Foreign Relations of the United States Diplomatic Papers, 1939, The American Republics, Volume V

611.3531/764½

Memorandum by Messrs. William A. Fowler and James C. Sappington III of the Division of Trade Agreements

[Extracts]

[Washington,] February 18, 1939.

(1) Our commercial relations with Argentina have reached a highly critical stage. For reasons presently to be indicated, a decision regarding them must be reached promptly. This decision is one of first importance since it will influence the future course of our commercial and political relations with Argentina for years to come and is bound to influence for better or for worse our political and economic relations with Uruguay and the American Republics generally.

(2) The Argentine Government is at present drastically curtailing imports of United States products into Argentina, on a bilateral basis, while imports from the United Kingdom, Germany and many other countries, on the same basis, remain free of restrictions. The existing Argentine system of controlling imports on a bilateral, country basis plays into the hands of Great Britain, which has forced exchange advantages from Argentina under threat of cutting down purchases of fresh meat from that country, and also of Germany and other totalitarian countries which can give commitments to purchase specified amounts of Argentine products, particularly fresh meat.

(3) Officers of this Department who recently discussed the matter thoroughly with Argentine officials in Buenos Aires came back with the firm conviction that those officials are by no means satisfied with the present bilateral system and that they would welcome eagerly an opportunity to lessen Argentina’s dependence on European markets and obtain release from the conditions imposed by those countries. The disruptive effects of severe import restrictions on the bilateral basis, particularly the recent restrictions on imports from the United States, have caused a rising tide of criticism, on the part of interested business men and the press in Argentina, which has placed the Minister of Finance and other high officials on the defensive. Because of Argentina’s large dependence upon the United Kingdom market, Argentina has in the past been forced to yield to British pressure for exchange preference, which makes Argentina feel that it is being treated as a colonial market. With reference to this situation an Argentine official is reported to have remarked that “Argentina would like to regain her sovereignty”. In the case of exports to Germany and certain Other European markets, there is not only the possibility of expansion but also the constant danger of arbitrary reduction of purchases from Argentina. Furthermore, in those cases in which the proceeds from the sale of Argentine exports can be spent only in the importing country, Argentine buyers are not free to make their purchases where they can do so to the best advantage. Argentine officials are worried now about how accumulated blocked marks can be utilized.

(4) Argentine officials feel that Argentina’s only hope of breaking away from dependence upon European markets lies in the possibility of substantially increased trade with the United States. However, they are aware of, and naturally tend to exaggerate, the danger to which Argentina’s export trade with Europe would be exposed if Argentina should break away from its bilateral commitments. It is very largely for this reason that we shall have to hold out to Argentine officials the prospect of really substantial tariff concessions if we are to expect them to risk endangering Argentina’s exports to Europe.

(5) The foregoing explains the real interest of Argentine officials in an agreement with the United States, on our multilateral basis, provided we could offer concessions which they would consider sufficient. That they are genuinely interested has been confirmed by reports from the Embassy and Consulate General at Buenos Aires, and through the press, since the officers of the Department referred to above left Buenos Aires on January 21, 1939. Among other things, these reports indicate that the Argentine authorities are awaiting with keen interest proposals from this Government along the lines discussed with them by officers of this Department.

(6) The Trade Agreements Committee within the last few days has again examined the whole situation and is impressed with the opportunity now presented to bring about a reorientation of Argentina’s trade policy. The Committee realizes that extensive concessions will have to be offered Argentina to bring this about, but not greater concessions than were previously recommended by it as entirely justifiable on economic grounds. The Committee’s recommendations when previously submitted were not all approved, it not being clear at that time how far it would be necessary to go in order to obtain an agreement. Recent conversations with Argentine officials leave no room for doubt that if this important objective is to be attained it will be necessary to make concessions such as those recommended by the Trade Agreements Committee.

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(8) … Recent discussions with the Argentine authorities have made it clear that any customs quotas, however liberal, would be unacceptable. They emphasized in this connection, as they did on other occasions, that we are proposing that they run the risk of losing part of their export trade with Europe by entering into a trade agreement on our basis. In order to justify such a radical change in their trade policy, involving danger to their European trade, they strongly feel that they must be able to say that in the case of the United States, in contrast to Europe, no limitations are imposed on the extent to which Argentine export trade can be developed.

(9) If our efforts to bring about a reorientation of Argentina’s commercial policy are to succeed, we must move forward without delay. We are informed by Argentine officials that the Argentine Government will begin discussions with the British in March or April relative to the question of renewal of their trade agreement with the United Kingdom which could be terminated at the end of this year. If, in advance of these discussions, the Argentine authorities become convinced that a trade agreement with us offers real prospect of compensation for any possible loss of exports to the United Kingdom, the discussions with the British could lead to a termination of Argentina’s virtual commitment to accord preferential exchange treatment to British goods. If we do not shortly so convince the Argentine authorities, their agreement with the United Kingdom doubtless will be renewed on the present basis, probably for another three years, and thus postpone indefinitely and beyond the life of the present grant of authority to negotiate trade agreements, an agreement with the United States on our basis.

(10) The question before us now is not the question of the timing of public notice of intention to negotiate; it is the question of finding a basis for eventual negotiations. After we have reached agreement on the basis, we can consider the question of the timing of the announcement of negotiations.

(11) The conclusion of an agreement with Argentina, on the basis of full equality of treatment, would have the most far-reaching benefits both in its trade and political aspects. It would mean a significant change of policy by Argentina, the foremost Latin American exponent of bilateralism. It would end the preferential position enjoyed by the British in Argentina for the past six years and would discourage German trading methods in Argentina. Uruguay, a country which has been following bilateralistic policies to the detriment of our trade, would undoubtedly follow Argentina’s lead. Furthermore, an agreement with Argentina would have a beneficial effect upon the other Republics in this hemisphere, a number of which are either practicing or tending towards bilateralism.

(12) The question which faces us is not merely whether we do or do not obtain advantages for our trade in Argentina. The alternative to finding a basis for a trade agreement is a trade war. The situation would not remain static but would become worse. In view of the present serious and obvious discriminations against our trade and the fact that these discriminations would become even greater if our efforts to find a remedy should not succeed, failure to suspend the application of trade-agreement benefits to Argentina (and Uruguay) would constitute a glaring disregard of the generalization policy laid down by the Congress in the Trade Agreements Act.⁶ Trade warfare with Argentina (and Uruguay) would be a severe blow to the good neighbor policy, the repercussions of which would be felt throughout Latin America, and would tend to throw Argentina (and Uruguay) permanently into the totalitarian, bilateral trade, orbit.

6. Approved June 12, 1934; 48 Stat 943.