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

611.3531/644a

The Department of State to the Argentine Embassy

Memorandum

Recent unforeseen developments have made it possible for the Government of the United States to consider giving early public announcement of intention to negotiate a trade agreement with the Government of Argentina with a view to completing negotiations and publishing the terms of the agreement not later than early September. In the event that the negotiations should not be completed and the agreement published by that time it would be necessary publicly to announce the unsuccessful termination of negotiations. To provide time for completing the procedure required by United States law, the announcement of intention to negotiate would have to be made not later than July 7, 1938. Since it is obviously undesirable that negotiations be publicly announced unless there is assurance that they can be brought to a successful conclusion, it is indispensable that substantial agreement be reached on the essential provisions of the agreement prior to public announcement, that is to say, before July 7.

With reference to the question of exchange allotments, the discussions which have taken place since last November have served to clarify the problems confronting both Governments. It will be recalled that the Government of the United States took the position, with respect to the exchange treatment of United States products imported into Argentina, that if all imports into Argentina from any third country were covered by official exchange, all imports from the United States should be covered by official exchange. Such a position, in the opinion of the Government of the United States, is in conformity with the unconditional most-favored-nation principle. Nevertheless, after further discussions, the Government of the United States reluctantly receded from its original position so far as to propose (on March 25, 1938) that there be allotted for imports from the United States a share of total official exchange available based upon the share of total Argentine imports supplied by the United States in a previous representative period.

Although there have been extended discussions of this compromise proposal, it appears that there has been some misunderstanding as to its exact nature and as to how it would work out in practice. It was never the intention, for example, to require that the formula be applied on a product-by-product basis. Rather, it was intended that, with reference to the position of the United States as a supplier of the Argentine market in some previous representative period, there be allotted a determined amount of official exchange for imports in general from the United States, leaving reasonable freedom to the Argentine Exchange Office authorities to allocate this amount between the various products imported from the United States.

The Government of the United States has reviewed the whole situation in the light of the Argentine Government’s note of May 28, 1938 transmitted by the Argentine Ambassador on June 9, 1938, and recent discussions with Mr. Louro. Although it is not possible to accept the proposal set forth in the note under reference, this Government has given careful consideration to the formula which it previously submitted with a view to clarifying it and presenting it in a form which it is hoped the Argentine Government will find it possible to accept.

How the proportional formula proposed by the United States would apply may be illustrated by taking 1924–1933 as the base period. The Government of the United States believes that it would be fully justified in considering this period as fairly representative of the position of the United States as a supplier of the Argentine market. Assuming that estimated official exchange available for imports during 1938 amounts to m$n 1,122,000,000, the amount of official exchange allotted for imports from the United States during 1938 would amount to m$n 233,937,000 (i. e., 20.85 percent of m$n 1,122,000,000).

However, after full and sympathetic consideration of the exchange problem with which the Government of Argentina is faced, and motivated by a sincere desire to find a formula acceptable to the Government of Argentina, the Government of the United States is prepared to accept the three-year period 1932–1934 as the base period. During this period imports from the United States constituted 12.86 percent of total imports into Argentina, on the basis of “real-value” figures. Applying this percentage to estimated total official exchange for merchandise imports (m$n 1,122,000,000) gives m$n 144,289,000 as the amount of official exchange which (in the absence of any change in the estimated total of m$n 1,122,000,000 during the year) would be allotted for imports from the United States during 1938.

In other words, on the basis of this Government’s present proposal, the United States would receive about m$n 90,000,000 less in 1938 than the amount which can be regarded as a fair and equitable allotment; and about m$n 38,000,000 less than the amount of official exchange sold to pay for imports from the United States in 1937 (m$n 182,000,000). This proposal represents the utmost extent to which this Government can go in its earnest effort to find a solution of this difficult problem.

The Government of the United States would expect to have the question of the base period reconsidered later on in the light of future favorable developments in the Argentine exchange situation.

In addition to agreement in regard to exchange treatment, it is necessary that agreement be reached before July 7 on the substance of the other general provisions and on the concessions to be granted by the United States and Argentina, respectively. Attached are²²

(1) Copy of the standard general provisions which the Government of the United States desires to have included in its trade agreements;

(2) List A, specifying the proposed concessions to be granted to Argentina;^* the items in this list represent more than 80 percent of total United States imports from Argentina in 1936; and

(3) List B, specifying the proposed concessions to be granted to the United States; items marked with an asterisk are those to which the Government of the United States attaches particular importance; they represent approximately 50 percent of total Argentine imports from the United States in 1936.

It will be apparent that very prompt action is essential. The Government of the United States would appreciate having an indication of the attitude of the Government of Argentina in regard to these proposals at the earliest possible date, since the time for considering any points of difference between the positions of the two Governments is so limited.

Washington , June 13, 1938.

22. None attached to file copy of this document.
23. lt is understood, of course, that these proposals must be regarded as tentative pending consideration of views of interested persons as required by United States law. [Footnote in the original.]