Foreign Relations of the United States Diplomatic Papers, 1938, The American Republics, Volume V

835.5151/906

Memorandum of Conversations, by Mr. James C. Sappington, Jr., of the Division of Trade Agreements

[Washington,] June 8 and 10, 1938.

Participants:	Mr. Alfredo Louro, Chief of the Argentine Exchange Control Office
	Mr. Hawkins20
	Mr. Fowler21
	Mr. Sappington

Mr. Louro came in on June 8, 1938, and advised that instructions had been received from his Government in reply to this Government’s memorandum of March 25, 1938, in regard to the proportional exchange formula.^* He orally translated a note from the Argentine Ministry of Finance. The substance of this note as translated by Mr. Louro was as follows: The Argentine Government found the proportional formula unacceptable for inclusion in a trade agreement but would undertake to grant imports from the United States official exchange on the basis of that created by exports to the United States; exchange would be granted to cover imports of a list of articles to be established in the light of exports to the United States, taking into account trade-agreement concessions granted Argentine exports; however, should Argentina allot merchandise imports from the United States more official exchange in any year than was created by Argentine exports to the United States, a deduction in the amount allotted imports from the United States would be made in the following year. Mr. Louro said that this note would be transmitted formally to the Department.

Mr. Louro left for consideration a copy of a table he had prepared to illustrate the proportional exchange formula to his Government. In this table Mr. Louro had allocated to merchandise imports from the United States 19.14 percent (United States percentage of total Argentine merchandise imports during the period 1935–1937 on the basis of the Argentine Exchange Control Office figures) of total estimated available exchange for all merchandise imports into Argentina in 1938. He had then allotted this amount proportionally by products or groups of products by taking the average proportion of such products to total Argentine imports in the period 1935–1937. By this ingenious method Mr. Louro maintained that the Argentine Government would have to deprive “essentials” of needed official exchange in order to allot additional exchange to “non-essentials”. In any case in which the resulting allotment to an American product was greater than that allotted to imports of a like product from the third country “most favored” in this respect, Mr. Louro had reduced the allotment to the United States product to an amount equal to that allotted the like product from such third country; as a result of this reduction the total percentage of official exchange allotted to American imports in accordance with Mr. Louro’s figures was reduced from 19.14 percent to about 12 percent. This, Mr. Louro stated, was in accordance with the most-favored-nation principle.

Mr. Louro again came in on June 10, 1938, at which time the abovementioned table was discussed. It was emphasized to Mr. Louro that it was not intended that the share of official exchange due merchandise imports from the United States must be proportionally allocated among individual products. It was pointed out in this regard that the draft accompanying the memorandum of March 25, 1938, went no further than to assure that the Argentine Government would take steps to insure the full utilization of the full amount of official exchange due United States exports to Argentina. In this connection, and with reference to Mr. Louro’s application of what he claimed to be the most-favored-nation principle in product allocation of official exchange, it was again stated that the proportional formula contemplated that the full percentage of total official exchange available for merchandise imports due merchandise imports from the United States (on a representative period basis) should be made available for the latter without deduction.

Mr. Louro indicated that because of exchange requirements for imports from third countries, it would be impossible for Argentina to assure the United States the amount of exchange it would be entitled to under the proportional formula.

20. Harry C. Hawkins, Chief of the Division of Trade Agreements.
21. William A. Fowler, Assistant Chief of the Division of Trade Agreements.
22. Mr. Louro had stated in a previous conversation with Mr. Hawkins, Mr. Muccio and Mr. Sappington that he was informed that such instructions were being transmitted. [Footnote in the original.]