611.2531/222: Telegram

The Secretary of State to the Chargé in Chile ( Frost )

52. Your 76 and 77, November 17 and 18.

1. Item (a) of suggested exchange provision is satisfactory, including the amendment suggested in your 77. As regards item (b) we are not fully clear as to its meaning and intent. Does it mean that only one rate will be applied in respect of payment for imports from the United States? Would this rate be the same as the rate for corresponding imports from all other countries? Does the exchange market referred to include exchange derived from all sources including that blocked in compensation countries? How, if at all, does the undertaking in (b) differ from a commitment to permit a free exchange market? Upon receipt of an interpretation as to the meaning of item (b), the Department will promptly inform you whether it accepts the item as proposed or in any amended form which you may submit.

2. García’s proposed paragraph with respect to entering into negotiations for a treaty of commerce and navigation is satisfactory. However, it is suggested that the language would be improved if it read as follows:

“The Contracting Parties undertake immediately to initiate negotiations for a definitive treaty of friendship, commerce and navigation.”

The new paragraph should be inserted between numbered paragraphs 5 and 6 of the Department’s counterproposal of February 18, 1937.40

In order that there may be no misunderstanding in the Foreign Office with respect to what is meant by a definitive treaty of friendship, commerce and navigation, you should explain clearly that such a [Page 417] treaty embraces the treatment of nationals and shipping and other general relations as well as the broad principles governing trade relations (but does not include tariff schedules) and, in this country, requires the advice and consent of the Senate to ratification. On the other hand, our trade agreements include tariff schedules and deal only with commercial matters. Under existing legislation, trade agreements are not submitted to the Senate for advice and consent to ratification.

If the Foreign Office has reference to the negotiation of a reciprocal trade agreement, you may say that we are prepared to explore the possibilities of entering into negotiations after the modus vivendi is signed.

On the other hand, you should explain that it would not be practicable to agree to an undertaking in the modus vivendi in respect of trade agreement negotiations. The trade agreements act41 requires that formal public notice of intention to negotiate be given in order that interested persons may have an opportunity to present their views. Inasmuch as the steps necessary for entering into trade agreement negotiations involve the setting up of more or less elaborate administrative machinery entailing considerable expense and labor, it is not practicable to make such public notice until the possibilities of entering into negotiations have been explored and it has been ascertained that a mutually satisfactory basis therefor exists.

3. With reference to the assurances requested by García in respect of nitrate, please explain that the President has no authority whatever in respect of binding this product on the free list except by means of a trade agreement.

Hull
  1. See American draft note, p. 387.
  2. Approved June 12, 1934; 48 Stat. 943.