Foreign Relations of the United States Diplomatic Papers, 1936, The American Republics, Volume V

631.003/511

The Minister in Venezuela (Nicholson) to the Secretary of State

No. 424

Caracas, August 21, 1936.
[Received August 25.]

Sir: I have the honor to enclose a copy of a memorandum regarding a conversation which the Secretary of the Legation, Mr. Villard, recently had with the Minister for Foreign Affairs in respect to the increases which it is proposed to make in the Venezuelan customs tariff insofar as such increases affect American products, particularly passenger automobiles.

These increases are part of a general upward revision of the import duties, amounting to two per cent for most products but to very considerably more in certain instances, which accompany the new tariff bill submitted to the current extraordinary session of the national Congress. Pending a detailed study of the bill which is being made by the Commercial Attaché, it is not possible to affirm that the new rates of duty would be directly discriminatory against American trade, but it is obvious that they would fall heavily on many products which are the manufacture of the United States. While in some cases a reduction in duties is contemplated, such reductions for the most part neither compensate for the increases insofar as American products are concerned, nor do they affect importations of greatest importance to American trade with Venezuela.

A preliminary study of the proposed law reveals, for example, an increase of 530 per cent in the duty on passenger automobiles in the lowest price class, with proportionate increases in the rates on higher priced cars; an increase of 1,777 per cent in the rates on radio and telegraph transmitters and instruments for electrical measurement; an increase of 1,309 per cent on electrical transformers; an increase of 964 per cent on typewriters and accessories and calculating machines; and an increase of 666 per cent on cash registers. Other increases proposed are: machines, apparatus and accessories not otherwise specified, from 27 to 609 per cent; electric refrigerators from 410 to 538 per cent; storage batteries, and cinematographs, accessories and exposed films, 155 per cent; metal furniture, 126 per cent; and radio receiving sets of the 25–50 kilo category, 104 per cent.

Reductions amounting to 50 per cent are provided for silk hosiery and silk clothing; 57 per cent for rayon clothing; 43 per cent for certain classes of fresh fruits; and 29 per cent in the case of apples.

While the memorandum enclosed herewith shows that the Foreign Minister has disclaimed any intention of his Government to use these increased rates for bargaining purposes in connection with the suggested negotiations for a reciprocal trade agreement between the United States and Venezuela, it is apparent that an upward revision in many items imported from the United States has been proposed on the very eve of such possible negotiations. From a confidential but reliable source, moreover, I have learned that this “bargaining plan” was probably in the mind of the late Minister of Hacienda, Dr. Alberto Adriani, who died a short time ago while still occupied with drafting the tariff bill in question.

It is clear that in any trade agreement that might be negotiated between the two countries, Venezuela would have more to offer to the United States in respect of tariff reductions—even without the proposed increases—than the United States would be able to offer to Venezuela. For this reason it might be argued that the Venezuelan position in the matter of the new tariff rates is a relatively strong one and that under the circumstances Venezuela would have little to gain by entering into reciprocal trade negotiations with the United States. In this connection I may observe, however, that the Venezuelan Government is apparently anxious to negotiate such an agreement for the reasons mentioned in my despatch No. 271 of May 7, 1936.¹⁶ Since that date, the Foreign Minister has several times brought up the subject and, I feel sure, would be keenly disappointed if the Venezuelan tariff should prejudice the success of any possible negotiations in the matter of a trade agreement.

Respectfully yours,

Meredith Nicholson

[Enclosure]

Memorandum of Conversation, by the Second Secretary of Legation in Venezuela (Villard)

When I called on the Foreign Minister on August 13, I took the occasion to refer to the proposed heavy increases in the Venezuelan customs tariff affecting importations from the United States, particularly passenger automobiles. I said that although I realized the Venezuelan tariff was being raised as a whole, the burden of the increases seemed to fall heavily on American goods and that in the case of automobiles I understood such increases amounted to four or five hundred percent. I also remarked that I had discussed this last point informally with Dr. Adriani, Minister of Hacienda, two days before his death, who had promised to go into the subject more fully before the tariff bill was presented to Congress.

I pointed out to the Foreign Minister that these very large increases in customs duties on American products were being introduced at the very moment when consideration was being given to the idea of negotiating a reciprocal trade agreement between Venezuela and the United States, and that such action on the part of Venezuela might have a most unfortunate effect in Washington at this time. I said I feared that the building up of customs barriers on the eve of negotiations for a trade agreement might produce the impression that Venezuela was raising its duties on American goods for bargaining purposes, in which case the success of any such negotiations might be prejudiced from the start.

Dr. Gil Borges replied that it was not the intention of the Venezuelan Government to raise the customs duties for bargaining purposes, but solely as a source of revenue, and that it was planned to tax so-called “luxury” goods with the latter plan in mind. He admitted that this might make a bad impression just prior to the start of trade agreement negotiations, but disclaimed any intention of his Government to impose especially heavy duties on American goods or to discriminate against the products of the United States in any way. With respect to passenger automobiles, he said that he realized low-priced cars were a necessity, and not a luxury, in the development of the country, and that while the Government planned to place heavy duties on such makes as Packards, Cadillacs or Lincolns, he was not in favor of doing so in the case of cars in the Ford or Chevrolet class. He said he would take up this matter with the Director of the Commercial Policy Division with a view to modifying the proposed increases on cars of that type.

Henry S. Villard

August 15, 1936.

16. Ante, p. 955.