632.6231/272: Telegram
The Secretary of State to the Ambassador in Brazil (Gaffery)
87. Your 173, November 23, 1 p.m. Please see Brazilian authorities at once and say that the suggested formula does not appear adequately to fulfill the commitment of the Brazilian Government to the United States with respect to competition of subsidized exports in the Brazilian market on commodities dealt with in the Brazilian-American trade agreement, and hence would not adequately protect the results of that agreement against possible displacement of American trade as a result of the use of subsidies. By the formula, each Government undertakes not to subsidize exports until such time as it shall determine that competitive conditions in the other country have changed because of measures adopted by other countries. It does not appear on the face of the text that the importing country assumes any responsibility or retains any right to participate in or to protest against the other’s decision that conditions have changed for the stated reasons. The phrase regarding change of competitive conditions is so vague that the interested circles here would no doubt regard the formula as affording no real assurance against unfair German competition during the life of the agreement.
Suggest that this unsatisfactory situation could be corrected by adding the following sentence to the formula: “In no event will either country engage in or permit any subsidization of exports in the trade between them which would impair or contravene any international obligation or assurance of the importing country”.