632.6231/60a: Telegram

The Secretary of State to the Ambassador in Brazil (Gibson)

80. From Welles. This afternoon I presented to Aranha orally the views of this Government with regard to the proposed commercial agreement with Germany and gave him as a résumé of these views the aide-mémoire which follows. I believe it desirable for you to see the Minister of Foreign Affairs at once, to thank him in the name of this Government for his courtesy in informing you of the nature of the proposed agreement, to read to him a copy of the aide-mémoire, making clear that it is only a record of the views of this Government communicated orally, and to reiterate the hope expressed by this Government that the Government of Brazil will continue to pursue a commercial policy based upon the broad principles of equal opportunity and treatment.

“The Government of the United States appreciates the friendly courtesy of the Brazilian Government in acquainting it with the nature of the trade and compensation agreement under negotiation with Germany. This Government believes that such consultation between governments desirous of pursuing the same liberal commercial policy is of mutual value, particularly in the matter of arrangements with countries pursuing a divergent policy of balancing trade and payments between two countries.

“This Government has not as yet received the precise text of the proposed agreement between Germany and Brazil which the Brazilian Government indicated it would be pleased to make available to our Government. In any event this Government does not desire at present to express any opinion as to the possible discriminatory effects or to seek to determine the balance between the advantages and disadvantages the agreement might involve for American trade.

“It is, however, not too soon to express the concern with which the Government of the United States would view the subscription by Brazil to the widely prevalent system of bi-partite intergovernmental agreements for balancing trade and payments between two countries as opposed to the system of non-discriminatory trade agreements which leaves it possible for payments to be balanced through multilateral movements of trade. At the present time, many governments are seeking the temporary illusory advantages which they may hope to obtain from exclusive bilateral agreements, though conscious that the system is deleterious to the broader interests of trade and offers little prospect of even narrow advantage in the long run.

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“As the Brazilian Government is aware, this Government has steadfastly refused to enter into any arrangement with Germany, or other countries, which would recognize or imply acquiescence in the system of bilateralism, trade restriction and discrimination which the commercial policy of Germany and of certain other countries exemplifies. This policy of avoidance of compensation arrangements has been at the cost of immediate advantages to this country on certain occasions but has been pursued in the belief that the principle of compensation and narrow bilateralism constitutes one of the chief barriers to the recovery and expansion of international trade which the world so urgently requires.

“In the existing exigencies of trade and international payments, there may be room for barter transactions for the exchange of specific commodities on fair terms offering mutual advantage. Such transactions negotiated between non-governmental producers or distributors of merchandise, even though facilitated by governments, while obviously an inefficient procedure suitable only when normal monetary facilities are unavailable, may not be objectionable in principle. When intergovernmental arrangements are systematically made, however, regulating trade between two countries on the basis of exchanging commodities against commodities, in pursuance of a considered policy, broad questions of principle are raised as to the conflict between that trade regime and the regime of multilateral trade which the Government of the United States has sought to promote by its own practice and by actively appealing to other governments to cooperate not only in their announced policies but by the avoidance of exceptions therefrom which in fact vitiate and tend to defeat the better regime of trade.

“The United States has pointed out to other governments that its policy is based on the belief that a general return on the part of the major commercial nations to the broad, liberal principle of seeking and of granting only equal opportunity and treatment with the commerce of other nations, combined with the gradual reduction or elimination of the numerous restrictions now throttling trade, offers the surest, if not the only way, of restoring international commerce. Were the leading commercial nations of the world to support this liberal, far-sighted policy in all its essential respects, the outlook for world peace and prosperity would be brighter by far than it is today.

“The Government of Brazil will, of course, recall that it is the first government with which the United States had the privilege of negotiating a trade agreement based upon the broad principles of equal opportunity and treatment in accordance with the resolution adopted at the Conference at Montevideo12 for restoring world trade. This Government has been greatly encouraged by the invaluable support which it has subsequently received from the Government of Brazil in furtherance of the policy so proclaimed. It feels confident, therefore, while fully recognizing the present difficulties confronting the Government and people of Brazil, that the provisions of any commercial agreement into which the Government of Brazil may enter with other [Page 261] governments will prove to be in complete accord with the principles of the policy above mentioned and will not permit the impression to be created that the Government of Brazil is in any sense compromising the position which it has so helpfully and resolutely maintained.”

For your confidential information. Aranha is cabling President Vargas directly tonight urging him to refuse to permit the German Agreement to be signed. He has asked me to let you know that he believes it would be very helpful for you to see the Minister for Finance personally, to advise the latter that Aranha has shown me the personal letter addressed to Aranha by the Minister recently, and to read to him the contents of the memorandum above quoted as a convincing reply to the arguments advanced by Souza Costa13 in his letter. [Welles.]

  1. Resolution V, Economic, Commercial and Tariff Policy, Report of the Delegates of the United States of America to the Seventh International Conference of American States, Montevideo, Uruguay, December 3–26, 1933 (Washington, Government Printing Office, 1934), p. 196.
  2. Arthur de Souza Costa, Minister for Finance.