Foreign Relations of the United States: Diplomatic Papers, 1942, The American Republics, Volume V

740.00112A European War, 1939/7599

The Assistant Secretary of State (Acheson) to the Ambassador in Brazil (Caffery)

Washington, March 30, 1942.

My Dear Mr. Ambassador: We have given a great amount of thought to the developments and suggested procedures concerning cooperation with the Brazilian authorities on Proclaimed List matters set forth in despatch no. 6518 of February 14, 1942.

This entire question is of such importance that I want to bring to your attention personally some of the considerations which we must reckon with here. I have kept in close touch with the Proclaimed List work and I am familiar with the difficult situation with which you and Mr. Donnelly have had to contend in carrying out a strong Proclaimed List policy in Brazil. In determining Proclaimed List policy here we have started with the assumption that neither we nor Brazil can afford to permit the Proclaimed List to be made a major issue between us. We have adjusted our procedures and policies on several important instances to meet this consideration. My present fear is not that we will not be able to make fair allowance in the future for the exigencies of certain important cases but rather that the Department’s, and in turn the Embassy’s, ability to keep the situation in effective balance will be impaired here unless the handling of these matters in Brazil is kept generally in harmony with the underlying realities here.

These realities are summed up in the fact that under the President’s proclamation of July 17, 1941⁶⁶ the maintenance of the Proclaimed List is vested in five other departments and agencies in addition to this Department. This is because the Proclaimed List is an instrument for administering controls which are vested in other departments and agencies—export control in the Board of Economic Warfare, priority and allocation control in the War Production Board, freezing control in the Treasury, etc. The task has been to find a common list which would free these controls as much as possible from the restraints of separate political intelligence services and permit the greatest freedom of commercial and financial transactions with persons not on a single published list. At the time the list was established trade had come almost to a standstill because no business man here could find out whether a prospective customer would pass the profusion of secret and separate lists.

In order to produce uniformity and simplicity of administration here, the work of administering the Proclaimed List has been carried out through the Department’s Division of World Trade Intelligence and an interdepartmental committee. The committee passes on all cases proposed for addition and deletion and as a practical matter the unanimous agreement of all members must be achieved on each case, not merely because the head of each of the interested agencies and departments must sign the orders promulgating the supplements to the Proclaimed List, but to maintain the authority of the list and prevent the establishment of a host of supplementary lists beyond the Department’s control. In order to maintain reasonably uniform listing standards and to prevent ill-considered actions, the committee members have been under instructions from their respective agencies to act only on recommendations which are supported with adequate substantiating information or reasons. While this has required education, both of the committee and some reporting officers in the field, the fact is that the committee has found no difficulty in taking speedy and unanimous action on cases which were adequately reported. This has been true of both additions and deletions. Experience to date has shown clearly that an extremely careful policy on deletions is necessary if the list is to be administered with fairness and effectiveness.

All this is by way of saying that the Department is not by any means a “free agent” on these matters and that we must carry these other independent departments and agencies with us. In fact, the actual economic warfare licensing control powers are vested, as I have said, not in the Department but in the other agencies. The Department has sought and so far maintained—but not without a struggle—the primary administrative responsibility for the preparation of the list. I am confident that the best of the argument is with us in this matter, but there can be no question that our retaining this control depends upon the continued harmonious functioning of the interdepartmental mechanism and on the Department’s ability and willingness to pursue a strong Proclaimed List policy. Furthermore, the interdepartmental authority affords the Department and the missions an essential element of protection against the political pressures which might well result in either emasculating the list or in seriously impairing the Department’s effectiveness in other diplomatic affairs if it bore the onus of resisting such pressures on its sole responsibility.

I have gone into this background at some length to bring out why it is imperative that the consultative procedures which have been arranged with the Brazilian authorities should be truly consultative and must leave with the Proclaimed List Committee here the authority to take such action as seems necessary under all the circumstances, including, of course, the views of the Brazilians and the concrete corrective and control measures which they are prepared to apply to specific cases.

I am fearful that if recommendations for the Proclaimed List are restricted to only those cases on which the Brazilian authorities have no objection, we shall find that they are composed mainly of little fellows or people without political influence. There has already been considerable criticism on this score, and if the other agencies became convinced that the Department’s leadership was producing this result, they would secede and go their own way with lists of their own, producing a situation far worse than anything the Brazilians have feared. Needless to say we all recognize the necessity for taking important political considerations into account in exceptional cases, but if this is to be done such cases must be the exceptions rather than the rule. As a matter of practical internal politics we can see how it will be very difficult for the Brazilian officials to agree to many cases being placed on the Proclaimed List. However, if they are prepared to check our information against theirs through the joint consultations and then let the decision and the onus of listing rest with us, their position would seem to be less vulnerable, particularly when they can subsequently intercede on a firm’s behalf to have the case considered for deletion on the basis of corrective measures taken by the firm or the government.

Despatch no. 6518 states that the local committee is generally opposed to inclusion of individuals on the Proclaimed List and suggests use of confidential list for most such cases. This raises the whole question of how far we can and should go in operating our controls on the basis of a confidential list. We are in full agreement that individuals who are connected with Proclaimed List firms but who would not be listed otherwise should generally be placed on the confidential list merely as potential cloaks. However, if an individual or a firm is engaged in inimical activities so that its transactions should be subject to effective control, the confidential list is not an adequate control measure. I will only mention the most important reasons why this is so:

1). The list cannot be kept confidential with respect to the people actually affected by the list. As soon as licenses are denied to the firm, the persons concerned complain to this government or to their government and all the controversies of public listing ensue.

2). To be an effective control measure the list would have to be put in the hands of

(a) at least six departments.

(b) all collectors of customs.

(c) all Federal Reserve Banks.

(d) all large banks doing foreign business.

(e) all diplomatic missions and consulates in the countries affected.

(f) large United States business firms in the countries affected.

(g) British and Canadian governmental agencies and missions.

3). It provides for no control over exports to the United States by undesirable firms unless consuls use it to deny invoices, in which event the existence of firms on the list is known at once.

4). A confidential list creates so much confusion among American business houses here and abroad that these houses frequently refuse to take foreign commitments when there is, as at present, a surplus of domestic orders. This aspect is particularly serious today when we are almost forced to ask firms to maintain essential business with the American republics.

5). A confidential list cannot be worked along with general licenses, all of which must be revoked if the control is to be in any measure as complete as the Proclaimed List. Today the Board of Economic Warfare still permits many items to move under general licenses to the American republics and the Treasury Department, generally speaking, permits all transactions incidental to inter-American trade to move under general license if the person or firm is not on the Proclaimed List. The Department, and I am sure the other American republics, would be most reluctant to see these general licenses withdrawn, but that is precisely what will be done if we begin a general practice of placing numerous important cases on the confidential list rather than on the Proclaimed List. The Treasury Department at present does not operate on a confidential list but they will insist on doing so if the Proclaimed List is to be seriously compromised. I am reasonably certain that if we get a profusion of covert controls there will be no inter-American trade.

A confidential list as contemplated in the circular air mail instruction of November 25, 1942 [1941]⁶⁷ is admittedly of limited utility, but our belief is that it is probably worthwhile if used as a check on potential cloaks and as supplementary to rather than as an alternative control for the Proclaimed List.

The whole situation as we see it comes down pretty much to this: a strong Proclaimed List is a sine qua non of getting essential goods to Brazil as our production and licensing authorities cannot justify the domestic sacrifices involved unless there is reasonable assurance that the goods are only going to persons and firms known to be affirmatively friendly to hemispheric defense and our war aims; it is important for the Department and the diplomatic missions to maintain a strong guiding hand on Proclaimed List policies, but this can only be done by preserving the interdepartmental cooperation through the Proclaimed List committee, and any attempt to delegate this authority to the field or to put the Committee in the position whereby it is supposed to act upon mere recommendations from the missions rather than upon full information will surely result in each of the licensing authorities going their independent ways and probably in a demand for independent field people to handle the reporting on these matters.

I went over all of this with Dr. Souza Costa who appeared to be satisfied and stated several times that all President Vargas asked was an opportunity for the Brazilian officials to be heard before action was taken here. But our interview was hurried and neither Duggan⁶⁸ nor Dickey⁶⁹ nor I felt that we brought home to him the alternative to the Proclaimed List which would result from administrative separatism here. In particular I don’t believe we were successful in explaining to him the vital connection between the maintenance of a strong Proclaimed List and our common efforts to get essential goods to Brazil. The American people and most of the people in the other American republics simply would not understand nor long tolerate a policy on our part which resulted in our severely limited exports being made available indiscriminately to our friends and pro-Axis elements. Such a policy would be unfair to our friends in Brazil and in the long run decidedly unrealistic politics for all of us. It seems to us that this is the crux of the matter which in some way we must get home to the Brazilian officials if we are to secure their sympathetic tolerance, if not their acceptance of a strong Proclaimed List.

With warm regards,

Most sincerely yours,

Dean Acheson

66. Department of State Bulletin, July 19, 1941, p. 42.
67. Not printed.
68. Laurence Duggan, Adviser on Political Relations.
69. John S. Dickey, Acting Chief, Division of World Trade Intelligence.