The Ambassador in Uruguay (Dawson) to the Secretary of State

No. 270

Sir: I have the honor to refer to my telegram no. 440 of October 20, 4 p.m., and to report that informal negotiations were resumed on October 17 with the following Uruguayan representatives: Sr. Felipe S. Grucci, Director of the Section of Commercial Affairs of the Uruguayan Foreign Office, Sr. Silveira Zorzi of the Bank of the Republic of Uruguay, and Sr. Mario L. La Gamma of the Ministry of Finance. The representatives of the Embassy were Mr. Chapin, First Secretary, Mr. Glover, Commercial Attaché, and Mr. Gilmore, Economic Analyst.

Although it was evident at the first meeting that certain minor modifications would have to be made in Draft Schedule I prepared by the Department, in order to meet certain recent changes in wording in the Uruguayan tariff schedules, comparatively little difficulty is expected in reaching a mutually satisfactory accord on the wording and the coverage of the tariff concessions requested and those to be given to Uruguay. The word “comparatively” is used advisedly, since the first meeting once again emphasized the divergence between the point of view advocated by the United States of unconditional most-favored-nation treatment, which forms the basis for our whole trade-agreement program, and that of Uruguay which is based upon the principle of narrow bilateral commercial agreements.

The Uruguayan representatives have on every occasion reiterated their theoretical acceptance of the principle of multilateral trade with [Page 576] unconditional most-favored-nation treatment, but have just as consistently stated that since the countries which form the most important outlets for their products have abandoned this system, have refused to recognize this liberal principle and have imposed the bilateral system upon Uruguay in binding agreements, they are unable to subscribe without reservation to the liberal principles advocated by the United States, particularly as they are contained in the provisions of Article IV of the current draft of the general provisions.

Moreover, it may well be that even were Uruguay free to adopt the principles which we advocate, the Bank of the Republic, which controls the economic life of the country, has found the present complicated system of exchange control so lucrative a source of revenue and such an advantageous weapon in its manipulation of Uruguay’s foreign trade that it would be reluctant to adopt in fact the principles to which it now gives lip service.

In the course of a second meeting on October 28 the Embassy’s representatives endeavored to set forth the advantages which our Government believes are inherent in the principle of unrestricted multilateral commerce. They pointed out as well that while it was desirable to construct an agreement which might have as permanent a character as possible, it was also clear that no one could foresee what course world economic conditions might take following the termination of present hostilities and that it seemed quite probable that all existing trade and commercial agreements would require some revision as soon as the post-war situation had begun to clarify. The escape features of Articles IV and XII were called to the attention of the Uruguayan negotiators but it cannot be said that they showed any disposition to recede from their position.

The Uruguayans were aware of the concessions granted by the United States in the exchange of notes supplementing the trade agreement recently signed with Argentina, exempting the British payments agreement from the provisions of Article IV, and they affirmed that Uruguay was in the same position as was Argentina with respect to sterling blocked balances. The representatives of the Embassy countered by requesting detailed information concerning Uruguay’s present sterling position and were informed that this information would be supplied. At the request of the chairman of the Uruguayan delegation a copy of the text of our note to the Argentine Government was furnished to the Uruguayan delegation. They stated that they would use this text as a basis for drafting a counter-proposal giving the Uruguayan interpretation of Articles IV and XII in the light of their own exchange situation.

At a third meeting held on November 4 the chairman of the Uruguayan delegation presented a memorandum together with two draft [Page 577] notes, copies and translations of which are enclosed with this despatch.42 It will be observed from the text of the covering memorandum that the divergency in basic view points is still as wide as ever. However, the memorandum brings out the rather ingenuous argument that, since the United States is not in a position to accord tariff concessions to Uruguay which have the relative importance of those accorded to Argentina, it should be willing to allow greater latitude to Uruguay with respect to its exchange-control policy. Specifically, the memorandum proposes that Uruguay consider itself bound to give most-favored-nation treatment as respects exchange to the United States only when the facilities available to Uruguay permit it to do so. In effect, the wording of the second draft note is just as loose as that.

The first note is modelled in general upon the exchange of notes supplementing the Argentine Agreement, although here again the wording is somewhat looser.

In accepting the memorandum and the draft notes, the representatives of the Embassy stated that they were of course not in a position to make any reply but would submit the text of the documents to the Department for study. However, they did observe that, even in the unlikely event that it were possible to make a specific concession of this nature to Uruguay alone, it would probably prove impracticable on the basic ground that such a concession, if given to Uruguay, would have to be generalized to every other country entitled to most-favored-nation treatment by the United States.

From the foregoing and from a study of the enclosures the Department will realize the difficulty of reconciling the two points of view and that a good deal of persuasion may be necessary before the Uruguayan Government can be disposed to recede from its position. In this connection it will be recalled that no original concessions of any importance not covered in the Argentine Trade Agreement have been offered by this Government to Uruguay. While persuasive arguments by a trained specialist in trade-agreement negotiations may be of some assistance in obtaining a modification of the Uruguayan position, it is to be feared that unless we offer some special inducement or bring some special economic pressure upon Uruguay it will be very difficult, if not impossible, to obtain a satisfactory agreement.

Respectfully yours,

William Dawson
  1. None printed.