The Minister in the Dominican Republic ( Schoenfeld ) to the Secretary of State
[Received October 21.]
Sir: Referring further to the Legation’s despatch No. 3546 of October 2, 1936, and to the Department’s telegram No. 13 of October 9, 1936—7 p.m., in relation to the threatened denial of most-favored-nation treatment to certain American products imported into the Dominican Republic, in apparent violation of the American-Dominican Modus Vivendi of 1924, I have the honor to submit below a study of Dominican-American trade, particularly with reference to the character of Dominican exports to the United States, which may assist the Department in determining the practicability of retaliatory action, if this should become necessary.
In the event that the Dominican Government fails to make a satisfactory reply to the representations contained in the Legation’s Note No. 259 of October 10, 1936 (see despatch No. 3556 of October 10, 1936), and denies to similar American products the same preferential treatment as is granted by the Dominican Republic to French products imported under the terms of the recent Franco-Dominican Trade Agreement, the Department may wish to consider the advisability of adopting retaliatory measures against Dominican products imported into the United States.
Dominican exports to the United States, exclusive of Puerto Rico, in 1935 were valued at $4,154,451, as compared with $2,613,741 in 1934, an advance of $1,540,710, or 59%. Exports to the United States have continued to advance in 1936, and they were valued at $2,402,272 for the first six months of the year. In 1935, the United States took 26.83% of all Dominican exports, against 20.27% in 1934, a gain of 6.56%.
Dominican imports from the United States declined from a value of $6,016,165 in 1934 to $4,742,194 in 1935, a drop of $1,273,973, or 21%, chiefly due to larger purchases in Japan, Germany, The Netherlands and British India. Imports from the United States have [Page 413] continued their downward trend in 1936, and were valued at $1,152,373 for the first three months of the year. The percentage of total Dominican imports furnished by the United States declined from 56.89% in 1934 to 48.44% in 1935, a drop of 8.45%.
It will be observed from the foregoing figures that, while the United States increased its percentage of purchases of total Dominican exports by 6.56% in 1935, the percentage of total Dominican imports purchased in the United States declined by 8.45% in 1935, when compared with 1934.
American-Dominican trade is gradually attaining a state of equilibrium and the visible balance of trade obtaining in favor of the United States is steadily decreasing. The approach to a condition of balance in trade between the two countries has been rapid in 1935 as will be observed from the following figures:
Dominican Trade with the United States
|Imports from U. S.||Exports to U.S.||Balance in favor of U. S.|
There are several basic reasons for an approaching balance in American-Dominican trade. The most important of these are: (1) increased Japanese, German and Dutch competition in the Dominican market, resulting in a marked decline in American exports to the Dominican Republic of cotton textiles, cement, chemicals, certain iron and steel products and lard; (2) greatly increased so-called internal revenue taxes on imports, imposed by Dominican Law No. 854 of March 13, 1935,9 which has appreciably reduced imports of most commodities other than prime necessities of life; (3) larger American purchases in 1935 and 1936 of certain Dominican products such as crude cacao, molasses and coffee.
Principal Dominican Exports to the United States Exclusive of Puerto Rico.
The enclosed analysis10 of Dominican exports to the United States discloses that of 15 principal items of export, seven are dutiable under the United States Customs Tariff Act of 1930,11 as revised to January [Page 414] 1, 1936, and eight are on the Free List. Dominican products (molasses, sugar, cane syrup, fresh fruits, hides of cattle, yams and coconuts, etc.) imported into the United States subject to duty were valued at approximately $902,473, in 1934, $1,607,904, in 1935, and $908,109, in the first six months of 1936.
It will be observed also from the analysis mentioned that the eight principal Dominican exports to the United States, now on the Free List, attain a value of roughly double that of the dutiable exports. These products (crude cacao, placer gold, yucca starch, coffee, beeswax, goatskins, Lignum Vitae, plantains, etc.) imported into the United States free of duty were valued at approximately $1,607,288, in 1934, $2,471,525, in 1935, and $1,453,047, in the first semester of 1936.
The Problem of Retaliation.
In 1935 three principal dutiable Dominican exports to the United States (molasses, sugar and cane syrup) accounted for $1,581,935 of total dutiable Dominican exports to the United States valued at $1,607,904, leaving to other dutiable exports a negligible value of $25,969. Most of these three principal dutiable items of export are produced in the Dominican Republic by companies that are American-owned or in which American capital is largely interested. For this reason, any attempt on the part of the United States Government to retaliate against Dominican products may be expected to evoke protests from American sugar interests here. Inasmuch, however, as the Dominican Republic’s sugar quota in the United States for 1936 is only 6,668,480 lbs. (3,334 short tons), it is apparent that around 90% of all Dominican sugar exported to the United States is for refining and re-export with a duty drawback. After deducting the value of Dominican sugar exports to the United States, there still remained in 1935, dutiable Dominican exports to the United States valued at approximately $918,217. It is, therefore, upon the value of these exports that calculations should perhaps be based as to whether retaliatory measures against Dominican exports to the United States are feasible.
Another consideration is, of course, the advisability of placing a quota on Dominican crude cacao exports to the United States (the most valuable item of export to that country), which amounted in 1935 to 27,380,475 kilos valued at $2,020,371. This, perhaps, would be the most feasible method of retaliation against any Dominican violation of the American-Dominican Modus Vivendi of 1924, inasmuch as it would not have a direct adverse effect on American sugar interests here, and the charge of discrimination against American interests would thus be avoided.[Page 415]
Dominican Exports to Puerto Rico.
Statistics of Dominican exports to the Island of Puerto Rico are kept separately from those to the United States by the General Receivership of Dominican Customs as well as the Dominican “Direction General de Estadistica National”. Since the leading Dominican exports to Puerto Rico differ appreciably from those to the United States, no attempt has been made to combine these two sets of figures in this study.
Accordingly, there is transmitted herewith a separate analysis12 of Dominican exports to the Island of Puerto Rico, disclosing that of nine principal items of export in 1935, five are dutiable under the United States Tariff Act of 1930, as revised to January 1, 1936, and four are on the Free List. Dominican products (corn, sole leather, cattle, bran and dyewood) exported to Puerto Rico subject to duty were valued at $136,659, in 1935, and $99,762, in the first semester of 1936. For 1935, these exports add the sum of $136,659 to the total of dutiable Dominican products (exclusive of sugar) valued at approximately $918,217 imported into the United States in that year, making the grand total of Dominican dutiable exports (exclusive of sugar) to the United States and Puerto Rico in 1935 approximately $1,054,876.
Secretary of Legation