611.2231/99
The Chargé in Ecuador (Sparks) to the Secretary of State
[Received January 19.]
Sir: I have the honor to report the substance of an informal conversation which I had this afternoon with Dr. Francisco Banda, Chief of the Commercial and Consular Section of the Ecuadorean Foreign Office. The conversation is of importance inasmuch as Dr. Banda is the presiding officer of the Permanent Committee for Studying Commercial Treaties (see despatch No. 366, May 12, 193618).
In the course of the conversation Dr. Banda stated that he desired to talk with me regarding the contemplated trade agreement with Ecuador, and particularly our unconditional most-favored-nation clause. After going into considerable detail in describing the trade relations and policy of his Government, he finally inquired whether it would be feasible to grant the customs concessions which the United States might seek in such a manner as would avoid the publication of the agreement. He frankly admitted that the purpose in view was to avoid publicity so that other nations enjoying most-favored-nation treatment with Ecuador might not request the extension to them of the concessions granted.
I told Dr. Banda that this was a matter upon which I should have to consult with the Department. However, I did point out that in my personal opinion agreements concluded under the authority of the Trade Agreements Act must be publicly proclaimed by the President of the United States before becoming effective, and that this procedure, if correct, would seem to preclude the conclusion of a secret trade agreement. It did not seem necessary to point out how impossible it would be to maintain such an agreement secret, but I did feel it desirable to reiterate the principles of American commercial policy which also seem to preclude the contemplation of the [Page 483] procedure proposed. I explained that our policy is based upon the principle of non-discriminatory treatment in view of which we neither ask nor accord preferential discriminatory treatment. In fact, through the application of our unconditional most-favored-nation clause, we automatically extend to all nations not discriminating against our trade the concessions we grant to any third country. I added that while we are primarily concerned with the treatment which Ecuador will accord to our commerce by virtue of the contemplated trade agreement, namely, that certain reductions in customs rates are granted and equality of treatment is assured on advantages now or in the future granted to any third country, I felt that my Government, in line with its commercial policy, could not view with favor the negotiation of a secret trade agreement providing for a preferential discriminatory treatment for American products.
Dr. Banda then stated that as our trade leaves an active balance for Ecuador, the United States is entitled to enjoy under Ecuadorean commercial policy the treatment granted to the most favored nation. Moreover, it is the desire of his country to grant us the concessions that may interest us. However, it wishes to consider such concessions as bilateral and not extend them to all countries. He added in this connection that Ecuador has already denied the extension to Germany of the Chilean advantages (see despatch No. 563 of October 13, 193620), and that his Government has maintained that position.
The question raised by Dr. Banda is complicated in some respects. From one point of view it would be advantageous to the United States if Ecuador refused to extend the tariff concessions it may grant to the United States, but I am convinced that the Department would not be prepared to enter into a secret agreement for such concessions. Also, instruction No. 114 of March 27, 1936,20 indicates clearly that our commercial policy is to discourage preferential discriminatory treatment, as such an agreement must necessarily provide, with the ultimate objective of re-establishing triangular or multilateral international trade as opposed to the bilateral theory.
In my despatch No. 563 of October 13, 1936, I reported the remarks of Dr. Banda with regard to his interpretation of the unconditional most-favored-nation principle. It is my impression that Dr. Banda understands well the principle involved, and that he is simply and hopefully seeking some formula which will permit the inclusion in our contemplated agreement of the conflicting principles of Ecuadorean preferential discriminatory treatment and American non-discriminatory treatment.
[Page 484]While I do not anticipate any difficulty, I should appreciate having the Department’s instructions in the premises in the event that Dr. Banda should again bring up the question. The Department may desire to have it clearly understood in an informal manner that we should prefer that Ecuador made no exception in the application of the unconditional most-favored-nation principle with other countries with the end in view that such precedents might not later be adduced as vitiating the principle. We recognize that such interpretation or application is a matter for Ecuador to determine according to its national interests. However, as concerns the application of the principle in American-Ecuadorean trade relations, we are vitally concerned and are agreed that in the application thereof no exception is admissible.
Respectfully yours,