632.6231/280: Telegram

The Secretary of State to the Ambassador in Brazil (Caffery)

12. Your despatch no. 258, January 11. The Department is greatly concerned with this latest report from your Embassy concerning the status of the Brazilian-German negotiations with respect to the subsidization of exports. The Department’s position in this matter remains as explained in its telegram no. 66, November 3, 8 p.m.63

If by the term “indirect subsidies” the German Government means subsidies paid by agencies of the German Government such as so-called associations of industry, it is obvious that any commitment on the subject by Germany which would exclude “indirect subsidies” would be of no value whatsoever to the trade of this country and would be wholly inconsistent with the agreement reached with Brazil last summer.

Regarding the last two paragraphs of your despatch, this Government is unable to accede to the position that since Germany may not continue to purchase Brazilian products except upon the former’s own terms, regardless of the extent to which those terms imply unfair competition with trade of the United States, Brazil should permit such trade practices in prejudice of this country’s legitimate interests, while expecting the United States to continue to purchase a large proportion of Brazilian products under no trade restrictions and without even an import tax on Brazilian coffee.

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The Brazilian authorities would do well to anticipate the very detrimental effect that would be produced upon public opinion in the United States if the basis of the trade agreement between the two countries is permitted to be undermined by a continuation of a wholly inconsistent type of trade with any third country to the prejudice of both United States export trade and the liberal principles of international trade which this Government is attempting so earnestly to further. They should realize, too, that it cannot be foreseen what effects such a state of public opinion might have upon the trade relationships between the two countries. You are requested to make known to the Brazilian officials the substance of the above on every appropriate occasion.