The Minister in Ecuador (Gonzalez) to the Secretary of State

No. 330

Sir: With reference to this Legation’s despatch No. 306 of March 17, 1936, regarding the proposed commercial modus vivendi between [Page 496] Ecuador and the United States, I have the honor to report that the Foreign Office handed the Legation on Wednesday, April 8th, a copy of its airmail instruction on this subject to the Ecuadorean Legation in Washington. A copy of the instruction with its enclosure, and a translation of the instruction and the pertinent part of the proposed draft are transmitted herewith.15

The Department will observe that the text approved by the Foreign Office is unacceptable and also inconsistent with the views expressed by the Ministry of Finance as reported in the Legation’s despatch under reference. In view thereof the Under Secretary for Foreign Affairs was immediately consulted as to this discrepancy. At first, he stated that the policy of his Government was not to accord the most-favored-nation treatment to any country. However, after informing him of the conversations had with the Ministry of Finance on this subject, he said that he would study the matter again and, if an error had been made, he would instruct Minister Alfaro to disregard the instruction pending the receipt of new ones. He added that he considered mandatory the inclusion in the agreement of a separate statement relative to according the United States the preferential tariff. This question was also discussed in the Legation’s despatch just referred to. However, as the Legation had not yet received the Department’s views on this proposed addition, I sent my telegram No. 15 of April 9, 5 p.m., 1936,16 inquiring whether it was considered an insuperable objection. The Legation was convinced that the Foreign Office would restore in the agreement the unconditional most-favored-nation treatment for the United States, but it did not desire to press on this point if the Department found unacceptable the addition proposed by Ecuador. For reasons of economy I did not give more detailed information in my telegram. However, I interpret from the Department’s reply (telegram No. 9 of April 13, 7 p.m., 193616) that the addition suggested by Ecuador is not unacceptable provided that the modus vivendi assures us automatic enjoyment of the lowest rates granted to any third country now or in the future. However, I have not indicated in any conversation the Department views on the proposed addition.

The Under Secretary stated this morning that new instructions were being drafted to the Ecuadorean Minister in Washington and that he would be pleased to furnish a copy this evening. I enclose herewith a copy with translation of the draft which is going forward in this airmail to the Ecuadorean Legation in Washington. I do not know what instructions have been given the Minister, but I do not [Page 497] anticipate that they are substantially different from those set forth in enclosure No. 3.

The Department will observe that the draft is to all intents and purposes identical to that submitted by the Department. An exception is the addition of a new paragraph immediately following No. 2 which reads in translation as follows: “3. The Republic of Ecuador also accords to the United States of America the preferential tariff inasmuch as the requirements set forth in the Executive Decrees establishing the said tariff have been fulfilled”. I do not consider that this proposed addition can be construed as a departure from our announced principles of commercial policy since it is solely a unilateral statement by Ecuador. The purpose thereof, as already explained, is to prevent other countries having commercial treaties with Ecuador containing the most-favored-nation clause, from invoking that clause to obtain the preferential tariff. I realize that this purpose is contrary to our policy, but I feel that we can accept it since it is a unilateral statement, we make no commitment, and it affects only the preferential tariff.

Another question in the draft which appears to require an explanation is the expression in the first line of Article 2 reading“…con respecto a los derechos de aduana existentes …” (with respect to existing customs duties). The Under Secretary stated that “existing” in the sense used means the customs duties which may be in effect at any time the agreement is in force. In other words, the expression is comprehensive and includes present and future customs duties. This same explanation applies as concerns the omission of any percentage in the preferential tariff which was included in the old draft. In this connection the Under Secretary stated that the United States will be accorded the maximum percentage of reduction in effect at the time the duties are assessed.

With the purpose in view of testing the effectiveness of the agreement, I called to the attention of the Under Secretary the agreement recently concluded with France. This provides for the inclusion in the Preferential Tariff of the specific liquors listed therein which are of exclusive French production, and provided that they are shipped from French ports directly to Ecuador and that they do not come from other nations, notwithstanding they may have been produced in France. As a matter of principle, since we have no special interests in the items listed, I inquired specifically whether the terms of the agreement with France would limit solely to that country the rebates accorded under the Preferential Tariff. The Under Secretary replied that under our modus vivendi, as drafted by the Foreign Office, these same advantages will be automatically extended to the United States when our agreement comes into force. When the specific restrictive wording of the agreement with France is considered, I feel that the [Page 498] Department will agree with me that Ecuador appears disposed to give the broadest and most liberal meaning to our most-favored-nation clause. I also inquired as to the application of the agreement with respect to future arrangements between Ecuador and third countries. The Under Secretary replied that we would automatically obtain all advantages which Ecuador might concede to such countries.

The only way that this treatment might be adversely affected is in the event that Ecuador should make further general reductions in its customs tariff in the same manner as it did for the Preferential Tariff and specifically provided that the reductions cannot be accorded to a country simply by virtue of the existence of a most-favored-nation clause. The enactment of such a measure seems highly unlikely at the present time and, in fact, no indication has been given that it is even being contemplated. However, I cite this possibility as the only apparent way whereby we would not be assured, by virtue of the agreement, the automatic enjoyment of the lowest rates granted to any third country in the future.

In view of the foregoing I expressed in my telegram No. 16 of April 14, 6 p.m., 1936, the conviction that the agreement will insure us the automatic enjoyment of the lowest rates granted to any third country now or in the future.

Respectfully yours,

Antonio C. Gonzalez
  1. Instruction not printed; the draft of the proposed modus vivendi presented to the Department by the Ecuadoran Legation is printed infra.
  2. Not printed.
  3. Not printed.