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

611.2131/137½

The Acting Secretary of State to President Roosevelt

Washington, December 4, 1933.

My Dear Mr. President: I submit herewith a draft of a reciprocal trade agreement between the United States and Colombia²⁵ which has been tentatively agreed upon between representatives of the two countries. In accordance with Article XI, the agreement would become effective only after Congress has enacted the necessary legislation to give it effect. The minimum term of the agreement would be two years.

The United States on its part agrees in the attached draft not to impose import duties, excise taxes or prohibitions on a list of nine products set forth in Schedule Two (Articles II, IV and V). All of the nine products affected are at present free of duty. By far the most important from Colombia’s standpoint is coffee. The draft agreement provides (Article IV) that any existing state excise taxes affecting interstate or foreign commerce subject to statutory control by the Federal Government, shall not be increased on the nine products listed in Schedule Two. The provisions of the Agreement if enacted into law would effect little change in existing laws of the United States. However, attention is called to the fact that under Article III the anti-dumping act would be rendered inapplicable to coffee. The Colombian negotiators insisted upon this provision.

Colombia, on its part, grants tariff concessions on a list of about 150 items, approximately half of which are subject to reductions in duty, the remainder being assured of tariff treatment no less favorable than that now enjoyed (Article I). The products affected include numerous industrial and a number of agricultural products. The American negotiators sought much more extensive concessions on agricultural products than those provided for in the draft agreement. The Colombian negotiators at first refused to make any concessions whatever on agricultural products and foodstuffs but eventually, by way of compromise, agreed to grant reductions in duty on a number of such products, including hog lard, prepared cereals, potatoes, certain canned vegetables, fresh and preserved fruits, prepared milk and tanned hides. In addition to the provisions regarding tariff treatment of American products the draft agreement contains commitments by Colombia regarding internal taxes similar to those which would be made by the United States (Article IV).

The draft agreement also contains a reciprocal provision for national treatment in regard to transportation charges (Article IV).

The draft agreement does not provide that the concessions granted by each Party shall apply exclusively to the specified products imported from the other. Both countries have most-favored-nation treaties with other countries. Colombia, for example, would be free to generalize to all other countries the concessions granted to the United States. But since the products on which concessions have been obtained from Colombia are those of which the United States is the principal source of Colombia’s imports, the United States would be the principal beneficiary of the concessions even though they are extended to products of other countries. The draft agreement provides that each country will grant the other unconditional most-favored-nation treatment (Article VTI), thus assuring that concessions granted under the agreement will not be impaired by the granting of more extensive concessions exclusively to some other country.

The situation respecting Colombian indebtedness should be called to your attention in connection with the proposed trade agreement. Colombian departmental (state) and municipal bonds are in complete default; and except for a provision to pay four percent interest on scrip to be issued in lieu of cash payments, the Colombian Congress did not provide for service on its external funded debt in the 1934 budget.²⁶ As most of these bonds were floated in this country, American bondholders may feel that any trade agreement signed with Colombia should include some assurances of a renewal or continuation of debt service in view of the amount of exchange provided through coffee sales in the United States. It has been felt that such a question should not be considered in connection with this agreement and it is most improbable that Colombia, would have negotiated any agreement including a debt service provision. Should it later appear advisable to endeavor to persuade Colombia to make some payment on her bonds held by American citizens, an effective argument might be found in the extensive control over foreign exchange granted the Secretary of the Treasury in section 8 of your Executive Order of August 28, 1933, “Relating to the Hoarding, Export, and Earmarking of Gold Coin, Bullion or Currency and to Transactions in Foreign Exchange”.²⁷

I believe it would be advantageous to the United States to sign the agreement and would appreciate being informed whether you approve this step.²⁸

Faithfully yours,

William Phillips

25. Not printed; it is the same, except for minor modifications, as the text signed December 15, 1933, post, p. 249.
26. For correspondence concerning suspension of debt service on external obligations, see pp. 254 ff.
27. For text, see New York Times, August 30, 1933, p. 2.
28. The President returned this letter on December 6 with the endorsements “OK FDR” and “Excellent—Go ahead. FDR”.