611.3131/193
Mr. Paul C. Daniels, Foreign Service Officer on Special Mission, to the Secretary of State
Sir: I have the honor to refer to the Department’s telegram no. 23 of May 7, 1938, and to the Legation’s telegram no. 41 of today’s date18 [Page 976] referring to the conclusion of a modus vivendi between the United States of America and the United States of Venezuela providing for reciprocal most-favored-nation treatment in customs matters.
Upon the receipt of the Department’s telegram under reference I immediately made an appointment with Dr. Uslar Pietri, Director of Economic Policy of the Ministry of Foreign Affairs, for Monday afternoon, May 9, to discuss the proposal in further detail. At that interview I handed Dr. Uslar Pietri drafts of notes which might be exchanged between the Legation and the Foreign Office, these drafts being identical in substance to the text transmitted in the Department’s telegram of May 7. The proposed drafts appeared acceptable to Dr. Uslar Pietri, and he said he would consult the Minister of Foreign Affairs with a view to ascertaining the opinion of the latter with respect thereto and arranging, if it should be so determined, a date for the exchange of proposed notes. I indicated that so far as the Government of the United States was concerned there was no objection to proceeding immediately with the exchange of notes, and that I would await further word from him as to the date it would be acceptable to Dr. Gil Borges.
On the following day Dr. Uslar Pietri informed me that Dr. Gil Borges had approved the draft notes with very slight modifications, and had decided that it would not be necessary to refer the matter to the Venezuelan Cabinet prior to the signing of the modus vivendi. He indicated however that Dr. Gil Borges desired to consult President Lopez Contreras regarding the matter, and later in the day informed me that the President had given his approval.
On the afternoon of May 11 it was arranged with Dr. Uslar Pietri to proceed with the exchange of notes on Thursday morning, May 12. At that time I accompanied the Chargé d’affaires ad interim, Mr. Braddock, to the Ministry of Foreign Affairs, where the final texts of both notes were compared and found to be identical in tenor, whereupon the two notes were signed by the Minister of Foreign Affairs and Mr. Braddock respectively and exchanged. There are enclosed exact copies of the two notes exchanged, together with a translation of the Venezuelan note. As indicated in the Legation’s telegram of today’s date it would be appreciated if the Department would telegraph the Legation as soon as possible the date on which simultaneous release of the texts may be effected in Caracas and Washington, in order that appropriate notification may be given to the Venezuelan Minister of Foreign Affairs.
Dr. Gil Borges seemed entirely pleased with the arrangement, and expressed satisfaction that the two Governments were in accord with respect to the principle embodied therein. I expressed the view that with the conclusion of the modus vivendi a more solid basis was created [Page 977] for proceeding with the conclusion of a trade agreement of a more comprehensive nature, and Dr. Gil Borges once more stated that the preparatory work for a trade agreement would be continued without interruption and indicated definitely that there would be no delay on account of the conclusion of the modus vivendi. He added that the question of the lists of commodities on which concessions might be sought or granted was a matter of concern primarily to the Ministry of Hacienda and lay outside the province of the Ministry of Foreign Affairs. The interview was most cordial throughout.
Various conversations which I have had in the course of the past week, particularly with Dr. Uslar Pietri, have led me to the conclusion that it was very desirable to conclude at this time with the Government of Venezuela a modus vivendi along the lines indicated in the Department’s telegram of May 7. To have deferred an agreement such as that now concluded would have meant exposing our trade to the uncertainties in respect of customs duties caused by the recent trend of Venezuelan commercial policy towards a two-column import tariff and preferential treatment for certain countries. The existence of a guarantee of unconditional most-favored-nation treatment at least in tariff matters should be reassuring to American exporters under present conditions, and should, in my opinion, facilitate rather than retard the conclusion of a trade agreement of a more comprehensive nature. Furthermore, the current study being given by the Venezuelan Government to a revision of the Venezuelan import tariff, involving not only the possible creation of a two-column tariff but also a revision of existing tariff rates on various commodities, makes it difficult for Venezuela to enter into contractual agreements on specific tariff rates. Through the operation of the most-favored-nation clause the modification of existing tariff rates by commercial agreements with other countries would in effect constitute a partial revision of the Venezuelan tariff and as such tend to conflict with the complete revision thereof now being undertaken by the Government. This factor may tend to delay negotiations between the United States and Venezuela with respect to specific tariff concessions, and it would appear highly advantageous in the meantime to have at least the guarantee of most-favored-nation treatment in customs matters.
The situation with respect to formal public announcement of trade agreement negotiations remains unchanged from that reported in my despatch no. 3 of May 6.19 As indicated in that despatch, I have been given to understand that the question of the Venezuelan request list will be discussed on Friday, May 13, at the regular meeting of the Venezuelan Cabinet and that there will be further developments to report early next week. I have made abundantly clear my interest [Page 978] in the matter, and have expressed a willingness and a desire to be of all help possible in clarifying any points at issue. The delay which is taking place with respect to this question of the Venezuelan list is an added indication of the advantage of signing today the modus vivendi transmitted herewith.
Respectfully yours,