine import trade during the conversations, these conversations would be much embarrassed or perhaps rendered futile. It is also obvious, if an Argentine-American reciprocal agreement were concluded, there should be complete assurance embodied in the instrument, that any favors therein granted could not later be lessened or entirely nullified by such measures. Should such nullification occur, this would not only destroy the favorable effects of the agreement, but might also aggravate the irritations which it is the purpose of the agreement to allay and to convert to further good will.

It is clearly essential that any agreement which may be concluded should contain commitments that these United States emergency laws, proclamations, and rulings, and any similar ones of present or future, shall not be so applied as in any manner to lessen or destroy in principal or in fact, the favorable undertakings of such agreement.

VI. Conclusions

In view of all of the obvious facts and clear truths above set forth, The Argentine Government proposes the following undertakings by the American Government on its part as a basis for the conversations:

(1) Restoration of all Argentine products to the tariff-rate treatment accorded to them by the United States Tariff Act of 1913; this to occur as of the date of the coming into effect of the proposed agreement.

(2) Assurance be given that, so long as the proposed agreement remain in effect, no changes in rates under Section 336, Title III, of the United States Tariff Act of 1930, nor under any valuation provisions of that act, nor under any similar present or future laws, proclamations, or rulings, which would in any manner lessen or nullify the benefits accorded to Argentina in the proposed agreement.

(3) Removal of the discriminatory, special regulations and restrictions affecting alfalfa seed, and mutton from Patagonia; and, after appropriate investigation, a fair and reasonable consideration of further modification or removal of American sanitary regulations in respect of meats exported from other regions of Argentina; and, further, assurance in the proposed agreement that no such discriminatory regulations be imposed or reimposed in the future upon any Argentine products without a frank exchange of views and a bi-national scientific investigation; all such matters to be considered in terms of zones rather than of the entire territory of the nation.

(4) Assurance that during the conversations, no special United States emergency or other similar laws, proclamations, or rulings, (as for example under the National Industrial Recovery Act or the Agricultural Adjustment Act), nor similar measures of any kind, be so enforced as to impose any additional burdens, not now existing, upon Argentine commerce; and assurance, by a clause in the proposed agreement, that no such measures of any kind shall, during the period the proposed agreement remain in force, lessen or nullify, in technical interpretation or in fact, the various other undertakings of the agreement.

Upon such a basis, both nations could restore and stimulate a waning commerce to wholesome proportions along lines both economically natural and sound, and mutually and reciprocally beneficial to their nationals; and could contemplate the future, with confidence in economic recovery and in the still further enhancement of the warm friendship and cordial good-will happily existing between the two Republics.

20. Signed July 27, 1853, Hunter Miller (ed.), Treaties and Other International Acts of the United States of America, vol. 6, p. 269.
21. 26 Stat. 567.
22. 30 Stat. 151.
23. 42 Stat. 9.
24. 42 Stat. 858, 941.
25. For lists of proclamations issued under the tariff acts of 1922 and 1930, see Miller, Treaties, vol. i (short print), pp. 168–169.
26. Roosevelt, Hon. Franklin D., Looking Forward, 1933, Chapter X. [Footnote in the original.]
26. 39 Stat. 756, 795.
27. See Foreign Relations, 1930, vol. i, pp. 246 ff.
28. United States Congress, Minority Views—Tariff Readjustments 1929. To Accompany H. R. 2667: (“Mr. Hull, of Tennessee, from the Committee on Ways and Means, submitted the following”). [Footnote in the original.]
29. Jones, C. F., Commerce of South America, Boston and New York, 1928, pages 36–92. [Footnote in the original.]
28. Not printed.
29. 38 Stat. 114.
28. Not printed.
31. Not printed.
31. Not printed.
31. Not printed.
32. Tornquist, Carlos A., Balance of Payments of the Argentine Republic for the Economic Year 1928–1929 and Balance of Payments of the Argentine Republic, in the economic years 1929–1930 and 1930–1931, published by S. A. Imprenta Lamb y Cia. Ltd.—Acevedo 445, Buenos Aires. [Footnote in the original.]
33. Not printed.
34. Not printed.
35. The term “non-dutiable category” Is used here to avoid confusion with the term “free-list”, which has a narrower connotation. [Footnote in the original.]
35. Not printed.
36. Not printed.
37. Pan-American Union, Fourth Pan-American Commercial Conference, October 5th–15th, 1981, Final Act with annexes and a summary of the work of the Conference. [Footnote in the original.]
38. United States Department of Agriculture, World Trade Barriers In Relation to American Agriculture, [Senate] Document No. 70, 73d Congress, 1st session, 1933, page 233. [Footnote in the original.]
37. Approved June 16, 1933; 48 Stat. 195.
38. Approved May 12, 1933; 48 Stat. 31.