The Chargé in Ecuador (Sparks) to the Secretary of State
[Received December 18.]
Sir: In compliance with the Department’s telegram No. 41 of December 10, 7 p.m., 1936, directing that I open preliminary conversations with the Ecuadorean Government for the purpose of determining whether a basis exists for proceeding with detailed negotiations for the conclusion of a trade agreement, I have the honor to report that I took up the matter with the Minister for Foreign Affairs this afternoon.
I opened the conversation by recalling that the Ecuadorean Government had formally indicated at the end of last year a disposition to initiate negotiations for the conclusion of a trade agreement, and that the modus vivendi signed on June 12, 1936,28 contemplates its substitution by a more comprehensive commercial agreement. I added that my Government had given considerable thought to this subject and that now, in line with its sincere desire to continue to work for liberalized international trade, it desires to give sympathetic consideration to a review of the trade relations between the United States and Ecuador. I further stated that if the review discloses a substantial agreement in the positions of the two Governments, the American Government will be disposed to make public announcement of intention to negotiate a trade agreement with Ecuador, and to proceed with such negotiations. I then informed the Foreign Minister that, with this end in view, I had been instructed by my Government to initiate preliminary negotiations which, of course, will have an ad referendum basis and which should be treated in a confidential way to avoid premature publicity. I had occasion later to emphasize the desirability of keeping confidential the conversations, with which he was entirely in accord.
I then proceeded to explain that my Government wishes the agreement to be predicated on the unconditional most-favored-nation [Page 508] principle and to follow, so far as the general provisions are concerned, the trade agreements recently concluded with Guatemala, Honduras and Nicaragua, copies of which I furnished him. I added that the unconditional most-favored-nation principle was, of course, simply a continuation of the principle already agreed to in our modus vivendi, to which he expressed his conformity.
In referring to the concessions which the United States might wish to obtain, I pointed out that my Government attaches special importance to substantial reductions of the present duties on wheat flour and hog lard. I added that there will, of course, be requests on other products as well, but that my Government is particularly interested at this time in ascertaining what the Ecuadorean Government is prepared to do with reference to flour and lard. I deemed it desirable to emphasize at this point that while the present duty rates are about twenty centavos per gross kilogram on flour and sixty centavos per gross kilogram on lard, consideration must be given to the fact that Ecuadorean consular fees and other fiscal charges on these imports bring up the amount of the duties to the approximate ad valorem equivalents of 45% and 34%, respectively. My reason in emphasizing this point was to convey that the percentage reduction on the duty proper must be sufficiently large to show an appreciable reduction in the total fiscal charges now being assessed.
I then informed the Foreign Minister that in return my Government will be prepared to consider reducing the duty on handwoven palm leaf hats; binding on the free list Ecuador’s principal exports to the United States, such as annatto, bananas, cascarilla, cacao, coffee, kapok fibre, reptile skins and tagua nuts; and binding against increase the present import tax of US$1.50 per M feet on sawed balsa lumber. I indicated that if the Ecuadorean Government is interested in other products now being exported to the United States, I would appreciate it if the Minister would furnish me full data thereon.
I concluded with the statement that the Department is of the opinion that both Governments should have a clear-cut understanding in advance with regard to the scope and content of the agreement so that they may be assured that subsequent negotiations could be successfully held. At the same time I delivered a strictly confidential memorandum incorporating the principal points of the conversation, a copy of which is enclosed herewith for the information of the Department.
The Minister for Foreign Affairs exhibited both pleasure and satisfaction at the disposition of the American Government to initiate the negotiation of a trade agreement, and indicated that his Government is desirous of giving the question immediate and favorable consideration. With regard to the principal point raised, namely, the substantial reductions desired on flour and lard, the Minister stated that these products are prime necessities and that it is the policy of his Government [Page 509] to endeavor to reduce the cost of such articles. In this connection he recalled the fact that at present flour is being permitted to enter the country free of duty. Naturally, the Minister made no commitment at this time as to what his Government might be prepared to do in the way of concessions on these products, but I did receive the impression that he himself anticipated no particular obstacle to meeting our wishes. Moreover, I am inclined to believe that the present shortage of certain foodstuffs, particularly flour, makes the present time opportune for Ecuador to give favorable consideration to this request.
With regard to products other than those already enumerated in which Ecuador might be interested in obtaining concessions in the United States, the Minister was not prepared to make any observations at this time. As concerns naranjilla juice, however, I have reached the conclusion that this is rather an aspiration than a reality. It appears that some two years ago samples were sent to the United States for analysis and to determine whether a market might exist. Considerable difficulty was experienced in shipping the samples so as to arrive in good condition, but the principal deterrents would appear to be the outlay necessary for advertising and introducing the juice in the American market and, more important, the fruit is not now available in the quantities that the importers would require. In other words, the export of naranjilla juice to the United States is simply a potential industry for Ecuador. However, it is one in which more than just a passing interest is being evinced, and if we could do something to meet their wishes I consider that it would prove most helpful. I have suggested that as naranjilla juice is “not otherwise specified” it would probably fall under the general classification of fruit juices, thus requiring a reduction in the duty on this classification with the resulting benefit to other exporting countries, and no positive advantage to Ecuador. The question was then raised as to whether the specification of naranjilla juice in the agreement would restrict the concession solely to that product. It occurs to me that it would not, but were that possible it would afford us an excellent opportunity to make a concession to Ecuador which would be highly esteemed and, I am sure, facilitate the negotiations.
In compliance with the Department’s instruction No. 186 of November 11, 1936, I have requested the Foreign Office to furnish me data on actual shipments of naranjilla juice to the United States and to whom consigned. In this connection I would add that when Mr. Cyril A. Crilley, Assistant Commercial Attaché at Lima, was in Ecuador last year, I understood that he made a study of this product and that he sent his findings, together with samples, to the Department of Commerce.[Page 510]
I am reporting the results of this first conversation by air mail. However, I shall use the telegraph to report any important developments.