The Secretary of State to the Minister in Ecuador ( Long )
Sir: Reference is made to your despatch no. 500 of May 26, 1939, and enclosed translation of a note from the Ecuadoran Foreign Minister, and to your despatch no. 507 of June 1, 1939, on the subject of the relation to the provisions of the trade agreement between the United States and Ecuador of the terms of the Ecuadoran law of March 3, 1939, which provides for the percentages of the export value of certain Ecuadoran products which may be allowed for statistical purposes in calculating the trade balance between Ecuador and individual foreign nations.
For your own information, the reply of the Foreign Minister to your note no. 45 of May 8, 193941 is unsatisfactory in that it disregards completely this Government’s fundamental concern with the law in question; it is no answer that the law since its effective date “has not prevented the normal commercial development” between Ecuador and the United States, nor “created any obstacles to the free and favorable issuance of permits for the importation of merchandise from the United States of America.” It is pertinent to observe, with reference to the above statements quoted from the Foreign Minister’s note of May 18, 1939, that to the best of the Department’s knowledge, the law has not yet been applied.
The fact that the law under reference has not yet been applied does not, however, diminish the concern with which this Government views [Page 626] its provisions, both on account of the conflict with the trade agreement should they be applied, and because those provisions appear to confirm the commercial policy of Ecuador upon a bilateral, country-by-country, trade-balancing basis, a policy to which, as you know, the Government of the United States is strongly opposed as being directly contrary to the trade-liberalizing principles which this Government is pursuing, and for which principles it is endeavoring to secure the active support of other Governments.
The important question is not the exact percentage of the value of the exports of certain products which the Ecuadoran Government may permit for the calculation of the country’s trade balance, but the effects of such action as they relate to the treatment which may be accorded imports from the United States, and the principles embodied in the law.
This Government would of course be glad to receive assurances that the law of March 3 would be repealed at the next session of the National Assembly. If this is not possible, an adequate but less satisfactory solution would be to receive assurances either that the law will be amended so as to eliminate any possible conflict in practice with the provisions of the trade agreement, or that, in view of the trade agreement, the law will not be applied against imports from the United States. In this connection, if the Government of Ecuador actually complies fully with the provisions of the trade agreement and of the arrangement recently concluded regarding permitted imports from the United States, a considerable part of this Government’s concern with the law of March 3 will disappear. Because of the principle involved, however, it is believed that your efforts along the lines just indicated should be continued, and to that end there is enclosed the text of a further note which you are authorized to hand to the Foreign Minister at an early date, once the matter of publicity has been settled in connection with the question of securing Ecuadoran compliance with the import control provisions of the trade agreement. It is believed that the enclosed note is self-explanatory, and it is hoped that it will result in a satisfactory solution of the question under reference.
You should also continue your efforts to see that the Foreign Minister is supplied with information as to the actual returns to Ecuador from exports of the commodities affected by the law, not primarily for the purpose of having larger percentages of export values permitted by the law, but more importantly as a means of securing the repeal or amendment of the law, or assurances along the lines indicated above.
If it is not possible to attain any of the above objectives, the Department will instruct you further upon receipt of a report as to the results of the action suggested herein.[Page 627]
In connection with the question under discussion, it may be noted that on page 3 of the draft note enclosed with the Department’s instruction no. 112 of May 5, 1939, reference was made in parenthesis to the apparent inconsistency between various Ecuadoran laws dealing with customs and import control matters. This phase of the present question does not appear to have been covered by any of your despatches, and the Department would appreciate receiving an explanation.
By the terms of Article 4 of the law of March 3, 1939, “the quotas fixed for imports from each country shall be in proportion to Ecuadoran exports to each of those countries,” with a margin of 20 percent in favor of Ecuador, which would seem to imply that permitted imports from any country could not exceed 80 percent of Ecuadoran exports to such country. Notwithstanding the above law, by a legislative decree of March 7, 1939, appearing in the Registro Oficial of March 15, and enclosed with your despatch no. 421 of April 5, the basic customs law was modified to provide that the Minister of Finance could impose a surcharge of up to 75 percent on imports from countries whose trade with Ecuador was found to be “unfavorable” to the latter by more than 30 percent. Presidential Decree no. 82, effective April 1, 1939 and appearing in the Registro Oficial of that date, refers to the above-mentioned legislative decree but provides for a customs surcharge of 50 percent, the same as during 1938, on imports from countries whose trade with Ecuador is “unfavorable” to the latter by more than 30 percent. While the provisions of Presidential decree no. 82 appear to be transitory in that the list of countries will presumably change in the future with the state of the trade balance between Ecuador and individual foreign nations, as that list has changed in the past, the legislative decree of March 7 appears to be basic Ecuadoran law and provides for action to be taken in the event Ecuador’s trade balance with any country becomes “unfavorable” to the stated extent. The Department does not see, however, how Ecuador’s trade balance with any country could be “unfavorable” to any extent if by the provisions of article 4 of the law of March 3 permitted imports from any country may not exceed 80 percent of Ecuador’s exports to that country. Inasmuch as there does not appear to be anything in either the law of March 3, or those of March 7 or April 1, to take care of the apparent inconsistency, the Department would appreciate an explanation of which law or laws are presumed to be in force at present.
Very truly yours,