611.3531/407
The Secretary of
State3
to the Acting Secretary of
State
[Buenos
Aires,] December 12, 1936.
Sir: During the President’s visit to Buenos
Aires4 the question
of a possible trade agreement between the United States and Argentina
naturally presented itself. At the request of the Argentine authorities
some preliminary conversations intended to clarify what might be
involved in a commercial agreement have been undertaken, with the most
complete of understandings that such conversations were merely
exploratory, bound neither party either to any course of action or to
any particular details, and were of a completely confidential nature.
The course of these conversations up to the present are recorded in the
two memoranda attached. In accordance further with these conversations
the Argentine authorities presented to us last night the attached
summary of the main concessions which they would hope to secure in the
event a trade agreement proved possible.
Will you please give prompt consideration to the question of the
undertaking of negotiations and cable us your views. By virtue of the
President’s declaration5 made here, we believe ourselves pledged to
make a sincere effort to try to reach the terms of a possible agreement.
On the other hand, no promise has been made to the Argentine authorities
as to when it might seem to us satisfactory to make formal announcement
of public hearings and prospective negotiations. Their wish is that such
public announcement be made on the eve of the departure
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of the Delegation from Buenos Aires.
However, this morning in a conversation with Ambassador Espil6 I
emphasized the fact that while I believe it might be quite possible to
reach finally a moderate agreement, there are many hazards and
difficulties in the way and that it was highly important that all care
be taken lest the effort be rushed, to the detriment of the objective. I
explained that of course the various American agricultural interests
that might be affected by the agreement would be subject to fears, often
of an exaggerated character, and that if now, while we were down here
and therefore unable to deal with efforts to block the negotiation,
sensational stories began to appear in the American press, that it was
not at all unlikely that certain interests might secure legislation in
Congress defeating our purpose. I furthermore fully explained that this
was a matter that had to be carefully considered by the Trade Agreements
organization and by the interested Government Departments. For all these
reasons I did not encourage the hope that any public announcement could
be made while we were here.
Will you, in strict confidence, kindly consult with the Secretary of
Agriculture in regard to the prospective Argentine requests and transmit
his judgment and reaction. Will you also please cable in very brief
summary form your judgment of some of the main tariff concessions it is
likely that we will ask, it being understood that if this information is
transmitted at all to the Argentine authorities, it will be understood
to be wholly without commitment.
I am bearing in mind also my memory that it may be desirable in the event
that negotiations with Argentina are undertaken, that negotiations with
Uruguay be conducted simultaneously.
Yours very truly,
[Enclosure 1]
Memorandum by the Economic Adviser (Feis)7
[Buenos
Aires,] December 8, 1936.
In accordance with a discussion between Mr. Welles8 and Ambassador
Espil, I met late yesterday afternoon with Mr. Prebitsch, General
Manager of the Argentine Central Bank, and the Commercial Attaché in
Washington, in order to exchange in a most preliminary way attitudes
and ideas regarding the possibility of an American-Argentine
commercial treaty.
[Page 177]
The conversation ranged far and wide. I explained that in accordance
with our habitual procedure, before any negotiations could be
concluded we would have to hold public hearings, and that thus all
exchanges of ideas and information would have to be regarded as
informal, non-binding, and confidential. This was understood. In
response to their query as to whether it might or might not be
possible to complete the negotiation of an agreement before the
Trade Agreements Act9 was renewed in June, I stated that I was not
in a position to answer this question and that it would depend
somewhat upon the course of our informal conversations and on events
back home and upon the ultimate decisions of the Department and the
President.
We discussed how these preliminary informal conversations might best
be made useful. I suggested that they, having the services of all
their Government departments available here, were in a position to
determine and make clear for transmittal to Washington what
concessions would be expected of us, and these could be given
consideration in Washington fairly promptly. However, the matter of
what concessions we would ask from them was, I understood, rather
complex and would require specialized study by different branches of
the American Government and by the regular Trade Agreements
organization, and I did not believe that it would be possible to
formulate them during our stay here.
Our talk was concluded by a discussion of their exchange policy and
their agreement with Great Britain.10 I emphasized the discriminatory character of the
present exchange arrangements. They explained and defended them on
the basis of necessity, and on the fact that important markets such
as Great Britain and Germany would only give their trade a chance
provided the proceeds of the sale of Argentine goods were pledged
for purchases of their goods. This situation, they said, still
confronted them. I pointed out that there are many signs that they
are now in a position to end the exchange discrimination against
American products, not the least of which was their ability to find
$35,000,000 with which to pay off their long-term debt in New York.
Mr. Prebitsch said this would increase their ability to furnish
exchange for American goods. The discussion of this important
question was left in suspension. One important point that it brought
out was that Article . . of the new agreement with Great
Britain11 apparently
has in Argentine eyes a precise significance that a quick reading
does not reveal; apparently
[Page 178]
it is viewed as giving the British the right to denounce the
agreement if, by virtue of actions of the Argentine Government, such
as lifting of the exchange control, British interests do not get the
full amount of sterling exchange which they furnish through the
purchase of Argentine goods. If the British use this as a continuing
threat it will of course restrain the Argentines from lifting the
exchange control and from making trade concessions which might cut
seriously in upon their purchases from Great Britain. The Argentines
apparently have gotten themselves in a situation in which to some
extent they will have to trade us off against the British and vice
versa.
It was agreed that these gentlemen should consult again with various
branches of their Government, looking towards a further exchange of
ideas.
[Enclosure 2]
Memorandum by the Economic Adviser (Feis)
[Buenos
Aires,] December 10, 1936.
By arrangement with Mr. Welles, Mr. Espil, the Argentine Ambassador
to Washington, called this afternoon, accompanied by the head of the
Central Bank and the Commercial Attaché in Washington.
The Ambassador—I believe in accord with a talk with Mr. Welles—had in
his mind the possibility that the Secretary of State might announce
on the day of his departure the intention to enter negotiations and
that simultaneous public notice might be given in the United States,
as required by the Trade Agreements Act.
I stated that I was in no position to pass upon the feasibility of
this proposal but that I would be glad to refer it on for
decision.
I ventured the judgment that a necessary step in our consideration of
the question would be some consultation with the other interested
Departments of our Government and the Trade Agreements organization.
In the event that the Secretary and Mr. Welles were in favor of
making the effort to carry out the idea, I expressed the opinion
that it could be best facilitated if the Argentine Government would
at once formulate in very brief form, and on the understanding that
the formulation was neither formal nor binding, a short summary of
the chief concessions they would hope to get from us. I expressed
the opinion that I thought that it would be found desirable to
transmit this to Washington for immediate consideration, at the same
time requesting from Washington a similar brief formulation of the
main concessions that we were likely to request of Argentina.
On one point I said I thought I was in a position definitely to
formulate one of the leading American requirements, to wit, the
ending of all discrimination in the exchange field. This gave rise
to an
[Page 179]
animated discussion
as to the reasons why the Argentine Government created and
maintained the discriminations. I vigorously maintained the point of
view that this discriminatory treatment represented an obstacle to
trade different from that of the ordinary tariff barrier and that
our insistence upon its removal would be a matter of principle as
well as of dollars and cents. The Argentine representatives upheld
the point of view that it was just another kind of obstacle—not
different in effect from a tariff—to be dealt with as part of an
arrangement for facilitating the trade movement. Mr. Prebitsch,
however, did indicate the view that there was a good possibility
that something could be done in gradual stages to lessen or remove
the discrimination.
Since Mr. Welles had still not returned and they felt strongly
desirous of facilitating discussion, I said I would seek approval,
that immediately upon the receipt from them of the memorandum
referred to above, a cable would be sent to Washington, transmitting
this tentative statement of Argentine requests, along with the
request that the informed Departments in Washington immediately
formulate a similar outline of what our main requests were likely to
be in addition to modifications of exchange arrangements, and that
immediately upon receipt of word from Washington (if possible, not
to be delayed any longer than a week from today) a decision could be
reached regarding the possible announcement of the commencement of
negotiations. They stated that they would have such a memorandum in
my hands by tomorrow night.
Incidentally, in the discussions the Ambassador indicated that the
Argentine authorities were willing to forego the making of any
request for concession on fresh beef, and I requested them to study
our trade with them, particularly with a view of discovering items
in the agricultural field in which they might be able to make
concessions to us.
One final point of interest on which a word might be added is that in
discussing the exchange discrimination, Mr. Prebitsch said that the
present situation is to be regarded as somewhat abnormal because it
was being affected by the very substantial inflow into Argentina of
short term capital leaving Europe.
[Enclosure 3—Translation]
Memorandum by the Argentine Government12
Being interested in the possibility of arriving at a trade agreement
with the United States, which will establish a basis for the future
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development of trade
between the two countries, more adequate than that of the old treaty
of 185813 and,
Bearing in mind the difficulties that have arisen at every attempt to
bring about an agreement in the last 78 years;
The Argentine Government would be disposed to enter into negotiations
on the following minimum bases:
1. In order to eliminate difficulties, the suggestion is accepted
that in these conversations all reference to fresh and chilled meat
be excluded, in view of the fact that such commerce is not possible
without the previous elimination of the present embargo and that
such embargo should be raised for reasons of justice in favor of
said measure and not for reasons of reciprocal concessions.
2. Of the seven principal articles which, in normal times, represent
more than 80 percent of our exportations to the United States,
namely; flax, cowhides, wool, maize, preserved meat, intestines and
quebracho extract, concessions should be granted at least as to the
following four items:
Flax. A reduction of the present duty of 65
American cents per bushel to 32½ cents per bushel. The imports of
flax, which represented 35 percent of the total of the trade and
which amounted to more than 40 million dollars have been reduced to
a third, in consequence of the high customs duties imposed in 1929
and 1930. The high duty has not brought about an increase of
domestic production, nor, for known reasons, is it possible that
this will provide for the total consumption.
Preserved meats. The present duty of “6
centavos* per pound but less than 20
percent ad valorem” is unjust, because it makes no distinction as to
qualities and the schedule of meats of less value sometimes amounts
to more than 100 percent ad valorem. In consequence, it is requested
that a sub-classification be in the tariff on canned meats, and that
in the item “corned-beef in cans”, which represents more than 90
percent of Argentine exports of preserved meat, a duty be
established of “3 centavos per pound, but not less than 20 percent
ad valorem”. As there is no production of corned beef in the United
States and it is not economically possible as experience has shown
in purchases for the United States army, and as this is an article
which is chiefly consumed by the poor classes, whose income does not
permit them to buy fresh meats, the reduction of the duty in this
way cannot cause very great opposition on the part of North American
cattle
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raisers, whose
interests the Argentine Government understands and respects.
Cowhides. Reduction of the present duty of 10
percent ad valorem to 5 percent ad valorem. The duty is unjustified,
as the United States does not produce, nor can it produce all the
hides it needs (the complete elimination of the duty and a return to
the situation prior to the tariff of 1930 cannot be requested, as,
under the present law it is impossible for the President of the
United States to reduce duties more than 50 percent).
Quebracho extract. Being an absolutely
non-competitive product, the maximum reduction is requested, namely
that the present duty of 15 percent be reduced to 7½ percent ad
valorem.
3. As to the other articles the total amount
of which is at present of little importance in most cases, not for
lack of commercial possibilities, but on account of the high United
States tariff, we are confident that by detailed analysis in the
course of the negotiations regarding each case, a satisfactory
solution will be reached. However, the following three items are
considered of importance and must be mentioned in these bases.
Caseine. The present duty of 5½ cents per
pound, should be reduced to 2¾ cents per pound. The increase of the
duty by more than 100 percent by the Tariff of 1930 drastically
reduced imports of this article, without the desired result being
obtained in the domestic production, which cannot increase in normal
years, on account of the technique of the milk industry. The duty
requested is higher than that in force in 1929.
Canary seed. The duty should be reduced from 1
centavo per pound to ½ centavo per pound. The domestic production is
insignificant and the specific duty which was not very burdensome on
the high prices of previous years is excessive for the present
prices.
Frozen turkeys. The high duty of 10 centavos
per pound should be reduced to 5 centavos per pound. This item was
excluded from the other of article 712 of the Tariff when by the
Canadian Agreement literally Treaty) the duties were reduced on gallinatos† and other birds. This reduction is
requested for the same reasons that motivated the concession to
Canada.
4. Seasonal Trade should be specially
considered in the Agreement (Tratado) and the
Maximum concessions are requested for it in exchange for like
treatment in the reciprocal seasonal trade on the ground that this
trade is non-competitive and of mutual benefit for both countries.
The concessions will be confined to a few months of the
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year. Among other
concessions it is principally requested that in suitable months the
duty on fresh grapes be reduced from 25 cents, American per cubic
foot, to 12½ cents per cubic foot.
5. It is requested that a declaration be made in the Agreement (Tratado) that the Argentine articles whose
importation into the United States is on the free list will not be
taxed during the time the Agreement is in force, especially: salted
and dried intestines, sheep, mare and ass hides, goat and kid skins,
guanaco skins, common fox skins, nutria skins, bones, guano and
dried blood, horsehair, horsehair (manes), quebracho logs and wine
dregs. It is also requested that a declaration be made that the
duties on imported Argentine articles whose rates have not been
changed by the Agreement (Tratado) will not
be raised hereafter.
6. A declaration in the Agreement is requested in the sense that
internal duties will not be imposed on the articles considered
therein equivalent to a customs duty, as happened with tallow, the
importation of which was practically eliminated by the imposition of
an internal tax on the imported article by the United States Tax Law
of 1936/37.14
