682.6231/146
The Chargé in Brazil (Scotten) to the Secretary of State
[Received April 2.]
Sir: I have the honor to report that, during the course of a recent conversation, the general subject of which was covered in the body of the Embassy’s despatch No. 1306 of March 11, 1937,7 Dr. G. [J.] A. Barbosa Carneiro, Chief of the Commercial Section of the Brazilian Foreign Office, called my attention to the fact that the compensation agreement between Brazil and Germany8 will expire in a few months, and added that the Brazilian Government is studying all phases of the matter carefully in order to decide what action should be taken upon the expiration of the agreement.
Dr. Barbosa Carneiro stated further that he had been informed by the Germans (he did not specify whether by the German Embassy or other German sources) that Aski marks were now being used by Germany in the purchase from the United States of cotton, petroleum and other commodities, with the acquiescence of the appropriate American authorities. He inquired whether this statement was true. [Page 319] I replied that I should prefer to obtain official information from the Department before answering him definitely, but that it was my impression that the Treasury Department had recently announced that the countervailing duty provisions of the United States tariff laws would not be invoked against certain classes of commercial transactions between Germany and the United States involving the use of Aski marks. I stressed the fact that any such transactions were exceptions and purely private ones between German and American individuals or companies. Dr. Barbosa Carneiro remarked that if transactions with Aski marks were permitted by the United States without penalty, this was of the highest importance to the Brazilian authorities in formulating Brazilian policy as regards trade with Germany. He requested that the Embassy furnish him with definite information concerning this subject as soon as possible. He seemed inclined to belittle the difference between private Aski mark or barter transactions and those sponsored by direct bilateral negotiations between two governments, such as the existing Brazilian-German trade agreement.
I based my statement to Dr. Barbosa Carneiro with regard to the nature of Aski mark transactions between the United States and Germany on the summary of the Treasury Department announcement regarding “German Mark Transactions” contained in the Department’s radio bulletin No. 303 of December 24, 1936. The item under the heading “German-American Trading Company”, contained in the Department’s radio bulletin No. 63 of March 18, 1937, would seem to indicate that active advantage is being taken of the privileges set forth in the Treasury Department’s announcement, and that they may even have been extended, since it is the Embassy’s understanding that that announcement referred to operations of single American parties with German exporters, without the intervention of third parties, whereas the Continental Export and Import Corporation, mentioned in the item in the later radio bulletin, with its small capitalization, would appear to be more or less of a “middleman” organization.
As the Department is, of course, aware, this Embassy earlier consistently advanced the view in its dealings with the Brazilian authorities that the American Government, as a matter of principle, deplored clearing and compensation agreements and the use of depreciated currencies in international trade as tending to counteract the beneficial effects of its trade agreement policy and its unceasing efforts directed toward the lowering of trade barriers throughout the world. The Embassy pointed out that countervailing duties had been put into effect in the United States on certain imports from Germany because of discrimination by the latter against United States trade involving the subsidizing of German exports by use of the controlled mark system. [Page 320] The fact that such practices were penalized by the United States of course made our position relatively strong in arguing with the Brazilian authorities on a matter of principle.
While the general argument is still valid that the entrance by the Government of Brazil into clearing and compensation agreements with other countries goes counter to the intent of the Brazilian-American Trade Agreement9 of stimulating commercial relations between the two countries, and is not in accord with the principles embodied in the Resolution on Economic, Commercial and Tariff Policies, approved on December 16, 1933, by the Seventh International Conference of American States, at Montevideo,10 it would be of great assistance to the Embassy if the Department could promptly furnish it with any available information and arguments calculated to combat the apparent inclination of the Brazilian authorities to consider that the use of Aski marks under recent Treasury Department regulations is analogous to their use under the Brazilian-German trade agreement.11
Respectfully yours,
- Not printed.↩
- Signed June 6, 1936; text in Wileman’s Brazilian Review, July 13, 1936, p. 34.↩
- Reciprocal trade agreement signed February 2, 1935; for text, see Department of State Executive Agreement Series No. 82, or 49 Stat. 3808; see also Foreign Relations, 1935, vol. iv, pp. 300 ff.↩
- Department of State Conference Series No. 19: Report of the Delegates of the United States of America to the Seventh International Conference of American States, Montevideo, Uruguay, December 3–26, 1933 (Washington, Government Printing Office, 1934), p. 196.↩
- Provisional commercial agreement by exchange of notes signed June 8, 1936; for text of notes, see telegram No. 152, June 10, 1936, 1 p.m., from the Ambassador in Brazil, Foreign Relations, 1936, vol. v, p. 269.↩