611.2231/226
The Secretary of State to the Minister in Ecuador (Long)
Sir: The Department refers to despatch no. 674 of April 1, 1938 from the American Consulate General at Guayaquil, Ecuador, a copy of which is enclosed herewith for your information. You will observe that Consul General McDonough has had informal conversations with Dr. Francisco Banda, Chief of the Department of Commerce and Consular Affairs of the Ministry of Foreign Affairs of Ecuador, on the subject of the contemplated reciprocal trade agreement between the United States and Ecuador, and that he considers that the prospects for completing such an agreement seem favorable.
With regard to the obstacle which developed in the negotiations, namely, the requested inclusion in the agreement of a trade balance clause, Dr. Banda has suggested that this difficulty might be overcome by Ecuador’s accepting the unconditional most-favored-nation principle in the agreement and this Government’s undertaking in an exchange of notes that in the event that the trade balance between the two countries should be “unfavorable” to Ecuador the enjoyment of the minimum tariff by the United States would be suspended. The Department is unable to accept this suggestion since it would involve an undesirable qualification of the unconditional principle by making the enjoyment of the minimum tariff contingent upon the state of the trade balance. For the same reason the Department is unable to accept the second suggestion of Dr. Banda, which envisages an exchange of notes providing for the termination of the agreement upon six months’ notice if the balance of trade between the United States and Ecuador becomes unfavorable to the latter.
However, this Government would be willing, provided an accord is reached on all other questions, to sign an agreement containing a six month termination clause. Naturally, either Government might invoke this clause for any reason. In the case of Ecuador, this would include the position which it has taken with respect to the trade balance and the minimum tariff. In so far as this Government is concerned, no mention of the trade balance clause could be included in the agreement itself or in an exchange of notes. It would be expected that during the operation of the agreement the treatment extended by each Government to the other would be that of the most-favored-nation without any condition. If at any time Ecuador should find that for reasons sufficient to itself it would be desirable to terminate the agreement, it would be free to give notice of termination. In this connection, however, the observations made by the Department on the benefits accruing from the principle of equality of treatment set forth in its [Page 513] memorandum of November 27, 19374 handed to the Ecuadoran Ambassador in Washington, should be reemphasized to the local authorities.
With regard to the shipments of cyanide precipitates to the United States and the reluctance upon the part of the Government of Ecuador to include them in the total exports from that country, reference is made to the Legation’s despatch no. 923 of October 14, 1937,5 in which it was estimated that about 70 percent of the proceeds from the exportation of the precipitates returned to Ecuador during that year. In view of the recent increased taxes imposed upon the South American Development Company, it is possible that during the current year the corresponding percentage will be appreciably higher than in former years. Therefore, this should remove any previous reluctance upon the part of Ecuador to include this product in calculating the total exports to the United States.
Should you consider that the present moment is opportune to resume the trade agreement negotiations, you are authorized to do so on the bases outlined above. However, it would appear desirable to limit your action to a discussion of the Ecuadoran position with respect to the trade balance clause, since in the absence of an agreement on that point the Department would be unwilling to proceed further in the premises.
You are authorized, should you so desire, to have Consul General McDonough accompany you to Quito to assist in the negotiations. Instructions in that sense are being sent to Consul General McDonough.
Very truly yours,
- Foreign Relations, 1937, vol. v, p. 518.↩
- Not printed.↩