The Consul General at Buenos Aires (Burdett) to the Secretary of State
[Received June 15.]
Sir: I have the honor to report that the American business firms in Buenos Aires are becoming increasingly disturbed over Argentine exchange control, particularly the 20% surtax on exchange required to pay for imports from the United States. It may be said that these business men are considering only one angle of a large problem, but it is indeed difficult for them to see millions of dollars of business going to their European competitors because of the 20% differential.
This measure is designed by Argentina to regulate trade and is equivalent to the imposition of customs duties 20% higher on certain merchandise from certain countries of origin than on like merchandise from other countries of origin. The United States is frankly the chief target of this discrimination.
The following is a case in point. The International Portland Cement Corporation, which is closely related to the American General Electric Company, is strongly inclined to use General Electric equipment. The Cement Company engineers are accustomed to General Electric machinery through having used it for many years in their plants. This Corporation’s Argentine branch is about to erect a large cement plant on the Parana River which will require an order of machinery such as is supplied by the General Electric Company, amounting to more than $1,000,000.
It now appears that this same machinery may not be purchased in the United States because of the 20% surtax and unless some unforeseen eventuality occurs, the machinery will be purchased in Europe.
Thus, we have not only the loss of more than $1,000,000 to American factories, but also the risk of unsatisfactory operation and output in the factory operating with equipment with which the American engineers are not familiar. On the other hand, there is the danger that this European equipment will prove to be more satisfactory than the American product and thereby will supplant it in cement mill design generally in foreign countries.[Page 209]
The American Chamber of Commerce in the Argentine has held several meetings to discuss the surtax and in late April decided to lodge a protest with the Government at Washington urging that a retaliatory action be taken against Argentine merchandise entering the United States through the President making use of his authority and imposing increased duties on Argentine products. The Chamber decided to address this protest to the Chamber of Commerce of the United States, to send copies to the home offices of the respective companies engaged in business in Buenos Aires to the end that the complaint be brought to the attention of the Senators and Congressmen from the districts within which these home offices are situated, and to give the fullest publicity to these documents. Copies of the rough drafts of these letters are herewith transmitted as enclosure No. 1.37
For obvious reasons the Consulate General advised that these letters be not sent out, stating to the Chamber that the Embassy has been making all representations to the Argentine Foreign Office as are possible in the circumstances, and made clear that the State Department is giving every sympathetic consideration to this matter.
A further argument against sending out these letters, which was pointed out by the Consulate General, was the fact that any imposition of additional duties on Argentine products entering the United States would react against the members of the local American Chamber of Commerce who export corned beef, hides, wool, linseed, and tallow.
At a meeting held on May 20, 1936 the Governors of the Chamber of Commerce voted to cancel the proposed letter to the United States Chamber of Commerce and instead, to substitute another letter, copy of which is herewith transmitted as enclosure No. 2,37 and to address this letter to official or semi-official entities in the United States to be decided upon later. This document is a very clear statement of the acutely distressing position of American business men in Buenos Aires, and can with profit be read by the officers in the Department who are interested in the general question of American trade movement with the Argentine.
The American Chamber of Commerce in Buenos Aires is largely composed of high grade executives who have weathered successfully the depression years. It is asserted that the American business community in Buenos Aires is perhaps more competent and more efficient than that of any other foreign city. Their Chamber of Commerce has cooperated closely with the Consulate General and has sought its advice on every important problem. This office has thus been in a position in the discussion of exchange to exercise a restraining [Page 210] influence against premature action or publicity to untimely criticism of the State Department’s policy.
Discrimination through exchange control is a vital question in American-Argentine business. Some of the American importers in Buenos Aires are not affected by this exchange restriction inasmuch as their exchange for imports are granted at the “official” rate through being considered as of public utility. These products include agricultural machinery. On the other hand, the best examples of the suffering from lack of official exchange for Americans and the consequent 20% surtax are steel and machinery. Every few days large orders are going to Germany and England which would ordinarily be taken care of by the United States and would afford work for thousands of unemployed in Pennsylvania and Illinois.
Many of the local branches of American firms are thoroughly agitated over this exchange discrimination. They feel that the wide publicity being given by their British competitors to the assertion that Argentina is not treating English trade fairly although England is Argentina’s best market, should be counteracted with publicity in the United States through semi-official organizations, and through the press, of the alleged violation of the Treaty of July 27, 185338 which stipulates in Article 3 that:
“The two high contracting parties agree that any favor, exemption, privilege or immunity whatever, in matters of commerce or navigation, which either of them has actually granted, or may hereafter grant, to the citizens or subjects of any other government, nation, or state, shall extend, in identity of cases and circumstances, to the citizens of the other contracting party,”
and Article 4 of the same Treaty, which states that:
“No higher or other duties shall be imposed on the importation into the territories of either of the two contracting parties of any article of the growth, produce or manufacture of the territories of the other contracting party, than are, or shall be, payable on the like article of any other foreign country.”
As stated above, the Governors of the Chamber of Commerce drafted two communications stressing the discrimination of this exchange surtax system, quoting the above-mentioned Treaty and saying that it has been violated by Argentina. The intention of the Chamber was not only to obtain support from the American Government but also to cause publicity to balance the large amount of British publicity now flooding the Argentine press, much of which is aimed directly against American trade. The members of the Chamber, engrossed with their own immediate grievances, have reached a point where some [Page 211] of them are criticizing the foreign trade policy of the Department. In preventing these letters being issued, the Consulate General, while agreeing with many of the causes for complaint of the Americans in Buenos Aires, pointed out that the proposed letters would at the present time be without helpful effect, and would hamper the State Department in its urgent wish to negotiate a commercial treaty with the Argentine and to maintain the friendliest relations possible with this key country of Latin America.
On June 2nd the Board of Governors of the local Chamber decided to await a redraft of the letter, enclosure No. 2, and adopted the following resolution.
“That the Chamber of Commerce bring to the attention of the National Foreign Trade Association the matter of the discrimination involved in the 20% surcharge now imposed upon American importers, requesting their assistance and advice as to the best manner of bringing this matter before the State Department and American public.
“That the Chamber should defer the proposed visit to the Minister of Finance as decided upon at the last meeting, until a reply is received from the National Foreign Trade Association and possibly until that Association shall already have taken some action in the United States.”
Further action by the Chamber or by the individual groups of importers will be reported.