The Minister in Honduras (Lay) to the Secretary of State

No. 1204

Sir: Referring to my telegram No. 70, of August 31, 4:30 [5?] P.M., regarding the forthcoming exploratory discussions here regarding the proposed trade agreement between the United States and Honduras, I have the honor to make the following observations for the consideration of the Department.

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The Honduran Minister of Finance, who will conduct these conversations on behalf of this Government, will probably be unwilling to grant us tariff reductions on many of the principal United States products exported to Honduras, since such a wide range of reductions would substantially reduce the revenue from customs upon which the maintenance of the Government of the country is largely dependent and which cannot be replaced with other taxes. Any slight advantage that might be gained by an increase in exports of a few Honduran products to the United States created by lower United States duties would not compensate Honduras indirectly for this loss in customs revenue. There may be a few products, however, imported mostly from the United States, now subject to prohibitive duties, the importation of which in larger quantities would increase the revenue without affecting the sale of similar local manufactures, that might form bases for conversations. The American Consulate at Tegucigalpa is making an effort to ascertain what products would meet these conditions and report them to the Department.

Another concession that we might request is the abrogation of a law which at present levies municipal taxes on certain products but amounts in effect to an additional import duty on important American products, as explained in the Legation’s despatch No. 1189 of August 27, 1934.

We could furthermore request that assurances be given that during the term of the agreement neither these municipal taxes nor any other internal taxes would be levied on products imported from the United States.

In addition to the above Honduras might not object to giving us assurances that it would continue to impose no restrictions on importations of our products through exchange control.

Respectfully yours,

Julius G. Lay