648A.003/361
The Minister in the Union of South Africa (Totten) to the Secretary of State
[Received August 21.]
Sir: I have the honor to refer to various reports regarding the adoption by the South African Government on May 10, 1935, of a three-column tariff.
As the Department is aware, the first column contains the rates given to the United Kingdom and other parts of the Commonwealth [Page 88] under the Ottawa Agreements of 1933 [1932].3 The second, or intermediate column, is to be applied to countries with which South Africa has concluded trade treaties or agreements, and the third column, which ranges from the same as the second column up to 10% higher, which is to be applied to all countries with which South Africa has no trade agreement, providing the items are affected by existing trade agreements in which they are used for bargaining purposes, that is to say, if in a trade treaty the Union gives ‘most favored nation’ treatment on certain specified articles in return for some customs privilege given by the other country, then all countries not having ‘most favored nation’ agreements with South Africa, are charged the third column, or maximum rate on the article in question.
The countries coming under preferential, or first column treatment, are:
- The United Kingdom,
- Canada,
- Australia,
- Irish Free State,
- The Rhodesias,
and to a certain extent, Mozambique.
The countries with which South Africa has “most favored nation” agreements are:
- Italy,
- The Netherlands,
- Costa Rica,
- Venezuela,
- Switzerland,
- Sweden,
- Norway,
- Liberia,
- Morocco,
- Egypt,
- Germany,
- Denmark,
- Colombia,
- Argentina.
The chief countries doing any considerable amount of import business with South Africa, to which the maximum tariff rates on specific articles would apply are:
- France,
- The United States,
- Russia,
- Japan,
- Poland.
The Union Government has now brought into operation for the first time by proclamation in the Government Gazette, the maximum rates of the three-column tariff on the following articles: [Page 89]
| Tariff No. | Article. |
| 69 (d) & (e) | New hats, caps and bonnets of felt, wool, hair, straw or other fibre. |
| 76 | Piece goods not being canvas, blanketing, or Kaffir sheeting. |
| 172 (b) | Glassware. |
| 213 (e) | Citric and Tartaric acid. |
| 299 | Beads. |
In the first two and the fourth items, the difference between the intermediate and maximum column rates is 5%. In the third and fifth items, the difference is 10%.
As far as the particular items affected by this tariff increase are concerned, I am of the opinion that there will be a relatively small actual loss in trade.
High grade fur felt hats, practically all manufactured by Stetson, have enjoyed some popularity in South Africa. Hats of this class are landed in South Africa at around $5. each. The extra 5% would have to be put on the selling price and as these hats are highly competitive with products from England and Italy, the difference would probably divert some trade from American to English factories. The agent for the Stetson hat, however, is of the opinion that his company can profitably ship their hats from their Canadian plant.
In piece goods, the United States has had very little business of late, as Japan and the Continent have been able to under sell the American product. There is still a fair business in denims, drills, and print materials for the clothing manufacturers, and these will almost certainly be curtailed.
All brown, or grey, sheetings and cloths used for dust coats, overalls, pocketing etc., for the clothing trade, will not be affected. The other items are of small importance to American trade, especially as fruit jars are not included under item No. 172 (b).
I have personally interviewed Mr. Heddon, the Commissioner of Customs and member of the Tariff Board, in regard to the possibility of additional items being placed on the maximum tariff and have been informed that no additional items will be included in this list unless and until such action becomes necessary by the conclusion of a new trade agreement, or agreements, where in the necessity for bargaining, other articles are affected.
The significance of this action by the South African Government, is that the three-column tariff is a bargaining measure and that the third column is to be used to force those countries with which South Africa has adverse trade balances to grant tariff privileges to South Africa in an endeavor to sell them more South African goods.
[Page 90]There is no doubt but that this action in connection with the imposition of third column duties on American products, constitutes discrimination to a certain extent and does not give to the United States the same ‘most favored nation’ treatment that is given by the United States to all other countries and would justify retaliation on the part of the United States.
As against such a policy of retaliation it may be mentioned, however, that the present list of five items will affect American trade very slightly, if at all, while anything in the way of punitive measures would probably re-act most unfavorably with American trade with South Africa.
Through the efforts of this Legation and the importers of American motor cars, the third column of the tariff under automobiles and automotive equipment, is the same as the second column and therefore there is no threat possible under the present tariff to our relatively most important trade with South Africa in these lines.
The points of interest in the present situation are: first, whether or not the Department is forced to consider the present South African tariff action as discriminatory to such extent that retaliatory action must be taken, or, second, whether or not it would be advisable, or feasible to study the question of a “most favored nation” trade agreement with the Union of South Africa.
The advisability of such action would, of course, entirely depend on the possibility of there being any customs advantages that could be offered to the Union of South Africa in connection with the American policy of identical treatment for all countries.
Respectfully yours,
- British and Foreign State Papers, vol. cxxxv, pp. 161 ff.↩