The British Embassy to the Department of State
- The United Kingdom Government have carefully and sympathetically examined the memorandum enclosing the revised list of products affected by the Ottawa Agreements on which an improvement in the treatment now accorded by the United Kingdom to the United States is suggested by the latter as a basis of negotiations for a trade agreement. They have also considered the list of products on which a binding of the present treatment is required.
- The examination has been made with every desire to meet the requirements of the United States, so far as appears possible without prejudicing the chances of favourable consideration by the Governments of the Dominions, India, Southern Ehodesia and Burma. It [Page 25] is unfortunately clear that the United States proposals as they stand would, at least in many cases, be unacceptable to those Governments and the United Kingdom Government fear that it would be useless to submit the proposals of the United States Government in their present form to the Governments concerned.
- The United Kingdom Government desire to point out that there is little, if anything, which they could offer to the Dominions etc. by way of compensation for what the latter may be asked to give up in what is by far their most important market. Dominion goods already enjoy free entry into the United Kingdom (subject to a few exceptions mainly of a revenue character); consequently the field in which the Dominions concerned would probably seek compensation consists of further preferences, i. e. increased duties on imports from foreign countries of the classes of goods not covered by the United States desiderata. The United Kingdom Government believe that on general grounds the United States Government would share their desire to avoid any such result.
- The United Kingdom Government would also point out that in certain cases the United States proposals raise difficulties from the point of view of protecting home interests. This difficulty will no doubt arise more acutely in the further requests which it is understood that the United States authorities may put forward at a later stage (in regard to commodities on which the United Kingdom is free from commitments to other Empire countries), but it also arises on some of the items in the present list. The duty on fresh apples, for example, is largely protective in aim, and is almost entirely so during certain months of the year. Such a duty would have been imposed even if there had been no Ottawa Agreements, and protective duties of the order of 20% ad valorem are far more difficult to reduce than protective duties of a much higher order.
- With regard to paragraph 3 of the United States Memorandum the United Kingdom Government assume that (subject to the reservation in the fifth paragraph) List 2 contains all the items affected by the Ottawa Agreements in respect of which a binding of the present tariff treatment is required. But they think it well to point out that they would in general be unable to entertain proposals involving the binding of existing revenue duties. While in most cases the binding of other duties naturally presents fewer difficulties than reduction in the rates of duty, it is important to recall, as pointed out in Mr. Chalkley’s personal note of the 29th December,40 that the United Kingdom Government are already faced with proposals for higher duties on a number of commodities in the course of discussions arising [Page 26] out of the Ottawa Agreements, and in the consideration of the claims of domestic industries for increased protection. These facts are mentioned lest the difficulties facing the United Kingdom Government and the value attaching to the conventionalisation of present duties and margins of preference should be underrated.
- The United Kingdom Government believe that the nature of the difficulties presented by the United States proposals will be most readily appreciated by a consideration of each item. This procedure will bring out in a practical way the difficulties which have already been formulated in general terms. The United Kingdom Government have accordingly prepared the attached notes,42 in which they have explained the position and indicated such alternative proposals as they would feel able to put to the various Governments concerned as a basis for consideration. It will be realised that their acquiescence must by no means be assumed.
13 April, 1937.