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

611.2231/378a

The Secretary of State to the Minister in Ecuador (Long)

No. 91

Washington, March 2, 1939.

Sir: Reference is made to correspondence during the past few months between the Legation and the Department in connection with Ecuadoran import control measures and their relation to provisions of the trade agreement¹⁸ and to imports from the United States.

With particular reference to your despatch no. 307 of January 12, 1939,¹⁹ with which there was enclosed a translation of an unofficial text of the new import control regulations issued on January 6, it would appear that the Ecuadoran Government has, as in the case of the previous import control regulations during the period following the effective date of the trade agreement, disregarded the provisions of that agreement in connection with restrictions upon imports from the United States. The Department believes it desirable for two reasons to bring formally to the attention of the Ecuadoran Government the applicability of the terms of the trade agreement in connection with restrictions upon such imports: (1) to impress upon that Government the importance which this Government attaches to the full observation of the provisions of the agreement in order that its integrity may not be impaired and (2) to secure for articles of United States origin the protection provided by the terms of the agreement. There is accordingly enclosed a note which, if you perceive no objection, you are requested to hand to the Ecuadoran Foreign Minister as soon as a suitable opportunity presents itself.

In presenting this note, you should point out to the Minister that your Government is fully aware of the difficult economic situation which Ecuador is facing, and has no desire to make that situation more difficult by requiring an unreasonably strict interpretation of the letter of those provisions of the trade agreement concerning the imposition of import control measures. At the same time, your Government regards it as of great importance that the clear terms of the agreement be observed and that articles of United States origin receive the treatment to which they are entitled under the terms of the agreement during periods in which there is control of imports in Ecuador.

If, following a study of the enclosed note, the Foreign Minister or other Ecuadoran officials should request information or suggestions as to the manner in which the import control system and the provisions of the trade agreement may be reconciled insofar as concerns the importation of articles from the United States included in Schedule I, you may point out to them that either Government, under the terms of the second paragraph of article VII of the agreement, may for any of the reasons stated therein, including protection of the currency, impose restrictions upon the importation of schedule products from the other country, provided the procedure outlined in that paragraph for notice and consultation is followed and the two Governments reach agreement concerning the proposed measures. In this connection you may say that you are certain that your Government would not be disposed to object to reasonable import control measures deemed necessary by the Government of Ecuador for the purpose of safeguarding the value of the currency in periods of exchange stringency. You may add that you would be glad to transmit to your Government any proposal which the Ecuadoran Government may wish to make at this time with a view to regularizing the present situation within the terms of the agreement.

For your own information, you will observe that the enclosed note raises the question of specific action to reconcile the Ecuadoran import control system and the provisions of the trade agreement only with respect to articles imported from the United States included in Schedule I of the agreement (article VII), and that a decision is reserved regarding the applicability of the terms of article VIII. While the Department believes that a strict interpretation of article VIII of the agreement in the light of the present Ecuadoran control regulations would show at least a technical contravention of that article, the Department does not wish to press this question at the present time, at least until the effect of the new system upon imports from the United States has been demonstrated.

With reference to that portion of your despatch no. 307 of January 12 in which you refer to alleged discrimination against American products in the granting of import permits, you should investigate this thoroughly, and if you find evidence of such discrimination under the present import control system, take up the question immediately with the appropriate officials.

Please keep the Department promptly and fully informed of developments in connection with the matters referred to above.

Very truly yours,

For the Secretary of State:

Francis B. Sayre

[Enclosure]

Note To Be Presented to the Ecuadoran Minister for Foreign Affairs (Tobar Donoso)²⁰

Excellency: Reference is made to the reciprocal trade agreement between the United States and Ecuador signed on August 6, 1938 and effective October 23, 1938, and the applicability of certain provisions thereof in connection with the regulations understood to have been issued on January 6, 1939 by Your Excellency’s Government for the control of imports.

It is my Government’s understanding that under the import control regulations issued by the Government of Ecuador on January 6, 1939, monthly quotas are to be assigned to individual importers on the basis of their average importations during a previous period, and that within the limits of their quotas, importers are free to make purchases from any country of any products connected with the normal operation of their particular lines of business. It is my Government’s understanding also that the import control regulations make no exception from the general rule in connection with the importation of articles included in Schedule I of the trade agreement. It would appear, therefore, that in drafting these new regulations Your Excellency’s Government failed to take into consideration the pertinent provisions of the trade agreement with respect to articles included in that Schedule.

I am instructed to bring to the attention of Your Excellency that, by the terms of the first paragraph of Article VII of the agreement, neither Government may impose any prohibition, import quota, import license, or any other form of quantitative regulation on the importation or sale of any article the growth, produce or manufacture of the other country included in the appropriate schedule annexed to the agreement. It may be noted that this paragraph prohibits not only the imposition of quotas but even the requirement that a permit be secured by an importer in connection with the importation of such articles. Your Excellency’s attention is likewise invited to the fact that, although the provisions of the second paragraph of Article VII of the agreement permit restrictions to be imposed upon imports of articles included in the schedules for certain stated reasons, Your Excellency’s Government did not give the notice and arrange for the consultation between the two Governments required in such circumstances.

With respect to the question of the applicability of the provisions of Article VIII of the trade agreement to the existing import control regulations, my Government wishes to reserve comment at this time.

Accept [etc.]

18. Signed August 6, 1938, Department of State Executive Agreement Series No. 133, or 53 Stat. 1951; see also Foreign Relations, 1938, vol. v, pp. 509 ff.
19. Not printed.
20. Presented by the Minister in Ecuador to the Ecuadoran Minister for Foreign Affairs as note No. 23, March 13, 1939.