611.1731/154 Suppl.: Telegram

The Secretary of State to the Minister in Nicaragua ( Lane )

14. Department’s 13, February 21. Your telephone conversation16 with Duggan17 this morning, Department genuinely sympathetic with Nicaragua’s difficult economic situation due in part to commercial policies of other countries. Proposed trade agreement designed to help Nicaragua; not to make situation more difficult.

Main purpose of general provisions including those about which questions have arisen is to safeguard the concessions exchanged. Proposed provisions are standard and identical with or closely similar to those in agreements with Honduras18 and other countries and to those presented to other Central American countries19 with which negotiations are in progress.

Point 1. It is not sufficient to obtain reductions or bindings of ordinary customs duties. It is necessary to freeze all other charges on importation as of day of signature of agreement except as required under mandatory laws in force on day of signature of agreement. Otherwise concessions in respect of ordinary customs duties might be impaired or nullified between day of signature and effective date by increases in such other charges. If answer to question under point 1 Department’s 13 is yes, Department does not see how article 1 as drafted would in any way prevent Nicaragua from pursuing any policy it may see fit with respect to other countries. As drafted it safeguards concessions to be exchanged between United States and Nicaragua. Proposed change would destroy this safeguard, hence it is unacceptable.

Point 3. Purpose of article 5 is to safeguard concessions exchanged on scheduled products subject to ad valorem rates. As drafted it would prevent changes in bases and methods of determining dutiable value or of converting currencies which would result in increased customs charges paid by importers and hence would impair or nullify concessions. It has nothing to do with gold value of the national currency or with official or bootleg selling rates for foreign exchange. Proposed change would leave way clear for arbitrary changes which would impair concessions, hence unacceptable. Inform Department [Page 794] as to present Nicaraguan law and regulations governing conversion of currencies comparable to section 522 Tariff Act 1930 and inquire what specific objections Nicaraguan negotiators have to provision as drafted.

Point 7. Purpose of this paragraph of article 7 is to safeguard interests of exporters in either country in event the other country should regulate quantitatively amount of imports by means of licenses or permits. It is not aimed at any existing practice in either country but is a safeguard against contingencies. It has nothing to do with exchange control in respect of payment for imported goods and does not involve any statistical difficulties. If either country should regulate by means of permits or licenses the quantity of goods permitted to be imported the paragraph provides merely that the total quantity permitted to be imported during a period of at least 3 months shall be made public; for example, that so many barrels of flour may be imported into the country between April 1 and June 30. Department and governments of other countries with which agreements have been signed regard this safeguard desirable and reasonable.

Point 8. Article 9 designed to safeguard concessions exchanged by insuring fair and equitable treatment in respect of exchange made available for payment for goods imported. Our main purpose is to define “fair and equitable share” in such a way as to prevent the use of such a criterion as the bilateral balance of trade in the interpretation of the quoted words. An allotment of exchange for commercial purposes based upon the proportion of the total exchange required for commercial obligations to all countries in a period prior to the imposition of exchange control which was used to settle commercial obligations to the other country is regarded as a fair and equitable allotment. Proposed changes would make possible an allotment less than that based upon the definition in article as drafted and hence would leave way open for impairment of benefits expected to result from agreement.

For your information Department does not believe that the question of possible discrimination as between commodities is as important as the possibility of discrimination in respect of the total exchange allotments to individual countries. Article as drafted would prevent exchange being denied for importations of principal items supplied by the United States and given to other countries in payment for different items supplied by those countries. If principal items from the United States were discriminated against but the total allotment of exchange held open for the United States was an amount based upon the formula in the article as drafted, there may be some question whether article 9 would provide a definite basis for protest. However, if such a case should be found to be inadequately covered by article 9 we could invoke the provisions of the general safeguard [Page 795] article. We hope that this rather complicated aspect of the matter will not be stressed during the negotiations since our main concern is to establish the principle of non-discriminatory treatment in respect of the allotment of exchange between countries. You may assure Nicaraguans that Department believes that article as drafted would not prevent Nicaragua from adopting any necessary measures in carrying out its control of foreign exchanges.

Point 10. Sense of word nominal translated into Spanish in text of Honduran agreement as “No se impondrán … multas mayores que las nominal establecidas sobre la importatión de articulos …”. Inform Department as to existing Nicaraguan law and regulations in regard to penalties for clerical errors and reply to question under point 10 Department’s 13.

  1. Memorandum of conversation not printed.
  2. Laurence Duggan, Chief of the Division of Latin American Affairs.
  3. Signed December 18, 1935; for text, see Department of State Executive Agreement Series No. 86, or 49 Stat. 3851; for correspondence, see Foreign Relations, 1935, vol. iv, pp. 729 ff.
  4. Agreement with Costa Rica signed November 28, 1936; for text, see Executive Agreement Series No. 12, or 50 Stat. 1582; for correspondence see ante, pp. 373 ff.

    Agreement with Guatemala signed April 24, 1936; for text, see Executive Agreement Series No. 92, or 49 Stat. 3989; for correspondence, see ante, pp. 584 ff.