Foreign Relations of the United States Diplomatic Papers, 1934, Europe, Near East and Africa, Volume II

653.116/161

Memorandum by Mr. John H. Morgan of the Division of Western European Affairs

[ Washington ,] August 15, 1934.

Flag discrimination as practised by the Portuguese government dates back to Decree No. 7822 of November 22, 1921, which initiated a policy of favoring Portuguese shipping by the imposition of discriminatory duties, rebates in respect of taxes and port dues, the levying in gold of taxes payable by foreign vessels and the imposition of graduated taxes on the cost of passage. Several decrees were issued subsequently which further increased the burden on foreign shipping.

During the thirteen years following the issuance of the initial decree the United States and the other interested governments have repeatedly protested to the Portuguese government but have not succeeded in inducing that government to take any practical action to put an end to discrimination against foreign shipping. As late as May 5 [June 9] of the present year six countries simultaneously protested to the Portuguese government but each received an identic reply³ to the effect that the Portuguese government does not consider that the most-favored-nation clause is applicable to this question and that abolition of discrimination can be obtained only by means of a special agreement granting adequate compensation to Portugal.

Great Britain, France and the Netherlands have yielded to the Portuguese point of view, in form at least, and have recently concluded special agreements with Portugal. Germany is understood to be negotiating such an agreement.

The Portuguese government now seems determined to force the remaining countries to follow the example of Great Britain, France, and the Netherlands, since on July [June] 29 by Decree-law No. 24,115 it repealed previous decrees giving duty reductions of 6 per cent on imports and 12 per cent on exports for merchandise transported under the Portuguese flag, increased the surtax on imports from 20 per cent to 28 per cent, and created a special surtax on exports of 13.5 per cent. The increased surtax on imports and the new surtax on exports are not to be applied to merchandise transported under the Portuguese flag or that of a country which has secured by treaty or agreement the abolition of flag discrimination. By a decree of August 7th, effective August 22nd, Portuguese vessels and those of countries which have secured abolition of flag discrimination are exempted from 50 per cent of the stationing charge.

The new surtaxes do not apply to certain articles (gasoline, mineral oils, coal and sugar), upon which the rates were specially fixed by an earlier decree but they do apply to certain other important American products, notably petroleum and print paper. Tobacco, which is shipped in important quantities from Gulf ports to Portugal, was at first stated to be subject to the new surtaxes but according to a despatch of July 10, 1934,⁴ the Portuguese authorities have ruled, without, however, having issued any Customhouse Order on the subject, that tobacco is exempt from the new rates.

Mr. H. B. Arledge of the Lykes Steamship Lines has already called at the Department to protest against the new Portuguese discrimination against American shipping. In the past the American West African line, New York, the Gulf West Mediterranean Line, Tampa, and the American Export Lines, New York, have expressed their dissatisfaction but nothing has yet been heard from them with regard to the present discrimination—possibly because of the total absence of any practical results from their previous complaints.

As thirteen years of protest on the part of this and other governments have brought no favorable result and only those countries which have recently abandoned the policy of protest and concluded special agreements with Portugal have obtained abolition of flag discrimination, it would seem time for the Department to consider whether it should not enter into a special agreement with Portugal or adopt retaliatory measures against Portugal.^*

In this connection it may be of interest to note that our Minister at Lisbon in his despatch No. 83 of November 3, 1933,⁴ reported that he had been informed on what he believed to be excellent authority that Great Britain early in 1933 gave up the policy of joint representation on the subject of flag discrimination and threatened to denounce the Anglo-Portuguese Treaty of 1914,⁵ and that this threat rather than any new and substantial promises had the desired effect.

If the United States decides to bargain for the abolition of flag discrimination it seems probable that the Portuguese government will ask in exchange that the regional marks of Port and Madeira wines shall be given a greater degree of protection in the United States than at present. (See the Legation’s despatches No. 70 of October 29 [26], 1933,⁴ page 4, paragraph 2, and No. 73 of October 28, 1933,⁶ last page, last paragraph). As examples of the type of concession which Portugal desires, it should be noted by the agreement of October 14, 1933,⁷ Great Britain adopted no new measures but guaranteed to continue until June 30, 1941, the protection provided by Article 6 for the Anglo-Portuguese Commercial Treaty of August 12, 1914, for the trade marks of “Porto” and “Madeira” wines, even if the treaty ceases to be valid. This is regarded by the Portuguese as a valuable protection against the competition of “Australian Port”.

By articles 17 and 18 of the Treaty of March 13, 1934,¹⁰ France and Portugal agreed to suppress on their territory the abuse of the geographic terms of origin of each other’s wine products. False terms of origin are prohibited even though the true origin of the products be mentioned or the false terms be accompanied by certain qualifying terms such as “kind”, “style”, “type”, or “rival”, or by a specific regional or other indication. There is likewise prohibited the use of all combinations of graphic terms and of all display likely to create misunderstanding in the mind of the purchaser.

By Article 13 of the treaty of June 28, 1934,¹¹ the government of the Netherlands recognizes Porto, Madeira, Moscatel de Setubal, Carcavelos, and Extremadura as regional marks of Portuguese wines with regard to which it promises to require certificates of origin and to suppress by seizure and other appropriate penalties the exportation, transportation, or sale of wines bearing these designations which do not come from the regions used to describe them.

3. Dated June 30.
4. Not printed.
5. The Traffic Division of the Shipping Board assures me that there are no Portuguese shipping companies operating between the United States and Portugal. [Footnote in the original.]
4. Not printed.
5. Signed at Lisbon, August 12, 1914, British and Foreign State Papers, vol. cviii, p. 369.
4. Not printed.
6. Foreign Relations, 1933, vol. ii, p. 654.
7. British and Foreign State Papers, vol. cxxxvi, p. 437.
10. Journal Officiel de la République Française (Lois et Décrets), March 30, 1934, p. 3211.
11. Tratado de Comércio e de Navegação entre Portugal e os Países Baixos, Direcção Geral des Negócios Políticos e Económicos, (Lisboa, Imprensa Nacional, 1935).