710. F.E.A.C./217a: Telegram

The Secretary of State to the Ambassador in Chile ( Bowers )

261. Pursuant to Resolution LXXX, Commercial Advantages Between Neighbor States, of the Seventh Conference of American States,98 the following contractual formula for tariff preferences to contiguous countries was submitted on July 31 to the Inter-American Financial and Economic Advisory Committee jointly by the representatives of the Governments of Argentina and Brazil:

“The Inter-American Financial and Economic Advisory Committee, having considered the terms of a contractual formula pursuant to the above-quoted Resolution, recommends that any such tariff preferences, in order to be an instrument for sound promotion of trade, should be made effective through trade agreements embodying tariff reductions or exemptions; that the parties to such agreements should reserve the right to reduce or eliminate the customs duties on like imports from other countries; and that any such regional tariff preferences should not be permitted to stand in the way of any broad program of economic reconstruction involving the reduction of tariffs and the scaling down or elimination of tariff and other trade preferences with a view to the fullest possible development of international trade on a multilateral unconditional most-favored-nation basis.”

This proposal was referred to subcommittee II for consideration. The subcommittee subsequently approved the formula but the Chilean representative refrained from voting. When the subcommittee’s recommendation was submitted to the full committee on August 7 the Chilean Ambassador stated that his Government was satisfied with Resolution LXXX and objected to the penultimate point in the proposed formula (reservation of right to reduce duties on like imports from third countries) and considered the last point rather vague.

After extended discussions, this formula was accepted with great reluctance by this Government as a part of the basis for again undertaking [Page 601] negotiation of a trade agreement with Argentina,99 and represents the limit to which we feel we can go in excepting from the principle of non-discriminatory treatment underlying this Government’s commercial policy tariff preferences to contiguous countries. Further background information in this regard may be obtained by telephone from the Embassy at Buenos Aires.

The Chilean representatives here seem to feel that the penultimate point conflicts with the Chilean Government’s present policy of exclusive preferences to contiguous countries. It has been pointed out to them by representatives of Argentina, Brazil, and this Government that the mere reservation of such a right by Chile and contiguous countries would not necessarily mean that it would be invoked; Chile might in certain circumstances consider it advantageous, after consultation with the contiguous country concerned, to invoke the reservation; if a country contiguous to Chile wished to invoke it, Chile might have no objection to the reduction in duty to a third country or countries; if Chile should have an objection, the other country might abandon its proposal, or a mutually satisfactory adjustment might be worked out, because of its desire to maintain good trade relations with Chile; such an adjustment might possibly involve the third country concerned.

Furthermore, the above quoted contractual formula represents the full extent to which this Government feels it could go, in connection with a trade agreement with Chile, in meeting the Chilean request for a blanket exception in favor of contiguous countries. In this connection, active study is now being given to the possibility of renewing trade-agreement negotiations with Chile on as broad a basis as possible.

You are requested to discuss this matter immediately with the appropriate Chilean officials with a view to removing any objections they may have to the formula in order that when this matter comes before the Inter-American committee for action on August 14 the Chilean representatives will support the proposal. Action on that date is desired in order to have this question settled prior to and in order to facilitate the early conclusion of our trade agreement with Argentina.

You may also have an occasion to point out that thus far the recommendations of the committee have been adopted unanimously.

Hull
  1. Report of the Delegates of the United States of America to the Seventh International Conference of American States, Montevideo, December 3–26, 1933 (Washington, 1934), p. 275. For correspondence concerning this Conference, see Foreign Relations, 1933, vol. iv, pp. 1 ff.
  2. See exchange of notes regarding preferences to contiguous countries accompanying the reciprocal trade agreement between the United States and Argentina, signed October 14, 1941, Department of State Executive Agreement Series No. 277, or 56 Stat. (pt. 2) 1685.