The Chargé in Haiti (Sparks) to the Secretary of State
[Received November 8.]
Sir: With reference to my despatch no. 479 of October 21, 1941, reporting my conversations with President Lescot and Foreign Minister Fombrun relative to the Commercial Convention signed by Haiti and the Dominican Republic, I have the honor to report that the Foreign Minister showed to me this morning unofficially a draft of a note that he wished to send me as soon as it had been approved by President Lescot.
The note, as drafted, would submit officially to the American Legation a copy of the Commercial Convention between Haiti and the Dominican Republic for comment by the American Government with respect to the unconditional most-favored-nation clause in the Haitian-American Trade Agreement of March 28, 1935, in the light of the contractual formula recommended by the Inter-American Financial and Economic Advisory Committee on September 18, 1941. The note then refers to the fact that Article XX of the Accord of August 7, 1933,47 namely “the Government of Haiti agrees not to reduce the tariff nor to modify the taxes and internal revenues in such a manner as to reduce the total amount thereof without the accord of the Fiscal Representative”, has not been incorporated in the Executive Agreement signed on September 13, 1941.48 The Foreign Minister then declares in his note that the Haitian Government does not consider that the preferential treatment granted in the Commercial Convention between Haiti and the Dominican Republic is contrary to the Haitian-American Trade Agreement of March 28, 1935, nor that it is contrary to the provisions of the Executive Agreement to Replace the Accord of August 7, 1933, signed on September 13, 1941.
I told the Foreign Minister that two problems would be presented, namely (1) the attitude that the American Government might assume with respect to the preferential treatment that Haiti proposed to grant the products originating in the Dominican Republic vis-à-vis the unconditional most-favored-nation treatment provided for in Article VII of the Trade Agreement of March 28, 1935; and (2) the effects that the operation of the Commercial Convention might have on Haitian fiscal revenues.[Page 358]
With regard to point one, I explained to the Foreign Minister that in my memorandum of October 21, 1941,49 (enclosure no. 1, despatch no. 479 of October 21, 1941) I had set forth that my Government was prepared to give earnest consideration to such proposals as the Haitian Government might wish to make, with reference to the most-favored-nation obligations in the Trade Agreement with the United States, in regard to the tariff preference it may desire to grant on certain articles imported from the Dominican Republic. Therefore, if the Foreign Minister addressed me on this point I would be pleased to transmit his proposal to my Government for consideration. At this point the Foreign Minister referred to the provision in paragraph 6 of Article VII of the existing Trade Agreement relative to advantages accorded “to adjacent countries in order to facilitate frontier traffic” and expressed the view that this provision would seem to cover the point. I reminded the Foreign Minister that in the Commercial Convention signed between Haiti and the Dominican Republic there was a separate protocol which referred exclusively to frontier traffic and that it was my understanding that the paragraph in our Trade Agreement, quoted above, covered only border exchanges of products. Also, in view of the confusion under which the Foreign Minister seemed to labor with respect to the recent exceptions made by the American Government in the Trade Agreement concluded with Argentina with regard to preferential treatment granted by the latter to contiguous countries, I pointed out that the exception made in the exchange of notes between the two Governments, which was pursuant to the contractual formula for tariff preference to contiguous countries recommended on September 18, 1941, by the Inter-American Financial and Economic Advisory Committee, was the result of negotiations between the United States and Argentina. In the contractual arrangements between the United States and Haiti provision had not been made for such an exception and therefore it was necessary that the Haitian Government should submit to the American Government for its consideration such proposals as it might wish to make for tariff preferences to the Dominican Republic.
With regard to point two, I expressed the personal view—since I had not yet consulted my Government and had not yet been informed of its views—that my Government would probably not wish to express an opinion as to what effects the operation of the Commercial Convention between Haiti and the Dominican Republic would have upon Haitian fiscal revenues. I suggested that my Government would not necessarily have sufficient information available to reach a conclusion as to the economic effects nor might it be sufficiently informed as to [Page 359] the political advantages which the Haitian Government might hope to derive from the operation of this Commercial Convention. In these circumstances, again expressing my purely personal views, I ventured to say that my Government would suggest that this is a matter which might more properly be submitted to the Board of Directors of the National Bank of the Republic of Haiti for study and opinion.
At this point the Foreign Minister recalled that Article XX of the Accord of August 7, 1933, relative to the powers exercised by the Fiscal Representative, had been canceled and that a like provision had not been included in the Executive Agreement of September 13, 1941. I agreed with the Foreign Minister that “the language employed in Article XX of the Accord of August 7, 1933, did not seem to be incorporated in the Executive Agreement of September 13, 1941, for the reason that the two Governments had decided to confer this duty of the Fiscal Representative upon the Board of Directors of the National Bank consisting of three American and three Haitian members,” In this connection I referred to Article V of the Executive Agreement of September 13, 1941, which required that the “budget shall be prepared cooperatively by the Government of the Republic and by the National Bank of the Republic of Haiti” in the manner described therein. Since the Board of Directors must estimate the expected revenues and the global expenditures and since the Government of the Republic must estimate the expenditures “within the limits suggested by the Board of Directors of the National Bank”, and since both estimates for the current fiscal year had been made and agreed upon by the Government and the National Bank, it would seem that the latter should be consulted before the consummation of the Commercial Convention which, from preliminary investigations, would entail a sizeable loss of Government revenues. I pointed out further that if the Commercial Convention were consummated and it were established that Haitian custom revenues were substantially reduced as a result thereof, it would then be incumbent upon the National Bank to take the steps necessary to reduce the expenditures of the Government so as to bring them within the revenues that might be available. The Foreign Minister argued that the operation of the Commercial Convention would not impair the validity or the compliance of the Haitian Government with its obligations to the bondholders since if it proved that the loss of revenues were too great reductions could be made in other expenditures of the Government and the Commercial Convention itself could be denounced within a period of five or six months.
The difficulty in this whole problem is the fact that the Foreign Minister is convinced that if the Commercial Convention were submitted to the Board of Directors of the National Bank the latter [Page 360] would advise against ratification of the Convention. I have been informed that Finance Minister Lacroix is opposed to ratification of the Commercial Convention because of the adverse effect which it would have on Haitian custom revenues. I am also informed that Mr. Williams is opposed for the same reason and the fact that he is unable to see how this loss of revenues might be replaced by other sources. In these circumstances, I believe, Foreign Minister Fombrun desires to obtain directly the consent and approval of the American Government, then proceed with the ratification, and finally present the measure to the National Bank as a fait accompli.
I recognize fully the desirability and necessity of improving the economic and political relations between the Republic of Haiti and the Dominican Republic. I believe that the conclusion of a sound commercial arrangement between the two countries might well contribute to an improvement in those relations. However, I do believe that both the spirit and the terms of the Executive Agreement of September 13, 1941, might very well be vitiated if the American Government undertook, without consultation with the Board of Directors of the National Bank of the Republic of Haiti, to pass upon independently the possible effects of the operation of the Commercial Convention on Haitian fiscal revenues. Moreover, it would seem unfortunate if at the very inception of the Executive Agreement of September 13, 1941, the Haitian Government were unwilling to consult and work out with the National Bank a commercial arrangement with the Dominican Republic which would reflect not only the economic but the political aspirations of Haiti.
As I have indicated above, I confined myself to an expression of purely personal views in the premises, for the reason, inter alia, that the Foreign Minister had consulted me purely informally prior to obtaining the approval of President Lescot to submit the Commercial Convention formally to the Legation for the opinion and comment of the American Government. Two courses are now open. If the Department agrees with the personal views expressed by me, I could confirm them officially to the Foreign Minister and President Lescot and thus possibly avoid the presentation of the contemplated note. This would seem to be the best course so as to avoid the necessity at this time formally to interpret the provisions of the Executive Agreement of September 13, 1941. Certainly it seems to me that the question of the economic and political advantages in the Commercial Convention between Haiti and the Dominican Republic is a matter which should be thrashed out by the Haitian Government with the Board of Directors of the National Bank so that it may be fully informed of the possible consequences that the Convention might cause.