611.1731/113b
The Secretary of State to the Minister in Nicaragua (Lane)
Sir: I am transmitting herewith the following material for your confidential use in negotiating a trade agreement with the Nicaraguan Government:
- 1.
- Copy of mimeographed report on Schedule I—Nicaragua, dated July 19, 1935, prepared by Country Committee;22
- 2.
- Copy of minutes of meeting of Trade Agreements Committee on July 23, 1935;22
- 3.
- One copy of mimeographed report of Committee on Textiles;22
- 4.
- One copy of mimeographed report of Committee on Machinery;23
- 5.
- One copy each of reports on Schedule II, dated June 14, July 16, July 17 and July 23, 1935;22
- 6.
- One copy of report prepared by the Department of Commerce on “Principal Articles in the Trade of the United States with Nicaragua, Calendar Years 1929 and 1934”.22
The Country Committee report on Schedule I (enclosure No. 1) consists of a group of recommendations for the reduction or the binding of present duty rates on some of our principal exports to Nicaragua. The following list gives the degree of importance attached to these various recommendations:
- 1.
- Wheat flour
- 2.
- Industrial machinery
- 3.
- Upper leather
- 4.
- Lard
- 5.
- Medicinals
- 6.
- Condensed milk
- 7.
- Radios and apparatus
- 8.
- Automobile tires and tubes
- 9.
- Paints and varnishes
- 10.
- Batteries
- 11.
- Beans
- 12.
- Fresh fruit
- 13.
- Canned vegetables
- 14.
- Canned fruit
- 15.
- Dried fruit
- 16.
- Electrical equipment
- 17.
- Cotton hosiery
- 18.
- Typewriters
- 19.
- Rubber Heels
In the course of your conversations with the officials who may be designated to act as negotiators for the Nicaraguan Government, please take into account the above indicated priority list, the observations [Page 825] made in enclosure No. 2 to this instruction, and the following considerations:
Wheat Flour
The Country Committee report on Schedule I recommends that the Nicaraguan Government be asked to bind the existing duty and import charges on wheat flour during the life of the agreement. While the Country Committee did not believe that under present circumstances the Nicaraguan Government should be asked to reduce the duty on wheat flour, in view of its importance as a revenue producer, the Department suggests that before presenting the request to bind you give careful thought to the advisability of asking for some reduction. If, as the Department anticipates, the reaction to such a proposal would be emphatically in the negative, or if you deem it inadvisable even to make such a request of the Nicaraguan negotiators, you may present the request for binding.
Medicinals
You will note on page 9 of the Country Committee report (enclosure 1) the text of two notes (a and b) concerning treatment of pharmaceutical specialties and patent medicines which this Government desires to incorporate in Schedule I. The Committee recommends that the fees charged in this connection be the same for imported as for domestic products with an alternative suggestion that the present rates be allowed to stand with the understanding that they would cover permanent registration and not be subject to renewal every five years as at present. The result of your conversations on this subject will have an important bearing on Article IV in the general provisions concerning national treatment.
Cotton Hosiery
As pointed out in enclosure No. 2, it is desired that you ascertain the present competitive position of American cotton hosiery exports to Nicaragua before you present this request. Likewise, if the Nicaraguan Government refuses to make any concession on cotton hosiery, you are requested to submit as an alternative a reduction in the duty on cotton shirts. The details and scope of such a concession can be worked out by you in the negotiations. (Consult pp. 20–23 in the report of the Committee on Textiles, enclosure No. 3 to this instruction.)
Enclosures 3 and 4 to this instruction are being supplied for background purposes only. Any recommendations contained therein are only valid if included in the Country Committee report on Schedule I, as amended by enclosure No. 2.
[Page 826]Franco-Nicaraguan Modus Vivendi
Four of the concessions indicated in the Country Committee’s report on Schedule I appear to be included among the items which enjoy a twenty-five percent reduction from base tariff rates by virtue of the modus vivendi originally concluded in 1902 between France and Nicaragua. The Department is not certain whether this discount could be claimed by France and the other countries enjoying most-favored-nation treatment in Nicaragua in the event Nicaragua grants duty reductions to this Government in the trade agreement on commodities mentioned in the Franco-Nicaraguan modus vivendi. The Country Committee, in formulating recommendations for decreases in duties, has indicated the lower rate of duty, adding the phrase “less M. F. N.24 25%”; hence the effective rate which we are seeking would be the net rate after the deduction of the twenty-five percent discount. This is a technical problem which you are requested to bear in mind during the negotiations and which I am sure you will be able to work out to the satisfaction of this Government and of the Nicaraguan Government. Consult in this connection enclosure No. 2 to this instruction.
As regards Schedule II, the concessions which we can make to Nicaragua, it is believed that the information contained in enclosure No. 5 will enable you to outline orally to the Nicaraguan negotiators the nature of the concessions which this Government is now in a position to make. You will observe from the text of the memorandum dated July 17, 1935, that some of the concessions which can be offered to Nicaragua are of interest to other countries with which trade agreements are pending. In the event that the agreement with Nicaragua should be made effective before such other agreements come into force, these other countries might obtain the benefit of these concessions under the most-favored-nation principle or by virtue of existing treaties or agreements, and the basis for bargaining with them might be to some extent impaired. Consequently, there may be occasion to postpone for a short time the promulgation of the agreement with Nicaragua after the negotiations have been concluded in order to bring the several agreements into force at about the same time.
The Trade Agreements Committee in its meeting devoted to a consideration of the agreement with Nicaragua was of the opinion that no concession would be possible on sawed cabinet woods due to the fact that Nicaragua is a minor supplier of these woods. In connection with the memorandum dated July 23, 1935, on sugar, with special reference to Nicaragua, refer to the Department’s air mail instruction No. 304 of August 3, 1935.25
[Page 827]You should request Nicaragua to submit a list of its desiderata, accompanied by information of a sufficiently detailed character to permit experts here to decide whether concessions thereon can be made, keeping in mind the fact that such concessions can only be made to chief or important suppliers of this market.
As regards the procedure to be followed in the negotiations, the Department believes, in the light of the long delays which have ensued in certain of the other Central American Republics to which a formal list of concessions has been presented, that better progress will be made if you can carry on personal direct negotiations with a person or persons authorized to represent the Nicaraguan Government. In this way you can present one after another, or in such manner as you deem most appropriate, the various requests for concessions outlined in the mimeographed report on Schedule I, (enclosure No. 1). Please keep in mind the great importance attached to concessions of any kind on flour and lard. If the Nicaraguan negotiators are unwilling to accept any concession either in the form indicated in the report or in any form at all, you should then drop such items and proceed with others.
In the trade agreement with Haiti,25a conditional concessions on certain items were granted by Haiti to become effective when Haiti’s budget expenditure reaches a certain figure. The Department does not desire you, however, at this stage of the negotiations, to propose concessions with a conditional feature involved. Later, if it proves necessary to resort to this expedient, and particularly if the Nicaraguan negotiators themselves suggest some such formula, further consideration will be given the matter.
The Department is well aware of the difficulties involved in reaching a satisfactory agreement with Nicaragua, but believes that direct negotiations will afford the best means of determining rapidly and with finality just how far Nicaragua is prepared to go in meeting our desires. I therefore trust that you will exert every effort to work out the bases of an agreement on the best terms obtainable. Please keep the Department fully informed concerning all developments and submit Schedule I as agreeable to Nicaragua as soon as possible for final review and approval by the Department.
Very truly yours,