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

611.3331/189a

The Department of State to the Uruguayan Legation

Memorandum

As the Government of Uruguay is aware, the Government of the United States has entertained the hope of negotiating a trade agreement with Uruguay, at the earliest practicable opportunity. It has expressed the view that, because of the similarity in important respects between the export trade of Uruguay and Argentina with the United States, the negotiation of trade agreements between the United States and Uruguay and between the United States and Argentina should take place simultaneously.

Recent developments have made it possible for the Government of the United States to consider giving early public announcement of intention to negotiate trade agreements with the Government of Uruguay and with the Government of Argentina. However, circumstances are such that in the event negotiations should not be completed and the agreements signed and published by early September 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 an agreement with Uruguay prior to public announcement, that is to say, before July 7.

Previous discussions have indicated agreement between the two Governments that a trade agreement between them should be based on the unconditional most-favored-nation principle applied to all forms of trade and payments control. In pursuance of this principle the Government of the United States in its memorandum of March 31, 1938 expressed the view that such an agreement should provide the assurance in detailed terms that both Governments would accord to the other treatment no less favorable than that accorded to any third country in respect of the allotments and the rates of the exchange made available for the payment of merchandise imports as well as in respect of all taxes and charges imposed in connection with such transactions. The following formula, which the Government of the United States believes will meet the essential requirements of both countries, is offered for the consideration of the Government of Uruguay:

This proposal is that the trade agreement embody provisions whereby Uruguay would undertake to make available for imports of merchandise from the United States a proportion of the total exchange made available in any period (e. g., calendar year, quarter year, or calendar month) for merchandise imports into Uruguay from all sources, which shall not be less than the proportion of Uruguay’s total merchandise imports supplied by the United States in a previous representative period. The following discussion and the attached draft provisions will indicate more clearly the nature of this proposal.

Taking as base periods 1) the five-year period 1927–1931, which is the five-year period preceding the establishment of exchange control in Uruguay, and 2) the three-year period 1930–1932, which is partly prior and partly subsequent to the establishment of exchange control in Uruguay, on the basis of such information as is available to this Government, the application of the proportional formula may be illustrated as follows:

1. On the basis of “official-valuation” figures for the period 1927–1931, the United States supplied 27.2 percent of total merchandise imports into Uruguay. It is understood that in 1936 a total of approximately £9,931,000 was available for merchandise imports into Uruguay from all sources. Of that amount it is understood that merchandise imports into Uruguay from the United States utilized approximately 18.34 percent or £1,921,000. Had the proportional formula been in effect in 1936, with the period 1927–1931 as the base period, there would have been made available for merchandise imports into Uruguay from the United States, on the basis of the same figures, exchange in the amount of £2,701,252 (i. e., 27.2 percent of £9,931,000).

2. During the period 1930–1932, imports from the United States constituted 19.5 percent of total imports into Uruguay on the basis of “official-valuation” figures. Applying this percentage to the total exchange understood to have been available for merchandise imports into Uruguay from all sources in 1936, that is, £9,931,000, merchandise imports from the United States would have received in that year under the proportional formula with the period 1930–1932 as the base period, £1,936,545. This amount is somewhat larger than the amount, £1,821,000, understood to have been actually utilized for the payment of such imports, but is £764,687 less than the amount (£2,701,232, or 27.2 percent of £9,931,000) which would have resulted on the basis of the period 1927–1931.

In the absence of information as to the amount of exchange which it is estimated will be available for total merchandise imports into Uruguay in 1938, it is impossible to determine the amount of exchange which the proportional formula would assure for the payment of merchandise imports into Uruguay from the United States in 1938, using the percentage resulting from the import figures for any previous period.

Although it is necessary that agreement be reached in regard to the substance of the exchange provisions as set forth in the attached draft article before July 7, agreement as to the precise representative base period for the purpose of the proportional formula need not be reached until after the issuance of the public announcement of intention to negotiate a trade agreement with Uruguay.

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 substance of the concessions to be granted by the United States and Uruguay, respectively. It will be noted in the attached List B that the Government of the United States requests that the products listed therein be exempt from the requirement that part of the customs charges on such products be paid in terms of the gold peso. With respect to products which are not the subject of a specific duty concession in the trade agreement, the Government of the United States would expect the assurance that the conversion rate used in calculating that part of the customs charges payable in terms of the gold peso on any such product imported from the United States would be no less favorable than the conversion rate used for the same purpose in regard to the like product from any other country.

Attached are

(1) Draft article embodying the proportional formula in regard to exchange;³⁰

(2) Copy of the standard general provisions³¹ which the Government of the United States desires to have included in its trade agreements;

(3) List A,³⁰ specifying the proposed concessions to be granted to Uruguay;^* the items in this list represent approximately 96 percent of total United States imports from Uruguay in 1936; and

(4) List B,³⁰ 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 62 percent of total Uruguayan imports from the United States in 1936.

In the event that it should be impossible to issue public announcement of intention to negotiate a trade agreement with Argentina by July 7, 1938, it would be necessary for the Government of the United States to reconsider the question of issuing public announcement of intention to negotiate a trade agreement with Uruguay.

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 Uruguay 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.

June 22, 1938.

30. Not printed.
31. Not found in Department files. These were presumably the general provisions of February 21, 1938, concerning which see footnote 18, p. 846.
30. Not printed.
31. It 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]
30. Not printed.