835.5151/627: Telegram

The Chargé in Argentina ( Wilson ) to the Secretary of State

21. Department’s telegram No. 20, February 8, 2 p.m. Article 9 of the Anglo-Argentine agreement gives the right to either party to abrogate the agreement should either Government take any measure “liable to upset the equilibrium resulting from this agreement”. This equilibrium is interpreted as meaning the allocation of sterling exchange in accordance with article 4 paragraph 1 of the agreement [Page 238] which presupposes that all British exports to Argentina will receive exchange at the official rate. Argentina during the past few years has had a favorable balance of trade with Great Britain with an approximate ratio of more than 2 to 1. While it is difficult to estimate even roughly how much British trade would suffer with the removal of 20 per cent surcharge, there is no doubt that it is of material assistance to British exports. When the 20 per cent surcharge was voluntarily imposed by the Argentines they made it clear that one of its principal purposes was to favor Great Britain in a policy of bilateral trade.

It might be that in conversations with us relating to the conclusion of a trade agreement, Great Britain might be willing to forego a strict allocation of sterling exchange provided under article 4 and might also be willing to favor the discontinuance of the 20 per cent surcharge. Such assurances by the British Government would take from the Argentines one of their principal arguments for the maintenance of the surcharge. I believe, however, that it would require either such assurances on the part of Great Britain or else substantial trade concessions from us before the Argentines would even consider relinquishing the 20 per cent surcharge which has become such an important and integral part of their present trade policy.

Wilson