611.533/182

The Department of State to the Portuguese Legation

Memorandum

With reference to conversations which have taken place between the Minister of Portugal and officers of the Department of State in regard to the possibility of a trade agreement between the United States and Portugal, the Department is deeply gratified to know that the Government of Portugal desires to enter into negotiations at an early date with a view to concluding such an agreement.

The Government of the United States shares the desire of the Government of Portugal for a mutually advantageous expansion of the trade between the two countries and its interest in the possibility of concluding a trade agreement with this objective in view. Careful consideration has been given to the subject, and the conclusion has been reached that a basis probably exists for a trade agreement between the two countries.

Under the requirements of the Trade Agreements Act of June 12, 1934, public notice of intention to negotiate a trade agreement must be given in the United States before definitive negotiations may be undertaken with another government. In order to avoid, so far as [Page 667]possible, delays in the progress of negotiations, it is usually desirable to clarify, before giving the required public notice, the principles and objectives on the basis of which it is expected that negotiations will take place. It would seem desirable, therefore, for the Department of State to set forth its views regarding the principles and objectives on the basis of which the proposed trade agreement between the United States and Portugal would be negotiated. When, after such further conversations as may seem appropriate, an understanding is reached by the two Governments regarding the basis for negotiations, consideration may then be given by the two Governments to the time when the required public notice of intention to negotiate the proposed trade agreement might be given.

As the commercial policy of the United States is based upon the principle of equality of treatment, it is customary to include, in the trade agreements which are negotiated between the United States and other countries, general provisions designed to carry out this principle, as well as to safeguard the reciprocal concessions which are granted. It is understood that the Portuguese Government is familiar with these general provisions and that it would be prepared to exchange, in the proposed trade agreement, similar guarantees of unconditional most-favored-nation treatment in respect of all forms of trade and payments control, as well as guarantees designed to safeguard concessions which may be granted by the United States on Portuguese products and by Portugal on American products. Confirmation of this understanding will be appreciated. Meanwhile, the appropriate officers of the Department of State will be very glad to endeavor to clarify any questions which may arise in connection with the general provisions.

With reference to the treatment to be accorded to American products upon importation into Portuguese colonies, it would be expected that the Government of Portugal would be willing to guarantee in the proposed trade agreement that such treatment would be no less favorable than that accorded to the products of the most favored foreign nation. The Government of the United States would be prepared, of course, to guarantee similar treatment to the products of Portuguese colonies imported into the United States and to the products of Portugal and Portuguese colonies imported into the possessions of the United States.

The Minister of Portugal has indicated that his Government is prepared to eliminate the discriminatory aspects of the surtax which is applicable, upon importation into Portugal, to goods carried in American ships. As the continuance of this discrimination is considered to be incompatible with the principle of equality of treatment, its removal could not be considered by the United States Government as compensation for concessions on Portuguese products, Consideration [Page 668]is being given to the possibility of dealing with the question of flag discrimination in the general provisions of the proposed trade agreement, as part of the exchange of guarantees of unconditional most-favored-nation treatment. The appropriate officers of the Department will be very glad to discuss this possibility as well as other ways of dealing with the subject.

As the broad objective of the trade-agreements program is to increase the general level of world trade, it follows that an important object of the proposed trade agreement between the United States and Portugal would be to increase the trade in both directions between the two countries. With this end in view, it is envisaged that the proposed agreement would include reciprocal reductions of existing tariff rates and other import charges, as well as the binding of the existing customs treatment, in respect of products of which each country is the principal or an important source of the other country’s imports.

It is the practice of the United States Government to publish, in connection with the required public notice of intention to negotiate a trade agreement, a list of the products in respect of which the United States Government will consider granting concessions to the other government concerned in the proposed negotiations. With these considerations in mind, the trade between the United States and Portugal has been carefully studied. This study indicates that it probably would be possible to include the following products, of which Portugal is the principal or an important source of United States imports, in the list of products to be published in connection with the public notice of intention to negotiate a trade agreement with Portugal:

[Page 669]
Paragraph
of Tariff
Act of
1930
Present
Customs Treatment
718 Sardines in oil: Valued over 9 cents per pound 30% ad valorem
774 Fresh vegetables, n. s. p. f.: Dasheens 50% ad valorem
804 Still wines produced from grapes, containing more than 14 percent, but not more than 24 percent of alcohol (other than vermuth) $1.25 per gallon
1511 Cork stoppers: Over ¾ inch in diameter at large end 25ȼ per pound
1511 Cork stoppers: ¾ inch and less in diameter at large end 31ȼ per pound
1511 Cork Paper 30% ad valorem
1511 Cork discs, wafers and washers: 3/16 inch or less in thickness 25ȼ per pound
1529(a) Embroidered line wearing apparel 90% ad valorem
1529(a) Embroidered linen articles n. s. p. f. 90% ad valorem
1646 Chestnuts, including marrons, crude, dried or baked Free
1661 Cork wood or bark, unmanufactured, and cork waste, shavings, and refuse Free
1728 Ergot Free
1796 Crude beeswax Free

It may be of interest to note that of total imports into the United States from Portugal valued at approximately 9 million dollars in 1937, imports of the dutiable items referred to above were valued at about 1.5 million dollars and imports of the duty-free items referred to were valued at about 6 million dollars.

It should be pointed out that the list of products given above is tentative. The United States Government will be prepared to consider the possibility of including, in the list to be published in connection with the public notice of intention to negotiate a trade agreement, other products of which Portugal is an important supplier and in which the Portuguese Government may express an interest. On the other hand, it is possible that the United States Government may wish to omit certain of the products mentioned above from the published list.

As the purpose of the required public notice of intention to negotiate a trade agreement is to provide an opportunity for interested persons to present their views in regard to the proposed agreement, it will be appreciated that it would not be possible for the United States Government to undertake any commitment in regard to the products which might be included in the proposed agreement with Portugal, or the extent of concessions which might be granted on such products, before the views of interested persons are received and appropriate consideration given to them. It may also be noted that, under the authority of the Trade Agreements Act of June 12, 1934, the President of the United States may not modify any existing rate of duty by more than 50 percent and may not transfer any article between the dutiable and free lists.

In view of the general object of the proposed trade agreement, which would be to provide for an expansion of trade in both directions between the two countries, the United States Government would expect the Portuguese Government to consider granting, in the agreement, concessions on American imports into Portugal roughly equivalent to the value of the concessions granted by the United States on Portuguese products. This does not mean, however, that the United [Page 670]States would endeavor, by means of the proposed agreement, to freeze the existing ratio in the trade balance between the two countries.

It would be expected that the Portuguese Government would be prepared to consider, in connection with trade-agreement negotiations, not only reductions of its customs surtax but also reductions as well as bindings of its customs duties and other charges on the importation of products of which the United States is in general the principal or an important supplier of Portuguese imports. The Department of State will be glad to communicate to the Minister of Portugal at an early date a list of such products to serve as the basis for further discussion of this aspect of the proposed negotiations.

In setting forth the foregoing views, the Department of State has been motivated by the desire to clarify the essential principles and objectives upon which it is hoped that it may be possible to enter into definitive trade-agreement negotiations with the Portuguese Government at an early date. Confident that the Portuguese Government shares this hope, the Department will greatly appreciate an early expression of the Portuguese Government’s views with regard to the possibility of initiating such negotiations on the basis discussed herein.