611.3531/593a: Telegram
The Secretary of State to the Ambassador in Argentina ( Weddell )
18. The discussions with Espil and Irigoyen referred to in the Department’s telegram No. 11, February 5, 3 p.m.,16 have continued throughout the past week in an effort to arrive at some mutually satisfactory understanding with respect to exchange treatment on the basis of which it would be possible to go ahead with trade agreement negotiations.
These preliminary discussions with the Argentine Government have been deemed necessary here because we did not wish to make public announcement of intention to negotiate with the Argentine Government [Page 284] unless it seemed clear that there was no unsurmountable obstacle in the way of a successful conclusion of an agreement. It seemed clear that it was wise to avoid unnecessary disturbance of trade both in Argentina and in this country such as might naturally arise during the period of negotiation, if the odds were against the successful conclusion of an agreement.
The one matter on which it seemed likely that agreement would be most difficult was that of the exchange treatment to be accorded to American commerce. This is because the present system of Argentine exchange control and most of its commercial treaties are based on the principle of bilateral balance, and official exchange allocations appear to be roughly adjusted to the volume of Argentine exports to particular countries. On the other hand the whole American commercial policy, which is part of a broad program having both trade expansion and the promotion of peace as its goal, is based on the use of the unconditional most-favored-nation principle, unrestricted by the terms of bilateral interchange. Accordingly our purpose has been in these preliminary discussions to make it completely clear to the Argentine Government that in any trade negotiations we shall be compelled to request of them unconditional most-favored-nation treatment in exchange matters. Our thought has been that if the Argentine Government fully understood this to be our position from which we could not recede under any circumstances negotiations could be announced and promptly carried forward and presumably concluded if and as both countries believed the terms to be of mutual benefit. The Argentine Government, of course, by full recognition of our position in this matter, would not be committing itself now to sign a trade agreement with us.
In the discussions which have been taking place, the Argentine representatives have emphasized the need for some measure of flexibility or, as they have called it “management”, in their administration of the exchange control. On the other hand, it is the opinion of this Government that the treatment to be accorded American commerce as regards the allocation of exchange must be a matter of explicit agreement; otherwise our rights under any agreement that would be signed would be necessarily discretionary within the authority of the Argentine exchange management, It has not been possible up to the present to bridge the difference of attitude on this point.
Therefore, this morning it was decided to put our position directly before the Argentine Government by means of a communication addressed to the Ambassador, for transmission to his Government. The letter addressed to the Ambassador is as follows:
[Here follows text of letter of February 12 and enclosures, printed on page 281.]
[Page 285]The idea of having within the trade agreement itself only a very brief paragraph of general principle, and of having the more precise interpretation of that principle embodied in an accompanying note was one that suggested itself during the discussions that have taken place, as possibly an easier form for the Argentine Government to consider—with reference to its other commercial treaty obligations—than would be the inclusion of the whole within the text of the trade agreement proper. However, this question of form is not essential provided substance remains the same.
As you know, we have heretofore taken the position that non-discriminatory treatment with respect to exchange would require that so long as Argentina makes official exchange available for all imports from any country it would also be required to make official exchange available for all imports from the United States. This the Argentine Government has stated categorically it cannot undertake to grant. In the discussions of the past week an effort has been made to seek some common ground satisfactory to both Governments. As a result of these discussions there has now been worked out the foregoing draft which would define non-discriminatory treatment in terms of individual commodities rather than of trade as a whole. It is sincerely hoped that this will facilitate agreement with the Argentine Government.
The Argentine representatives here have tried to induce us to modify the formulation of our requirements to terms of general principle in place of the precision of definition and method in the draft. This, however, appears to us unsatisfactory because every effort at definition in general terms that has been made leaves a large margin of vagueness almost certain to give rise to future controversy, and almost naturally subject to interpretation along the lines of the bilateral attitude which Argentina has maintained. We therefore deem the clear definition contained in this document as essential.
In handling these communications to Espil this morning, he was informed that they would likewise be communicated to you and that you would be asked to make a supplementary presentation of the matter to the Argentine Government. In view of the importance of the matter and the desirability of reaching prompt decision on this question, will you kindly seek an appointment with the President-elect and present the foregoing to him. You may say that it would naturally give this Government the greatest gratification if the announcement of contemplated negotiations could be made at the outset of his new administration.
In adhering to its view that in any and all trade agreements the American Government must seek for its commerce protection against discrimination, this Government believes it is standing only on [Page 286] grounds of reason. Furthermore its policy is calculated to permit trade to develop without the restrictive effect of bilateral measures. The acceptance by other countries of this American principle of commercial policy should in the long run greatly benefit Argentina which trades largely with the whole world. For example, if the United States and the United Kingdom reach an accord of the substantial type under consideration, it is to be anticipated that in both markets new opportunities would be created for Argentine goods as a result of following a line of policy without bilateral restriction or reference.
You might find one other consideration useful in your presentation of the matter: the inclusion in the trade agreement of suitable provisions enabling either country to terminate the agreement on short notice would furnish protection to both against unexpected developments in the exchange situation.
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