The Secretary of State to the Ambassador in Peru (Steinhardt)
63. Your 69, December 18, 1 p.m. Please convey orally a message along the following lines from the Under Secretary to the Foreign Minister with regard to the application of Article 9 (c):
- Of all the countries that gathered at the International Sugar Conference in April the United States was perhaps the least directly interested party. Its domestic legislation was satisfactorily taking care of the domestic situation. It had no sugar to export to the world market. It participated in the Conference and was glad to do so in order to lend its weight to the effort to restore healthy conditions to a sick sugar industry in the countries exporting to the free market. Among those countries it was particularly interested in helping the countries of the Western Hemisphere.
- After much difficulty an agreement was finally adopted which it is believed in general is satisfactory to all parties concerned. It is now operative on a provisional basis, by resolution of the Provisional Sugar Council running “until further notice”. If maintained in operation it should once again put the sugar industry in those countries exporting to the free market on a healthy basis; if not it is likely that the sugar industry in those countries will continue as at present, or conceivably in an even worse condition. In the last analysis the decision as to whether the agreement will enter definitively into effect rests upon the principal participants and not upon the United States. If certain countries feel, in the light of information not comprehended by them when they signed the agreement, that other signatories are not to bear their share of the sacrifice, the first group of countries are still free not to continue with the agreement, which of course would at once destroy its efficacy.
- With regard to the interpretation of Section 9 (c), on the one hand are Peru and the Dominican Republic which are opposed to any amounts being charged against their free market quotas that are admitted as a result of redistribution of the unused Philippine quota. On the other hand are other countries which are equally firm in their belief that the amounts of sugar not chargeable to the free market quotas of Peru and the Dominican Republic should be definitely limited.
- While the agreement gives to the United States the right to determine the amount which will not be chargeable to the free market quotas, nevertheless it is believed to be obvious that if a figure is selected which is considered unreasonable by other countries there is a [Page 968] very real possibility that those countries rather than accept this figure will withdraw from the agreement. Mr. Norman Davis was informed at the Brussels conference19 that the Dutch will take a very strong stand against exceeding the figures informally mentioned at the London conference. If Peru stands firm in its contention that there should be no limitation, and the United States so interprets 9 (c), there seems to be little doubt but that the agreement will lapse. This would have little or no effect upon the sugar industry in the United States. However, according to statements made by the Peruvian delegates, a continuance of the present price for Peruvian sugar in the world market will ultimately ruin the industry.
- The United States, therefore, is in the position of a mediator endeavoring to find some common ground on which the contending parties can meet. In view of the far-reaching benefits that would accrue to the Peruvian sugar industry from the operation of the international sugar agreement, the Under Secretary is confident that Dr. Concha will view this difficult problem from a broad vantage point. He knows of the good will that the United States bears for Peru. He knows to what extent the President and the Secretary went to persuade Congress to include a provision in the Sugar Act of 1937 which would permit an increase in the quotas of Peru and other full duty countries. This was a very practical demonstration of the desire of this Government to help Peru. Whatever limitations on Article 9 (c) may be accepted, the Article assures Peru the possibility of substantial shipments over and above the free market export quota which was the highest that could be obtained by hard negotiation at the Conference. The present initiative with regard to Article 9 (c) is likewise motivated by a desire to assist Peru, since in the considered opinion of the sugar authorities of this Government the collapse of the agreement would probably postpone another effort to bring about a sugar agreement for several years, during which time the Peruvian industry would suffer greatly. It would seem preferable for some decision to be reached prior to the next Council meeting, which was the reason for having raised the question now with the Peruvian Government. Therefore, the Under Secretary would appreciate Dr. Concha’s further study of the problem and his comments at as early a moment as possible.
In the ensuing discussion you should make it clear that the sugar agreement could not in any way affect the amount of sugar Peru is permitted to export to the United States, which is determined solely by the Sugar Act of 1937. The United States imports from Peru for each calendar year comprise three elements: (1) the original quota [Page 969] granted for the year by the United States; (2) the quota granted after September 1 by redistribution of unutilized parts of quotas of full-duty countries; and (3) the quota granted (probably soon afterward) by redistribution of unused Philippine quota. Elements (1) and (2) are clearly chargeable to the Peruvian export quota (in the export quota year in which they are actually exported) under the International Sugar Agreement, being covered by Article 9 (a), and the third will be chargeable to Peru’s free market quota except such amounts thereof as may be excepted under 9 (c).
The United States cannot guarantee how large an import quota Peru will receive in any calendar year from these redistributions but it may reasonably be expected that for the next few years they will be equal to or greater than the 1937 figures.
[At a meeting of the Sugar Council on April 27, 1938, the American delegation presented a statement to the effect that after consultation with interested countries the United States now exercised its right under article 9 (c) with the limitation that of such additional imports in any calendar year during the 5-year life of the Agreement not more than 18,000 tons imported from the Dominican Republic, 2,471 tons imported from Haiti, and 29,950 tons imported from Peru should be chargeable to the export quotas of those countries under the Sugar Agreement, nor would the aggregate limitation under authorization of article 9 (c) exceed 50,421 tons. These quantities were in terms of metric tons of 96 degrees sugar and were in proportions established for import quotas by the United States Sugar Act of 1937. In telegram No. 354, April 29, 1938, 7 p.m., the American delegates to the Sugar Council reported that the article 9 (c) controversy appeared ended, the statement being received by the Council without opposition (561.35E1A/346).]