Foreign Relations of the United States Diplomatic Papers, 1937, The American Republics, Volume V

611.2531/206: Telegram

The Secretary of State to the Ambassador in Chile (Philip)

Washington, October 28, 1937—7 p.m.

40. Your despatches 714 and 723 of September 17 and October 1, 1937.

(1) Using as a basis the Department’s counter proposal of February 18, 1937, the text of which you transmitted to the Ministry of Foreign Affairs on February 22, 1937 [Enclosure to your despatch No. 527 of March 13, 1937],³² you are requested to endeavor to conclude as soon as possible, a new modus vivendi to replace the existing exchange of notes.

(2) Considering that the automobile quota is expected to be abolished, the Department feels that Chile should have no serious difficulty in agreeing that future quotas shall be allocated on a proportionate share basis. Hence the Embassy should use its best efforts to have numbered paragraph 2 of the aforementioned draft accepted.

(3) You may propose to the Foreign Minister, if you perceive no objection, the following language in lieu of that appearing in numbered paragraph 3:

• “(a) The contracting parties respectively agree to accord unconditionally no less favorable treatment with respect to rates of exchange, and taxes or surcharges on exchange transactions, in connection with payments for or payments necessary and incidental to the importation of articles the growth, produce or manufacture of the other country than is accorded in connection with the importation of any article the growth, produce or manufacture of any third country.
• “(b) The Government of Chile undertakes to abolish, as soon as possible, all forms of exchange control affecting the transfer of payment for articles the growth, produce or manufacture of the United States.”

You may mention to the Foreign Minister that the second part of the foregoing is less comprehensive than both the proposal of the Foreign Office embodied in its memorandum of March 16, 1934,³³ and the draft agreement of March 27, 1934,³⁴ which was agreed to in principle by the Chilean Government. You may also cite the first paragraph of the note of the Chilean Government dated July 5, 1937,³⁴ which declares that the Chilean Government considers the existing commercial restrictions as emergency measures “whose final elimination constitutes the true object of its commercial policy.”

In view of the expected abolition of the discriminatory gold exchange rate, this Government hopes that the foregoing will be acceptable to the Chilean Government. If, however, these provisions appear to be impossible of acceptance, you are authorized to negotiate with a view to reaching, subject to the Department’s approval, the best agreement possible in respect of exchange.

(4) In the course of your conversations, you may say that as soon as American trade is accorded equality of treatment in Chile, this Government would be ready to explore the possibilities of entering into negotiations for a reciprocal trade agreement.

(5) The word “agreements” in the first line of numbered paragraph 6 should be changed to read “agreement”.

Please report the results of your endeavors by cable and await further instructions before signing.

Hull

32. Brackets appear in the original.
33. Not printed; for summary, see telegram No. 33, March 17, 1934, 3 p.m., from the Ambassador in Chile, Foreign Relations, 1934, vol. v, p. 16.
34. Not found in Department files.
34. Not found in Department files.