611.2531/205
The Ambassador in Chile ( Philip ) to the Secretary of State
[Received September 23.]
Sir: I have the honor to acknowledge the receipt of the Department’s Instruction No. 261 of the 8th instant relative to the anticipated [Page 400] ratification of the Franco-Chilean Commercial Treaty of January 16, 1936, and its effect upon our most-favored-nation rights in Chile.
In its instruction the Department requests me to discuss the question of most-favored-nation treatment of American trade with the Foreign Minister.
I beg to report that I have at no time received the impression that the Chilean Government would be disposed to create difficulties in the matter of the continuance of our most-favored-nation treatment in the event of the ratification of its new treaty with France which will automatically bring about the cancellation of the existing modus vivendi between the United States and Chile.
The urgency of the situation referred to by me lies in the necessity for some definite understanding between our Governments that the most-favored-nation treatment stipulated in the modus vivendi will not lapse when the new treaty with France is ratified.
Although sufficient statistical information is not available to determine the exact amount of American goods imported into Chile under reduced duties provided for in the French and other commercial treaties, the Commercial Attaché to the Embassy informs me that he estimates at approximately $330,000, United States currency, the amount that would be affected by the withdrawal of most-favored-nation treatment from the United States. This estimate has been based partly on trade estimates although official import statistics have been employed wherever applicable.
Iron and steel products are the two largest groups of imports which would be affected. The Commercial Attaché also states that, in the first case, Germany is a far more serious competitor than France and, in the second case, Japan and Germany are both important competitors in addition to France.
Treaties now in force between Chile and Germany and between Chile and Japan give those countries most-favored treatment. It is of obvious importance, therefore, that United States products receive equal tariff consideration.
In the circumstances, it would seem but necessary for the Department to decide what procedure it prefers to follow in the attainment of this end. I have assumed heretofore that a fresh exchange of notes here to provide for the continuation of most-favored-nation treatment under the conditions which will supervene as a result of the ratification of the new Franco-Chilean Treaty would be the means favored by the Department. However, as I seemed to lack the necessary authorization, I have scrupulously avoided all mention of the subject in my conversations with Chilean officials. At the same time, it was reported to me several days ago by the Commercial Attaché that, from his informal talks with Don Desiderio García, he had inferred [Page 401] that the Chilean Government would be glad to negotiate a new modus vivendi whenever I should intimate such a desire on the part of the Department.
I have noted that the Department in its above-acknowledged instruction authorized me only to discuss the question of the continuation of most-favored-nation treatment with the Minister of Foreign Affairs and that no allusion was made by it to the possibility of a new modus vivendi.
In the belief, therefore, that the Department may not favor the authorization for an exchange of notes to this effect, I confined my remarks to the Foreign Minister, in an interview on the 16th instant, to a discussion of the situation as it will exist after the anticipated ratification of the French Treaty.
I inquired whether the Chilean Government would be prepared to assent to a continuation of most-favored-nation treatment by mutual accord only, until the terms of a commercial treaty with the United States may be agreed upon.
Señor Gutiérrez29 said that, in his personal opinion, this would seem to be feasible and the most simple method of treating the situation. He added, however, that in order to give me his official opinion in the matter he would be obliged to confer with the specialists in his Ministry.
With regard to the question of a possible modus vivendi, I beg to mention the fact that the British Government evidently has proceeded on the assumption that the expiration of its modus vivendi, also based upon the Franco-Chilean modus vivendi of May 22, 1931, will precipitate an anomalous situation for British trade. As already reported to the Department, the British Ambassador took energetic steps with the Chilean Foreign Office to assure the postponement of the pending ratification with France until the end of October next. During this interim I understand the British Government will open negotiations with Chile for a new commercial treaty.
Although the Foreign Minister has not yet informed me of the result of his inquiries following upon our conversation of the 16th instant, I feel reasonably confident he will suggest that a fresh exchange of notes to extend the most-favored-nation treatment (as was necessary in May 1931) until the negotiation of a commercial treaty, will be desired by his Government.
I have not yet ascertained that there is any provision in the Chilean laws which would prevent that Government from granting most-favored-nation treatment by mutual verbal accord. But the Department is aware that during the long period from 1851 to 1931, when such an arrangement existed, Chile was in a position to accord a general [Page 402] guaranty for such treatment. This policy was definitely changed in 1931 with the advent of the French and other commercial agreements.
The present intention of the Government seems to be to effect a gradual reduction of the gold exchange rate, in order to fulfill its assurances in the matter of the abandonment of its exchange control policy. It is generally considered that this process will cover a period of approximately one year. Therefore, if this intention is carried out, there will continue to exist discrimination against American trade during that period. In such case the negotiations for a treaty satisfactory to the Department may be protracted, or delayed, and my opinion is that it will be desirable, if not strictly essential, to confirm the most-favored-nation treatment for our commerce in general by a simple exchange of notes with the Chilean Government. It is my understanding that the previous suggestions by the Department as regards the text for a modus vivendi are deemed to have been more or less superseded by the assurances received from Don Desiderio García last summer.
There are at present taking place informal conversations by the Commercial Attaché with Señor García for the purpose of studying a suggestion by the latter of a means to hasten the abandonment of the gold exchange control policy of his government. As soon as anything tangible arises from these conversations I will at once inform the Department.
Respectfully yours,
- José Ramon Gutiérrez Alliende, Chilean Minister for Foreign Affairs.↩