611.48A31/40
The Secretary of State to the Minister in the Union of South Africa (Totten)
Sir: Reference is made to your despatch No. 936 of July 24, 1935, in regard to the enforcement of the South African three-column tariff adopted on May 10, 1935. The information contained in the despatch under reference and the questions raised in the penultimate paragraph thereof have received thoughtful study in the Department.
With reference to the question of counter measures, the Department believes that the time is not opportune for taking retaliatory action, such as withholding from the Union of South Africa the benefit of concessions made under trade agreements with other countries. In the first place, your analysis of the probable effects on American trade of the imposition of the third-column rates recently proclaimed in [Page 91] respect of a limited number of items would tend to support the view that present discriminations against American trade are relatively slight. In the second place, it seems not unlikely that any counter-measures which might be taken, before attempting to come to some mutually satisfactory agreement, might accelerate rather than retard the utilization of the penalty rates provided for in the South African tariff.
With reference to the question of trade agreement negotiations with the Union of South Africa, it may be pointed out that the trade agreements organization is heavily burdened with current negotiations and that negotiations with a number of countries are expected to be undertaken soon. Moreover, the Department believes that the present situation in the United States is such that it would not be advisable to initiate trade agreement negotiations with the Union of South Africa in the near future.
Although the Department is not now disposed to adopt counter measures against South African trade and does not believe the time opportune for opening trade agreement discussions with the Union of South Africa, it is of the opinion that an effort should be made at once to avoid the development of a situation in which the only recourse would be to counter measures such as the withholding of concessions made under trade agreements or, possibly, the use of Section 338 of the tariff act,4 as a step toward the removal of reciprocal discriminations. It is proposed, therefore, to suggest to the Government of the Union of South Africa that a simple most-favored-nation agreement be concluded at an early date with a view to stabilizing commercial relations between the United States and South Africa pending the conclusion at some future time of a trade agreement involving reciprocal concessions. This proposal is contained in the draft note enclosed with this instruction. You will, if you perceive no objection, present this note in proper form, at the earliest suitable occasion, to the appropriate officer of the Union government.
In presenting the note, you may wish to refer at greater length than is done in the note itself to this government’s trade agreements program and to the policy being followed in regard to the generalization of concessions granted under trade agreements (See Department’s Instruction No. 222 of June 27, 1935, with enclosure). You may wish to point out that although as yet no duties have been reduced on products of any great importance to South Africa, cacao beans, gingerroot and sisal fiber, of some interest to the Union, have been bound on the free list under the trade agreement with Haiti;5 and that it is not at all unlikely that concessions of considerable interest to South Africa [Page 92] will be made in connection with agreements now in process of negotiation or contemplated. The Department believes that it would be inadvisable for you to initiate any discussion of existing minor discriminations against American trade. If the South African officials bring up the subject, you are authorized to say that although your Government regrets exceedingly that the South African Government has seen fit to place American trade at a disadvantage in respect of the tariff rates on the products in question, several of which are of some interest to the United States, it is awaiting developments in regard to such tariff disadvantages before giving serious consideration to withholding trade agreement concessions from the Union of South Africa in accordance with the fair and reasonable policy laid down by the Trade Agreements Act.6
You may take occasion also to state that the Government of the United States feels that when the larger picture of the trade of the United States with the British Empire and the rest of the world is viewed, there stands out in bold relief the indisputable fact that the large purchases by the United States of products from other British and foreign political units make available in London and other centers credits which are used in part for the purchase of South African products. In other words, the purchasing power of the United States contributes largely to the prosperity of the Union of South Africa, even though its direct purchases therefrom may appear to be below what is desired.
The Department fully realizes that the odds are against acceptance of a most-favored-nation proposal by the Union government, since the apparent object of the three-column tariff law is to force countries such as the United States and Japan, which export much more to than they import from the Union of South Africa, to grant reductions in nondiscriminatory rates in return for the mere removal of artificial penalty rates. Nevertheless, it is believed that the proposal to enter into a simple most-favored-nation agreement, even though the proposal is rejected, will strengthen rather than weaken the position of the United States in the event it should be decided, later on, if South African discriminations should become serious, to adopt counter measures.
If you have any doubts as to the advisability of proposing a simple most-favored-nation agreement, the Department would greatly appreciate being informed of what they are and your reasons therefor. Your advice is also sought in regard to the form such an agreement should take in the event the proposal, if made, is favorably received by the South African Government. In this connection the question of how to deal with Empire preferences naturally arises. Perhaps [Page 93] it would be possible to avoid a general commitment to accord most-favored-nation treatment with a specific exception covering Empire preferences, by providing, on the part of the United States, merely for the extension of concessions granted under trade agreements, or minimum tariff rates, in return for the application of South Africa’s second-column rates, or minimum rates on products from “foreign [i. e. non-British]7 countries”, to American commerce.
Very truly yours,
- Tariff Act of 1930; 46 Stat. 590.↩
- For text of agreement signed March 28, 1935, see Department of State Executive Agreement Series No. 78 or 49 Stat. 3737.↩
- Act of June 12, 1934; 48 Stat. 943.↩
- Brackets appear in the original.↩
- Vol. i, p. 536.↩
- Not printed.↩
- For text of agreement signed February 27, 1935, see Department of State Executive Agreement Series No. 75 or 49 Stat. 3680.↩
- For text of agreement signed May 25, 1935, see Department of State Executive Agreement Series No. 79 or 49 Stat. 3755.↩
- This note was presented to the South African Prime Minister on January 25, 1936, and was acknowledged by him on February 4, 1936 (611.48A31/42). No further reply was received.↩