611.2231/194: Telegram
The Minister in Ecuador ( Gonzalez ) to the Secretary of State
[Received September 26—6:50 a.m.]
54. Referring to Department’s telegram number 40, September 20, 2 p.m., the Minister for Foreign Affairs insists upon the inclusion of the clause which would make the concession of the preferential tariff conditional upon our trade showing a balance favorable to Ecuador. I again pointed out that this position would seem unacceptable since it could be construed only as a qualification of the unconditional most-favored-nation principle whereupon the Foreign Minister admitted that the commercial policy of his Government is based on the conditional principle. I recalled that the Ecuadorian Government adhered to the principle of equality of treatment in the Montevideo and the Buenos Aires Conferences and, moreover, that it agreed formally that the proposed agreement would be predicated on the unconditional most-favored-nation principle. The Minister for Foreign Affairs replied that the whole Ecuadorian commercial treaty structure is based upon the conditional trade clause and that an exception in favor of the United States cannot be made. He added that his Government is determined upon this policy and that if necessary it will publicly renounce its adherence to the unconditional principle.
Preliminary statistics indicate that the diversion of Ecuadorian exports has been so great that the trade balance with the United States this year may be passive. The reluctance to include the value of cyanide precipitates notwithstanding the pertinent law refers to the visible balance of trade and not of payments, may make that balance even more passive. Should this situation arise we would be faced with the threat of classification in the second or third categories mentioned in my despatch number 503, August 26, 1936,50 with the consequent penalties and discriminations.
[Page 508]The Minister for Foreign Affairs offered to make bindings of ad valorem and specific duties in dollar equivalents and a few additional reductions. While he believed the schedule rates could be maintained he said that his Government must reserve the right, so that it could have a free hand, to increase the whole tariff proportionately if found necessary for revenue purposes.
The commitments of the Government in foreign currency demand stabilization of customs charges in dollar equivalents. I am informed that even these revenues are insufficient and that additional amounts must be purchased in the open market. The outlook for next year is obscure and failing a halt in armament purchases financial conditions may be expected to become increasingly critical.
In view of the foregoing I am of the opinion that the negotiations should be suspended until a more propitious moment.
- Not printed.↩