611.3531/589: Telegram
The Consul at Buenos Aires (Ravndal) to the Secretary of State
[Received February 4—6:30 a.m.]
The Argentine Government’s reaction to the Department’s communication as forwarded by Espil to the effect that the United States requires before the preliminary announcement assurance that under the trade agreement official exchange will be granted for all United States exports irrespective of the status of Argentina’s trade balance with the United States is, according to Louro, one of complete surprise. Argentina’s understanding of the United States requirement has been the removal of discrimination and the granting of most favored nation treatment beginning with and continuing after the formal announcement. This Argentina is prepared to do and it may well be that in practice all United States merchandise will be admitted at the official rate. For example, it has been calculated that had there been a trade agreement in 1937 all imports from the United States in that year would have received official exchange.
Louro says Argentina cannot and will not agree to the undertaking now allegedly required by the United States Government. The reasons are: First, such an undertaking would mean giving the United States more than most-favored-nation treatment as interpreted by Argentina in its treaties. Second, the trade agreement countries, particularly Great Britain, would have just cause for serious protest. The British, for example, would protest buying Argentine meat at the expense of the Dominions to enable Argentina to buy American textiles at the expense of British industry. Third, it would probably entail in consequence having a shorter official exchange for remittances on British investments and that would constitute too heavy a strain on the official market. And fourth, it would mean the virtual abolition of the free market, Argentina’s safety valve.
I was most emphatically informed that in no case whatsoever does an Argentine trade agreement assure a foreign country complete official exchange coverage irrespective of the balance of trade with that country.
In Louro’s opinion, if the United States should persist in requiring complete official exchange coverage on a multilateral basis, Argentina [Page 279] would be faced with an impossible situation, negotiations probably would not materialize and the United States might find itself placed in a worse position than in the past 2 years, when Argentina made gestures to stimulate the initiation of negotiations.
It was added not for attribution that if the negotiations with the United States should fail the United States probably would have to be included in a plan now being formulated for Japan requiring importers to obtain a permit before any merchandise could be cleared through the official or free market, the purpose being to achieve a balance between exports and imports, as in the case of Germany, primarily because of the prospects of a much smaller influx of exchange due to lesser exports and the fact that there is now a much greater demand for than supply of exchange in the free market.
Louro suspects that Espil did not at least in the beginning clearly understand what the United States exchange requirements are, for according to Espil’s despatches it would appear that the United States Government is changing its requirements and this Louro finds is creating a most unfortunate reaction among responsible officials of the Argentine Government.