611.1231/415

The Mexican Ambassador (Castillo Nájera) to the Secretary of State

[Translation]

8258

Excellency: On instructions from my Government, I have the honor to refer both to the memorandum presented by the Department under Your Excellency’s worthy charge on May 21 [20?], 1942,15 and to the draft of bases for a trade agreement, prepared by the said Department and dated May 26, 1942 which, through my intermediary, Your Excellency’s Government submitted for the consideration of the Government of Mexico.

In the memorandum which I have the pleasure of sending to Your Excellency with this note, there are set forth the general points of view which the Government of Mexico feels should inspire the negotiations for a trade agreement between our two countries. In addition, amendments, additions or substitutions are proposed for articles in the draft drawn up by the Department of State, the reasons being given which, in the opinion of the Mexican Government, justify the advisability of the changes suggested. Lastly, the memorandum contains certain new articles which my Government considers it indispensable to include in the definitive text of the agreement.

I have the pleasure of informing Your Excellency that my Government is animated by the greatest willingness to make, in the course of the negotiations, all such concessions as are compatible with its possibilities, without further limitations than those inescapably imposed by its economy; nevertheless, my Government wishes to invite Your Excellency’s attention to the principal concession which my own Government is disposed to offer and which consists in undertaking not to raise its tariffs with respect to a great many products, a circumstance which, of itself, means a great advantage for the United States.

Lastly, I am pleased to inform Your Excellency that the technical delegation appointed by the Mexican Government is now in the city of Washington; accordingly, this Embassy feels that it is an easy matter to hasten the negotiations, beginning the final conversations at the earliest date convenient for Your Excellency’s Government.

[Page 498]

Mr. Ramón Beteta, Envoy Extraordinary and Minister Plenipotentiary, heads the said delegation.

I wish [etc.]

F. Castillo Nájera

Washington, July 6, 1942.

[Enclosure—Translation]

Memorandum

I

With respect to the fundamental points of view concerning commercial and tariff policy which the trade agreement between Mexico and the United States should determine for the two countries, the Government of Mexico has special interest in having the Government of the United States give attention to the general considerations which are herein briefly set forth and which, in the course of the negotiations, may be enlarged upon to the necessary degree.

The Government of Mexico feels that, in order for the agreement which is to be negotiated to be founded on a basis of real, just and equitable reciprocity, account will have to be taken of the necessity of substantial tariff concessions being granted by the United States, in general, even though, in some cases, Mexico may find it impossible to modify its tariff rates now in force, or else can only decrease them on a very slight scale.

Any concession which Mexico may make in this respect, however little it may appear, certainly means a sacrifice greater than a similar reduction in its tariff rates can mean for the United States of America. In fact, Mexico is in a disadvantageous position with respect to the United States as regards the tariff situation. A number of reasons may be invoked to justify the above assertion; and, among others, the following comments may be made herewith:

a) The so-called “Underwood Tariff”, approved in 1913,16 set import duties which were far too high—even though it could be called liberal by comparison with the excessive protectionism of the 1897 tariff,17 which established quotas which were relatively as high as in the tariff of 1864,18 famous for its high tariff level. After the last World War, the said level was raised on various occasions and, in 1922, a new tariff19 was established in the United States which had even more protectionist tendencies. Finally, in 1930, the Hawley-Smoot tariff,20 in effect at present, set the highest import duties in all American history.

[Page 499]

Accordingly, the American tariff which will serve as a point of departure in the negotiations for the agreement is a tariff, without precedent, as respects its height, in the history of the United States and, possibly, without equal in the rest of the world, while the tariff in force in Mexico can be termed one of the lowest in existence.

b) Almost all Mexican duties on imports are specific duties and, accordingly, are constant and independent of the prices of the products; while those in the United States are, in the great majority, ad-valorem, the result of which is that they fluctuate along with the price of the products.

As a consequence, as the value of Mexican currency has been decreasing in relation to the dollar, that is, in proportion as prices, in pesos, of American articles imported by Mexico have gone up—which has happened to a marked degree since 1932—Mexican tariffs have amounted to an actual, increasingly smaller charge against American products imported by Mexico, and the disparity between them and the corresponding duties in the United states has been becoming continually sharper.

Furthermore, the low level of the Mexican peso (which is due to reasons which it is not necessary to explain here) is far from having decreased Mexico’s capacity to import American goods. On the contrary, such imports have considerably increased, as is shown by statistics for the years 1932 to 1941 (Appendix 1).21

c) Mexico does not seek autarchy nor does it try, on any grounds, to do without articles from the United States. However, being a country whose industrial development is barely starting, the majority of its incipient industries unavoidably require protection against the competition of foreign industries which are already full grown, and which operate on a large scale, with low costs of production. The Mexican Government has decided to limit this protection to those industrial activities which, in accordance with the means and resources of the country, may be useful in assuring the stability of its economic future, and is not trying artificially to stimulate, with tariff measures, the establishment of exotic industries, lacking a basis of real economic support.

d) The Governments of Mexico and the United States obtain approximately equal amounts, in absolute figures, from duties on the commercial movement between the two countries, as may be seen by the statistical table attached (Appendix 2);21 however, the amount of such sums is equivalent, in Mexico, to more than one-fourth of the total collections (27.1% in 1940), while, in the United States, it represents only 0.5 per cent of the Federal receipts in the same year, 1940.

e) Furthermore, within the limit of its possibilities, the Government of Mexico is assisting in continental defense, a circumstance which will necessarily have the effect of increasing its expenditures for military purposes and projects of a strategic character. This is one additional reason why Mexico cannot dispense to a substantial degree with the receipts coming from its tariffs.

[Page 500]

f) The recent agreements concluded between Mexico and the United States on the oil and claims questions24 impose on Mexico the obligation of paying the Government of the United States very large amounts, the payment of which will be made in installments which will mean a positive sacrifice for the Mexican treasury. In addition, the balance of payments will be still more unfavorable for Mexico at the time when it has to pay the principal and interest on the new American investments. Mexico will only be able to export the necessary amount of foreign exchange if it sells an equal amount of goods or services to the United States. Accordingly, it is considered necessary for the Government of the United States to take Mexico’s situation as a debtor country into consideration so as to grant it special tariff concessions, which will surely be greater than those which it has granted to other countries with which it has concluded trade agreements in recent years.

The Government of Mexico considers that the facts and arguments set forth in the above paragraphs satisfactorily prove that, in order for there to be true reciprocity in the trade agreement between Mexico and the United States, it is necessary for the greater part of the tariff reductions established to be granted by the United States.

II

The Mexican Government has studied with great care the concrete proposals submitted to it by the Government of the United States in the documents to which reference was made at the beginning of this memorandum. With respect to them, it is necessary to point out forthwith that Mexico holds that the forthcoming trade agreement should permanently strengthen the economic relations between the two countries; therefore, the Mexican Government would like to have the agreement be in effect for the longest possible time and not have as its limit, not even in the case of certain concessions, the termination of the present conflict. To this it must be added that, in any event, Articles X and XI of the proposed agreement presented by the Government of the United States empower either of the two countries to withdraw the concessions established, in whole or in part, in case they involve an injury to the interests of either of the contracting parties.

III

With respect to the guarantees touching on export duties, mentioned in the Department of State’s memorandum of May 21 [20?], 1942,25 it may be remarked that, as soon as the concessions which the [Page 501] Government of the United States is disposed to make to the Government of Mexico are known, the latter will study the proposals submitted to it with the greatest good will, with the understanding that it is confident that a formula will be found which will satisfy the interests of both countries.

IV

The Government of Mexico considers it pertinent to make certain proposals concerning some of the articles which constitute the draft trade agreement submitted to its Embassy in Washington by the Department of State. At the same time, it begs to propose the acceptance of certain additional articles which the Government of Mexico considers it necessary to include in the aforesaid agreement. The Government of Mexico does not doubt that they will meet with the approval of the Government of the United States since it feels that the stipulations thereof are in harmony with the general spirit which animates the proposals of the American Government and in view of the fact that some of the said articles have been adopted in similar agreements signed by the United States with other countries.

A. Concerning the draft agreement proposed by the Government of the United States, the Government of Mexico considers that the preamble and articles I, II, IV, V, VIII, IX, XIV and XVI can be accepted without change, in the form in which they were drawn up by the Department of State.

With regard to Article II [III] of the above-mentioned draft, the Mexican Government has no objection to accepting the first paragraph thereof. But with regard to paragraph 2, it believes that the wording should be changed to read as follows:

“If the Government of the United States of America or the Government of the United Mexican States imposes any restriction or quota allotment on the importation or exportation of any article, or on the sale, distribution or use of any article imported, public knowledge shall be given of the total amount or the total value of the said article which it shall be permitted to import, export, sell, distribute or use during the period specified, as well as of any change in the said amount or value. Furthermore, if the Government of the United States of America or the Government of the United Mexican States allots a proportion of that amount or value to any third county it shall allot to the other country, with respect to any article in which it has an important interest, a share based on the proportion of the total value or amount supplied by the said country or, in the case of exports, a share based on the proportion exported to the said other country during a previous period which can be considered as typical. In the case of quotas on imports or exports already established on the date of the Treaty, they must be modified in conformity with the principle established in the foregoing sentence. In no case shall one year be selected as a typical period and an endeavor shall be made to take, as the basis for quota allotments, a share equivalent [Page 502] to the proportion of the trade in each specific article which the respective countries have had during a typical previous five-year period, or in any other previous typical period on which the governments of the two countries may agree.”

Paragraph 3 is acceptable in the form in which it was presented. With regard to Article V, the Mexican Government proposes that the wording of the first paragraph be changed to read as follows:

“If the Government of the United States of America or the Government of the United Mexican States establishes or maintains in force an institution with exclusive rights over the importation, sale, distribution or production of any article, or if exclusive privileges are granted to any agency to import, sell, distribute or produce any article, fair and equitable treatment shall be granted to the commerce of the other country as concerns the foreign purchases of the said institution or agency. To this end, the said institution or agency shall be governed, in making its purchases of any article abroad, solely by considerations such as price, quality, market, transportation and terms of sale, which would ordinarily be taken into consideration by a private commercial company interested solely in buying the said article on the most favorable conditions.”

Paragraph 2 of this article can be accepted in its present form.

The Mexican Government considers that paragraphs 1, 2, 3, and 4 of Article VI of the United States draft are acceptable in the form in which they were presented, but that the wording of paragraph 5 should be changed to read as indicated below:

“If the Government of the United States of America or the Government of the United Mexican States makes representations to the other government with respect to the application of any law or sanitary regulation for the protection of human, animal or vegetable life or health, and if there is disagreement in regard thereto, there shall be established, at the request of either of the governments, a committee of technical experts on which each government shall be represented in equal numbers, to consider the case and make a decision with regard thereto. If the said committee should not reach an agreement, an arbiter shall be appointed, after consultation with both governments, and he shall be a person of unquestioned integrity and technical ability.”

The Government of Mexico believes that Article XII should be eliminated from the forthcoming agreement, since it considers it inadvisable that causes foreign thereto may be taken as a reason for giving notice to terminate it.

With respect to Article XIII, the Government of Mexico accepts the first paragraph but it thinks that the second paragraph should be modified by eliminating the part which reads “but they shall not be applicable to the Panama Canal Zone.”

B. The Government of Mexico also feels that certain articles should be added to the draft agreement which was presented to this Embassy [Page 503] by the Government of the United States of America and begs to suggest that the latter be these articles:

“Article_The Government of the United States of America and the Government of the United Mexican States shall give all facilities in their power to achieve the free transit across their respective territories of articles the produce, manufacture or growth of the other country which are consigned to third countries.

“Article_As respects articles the growth, produce or manufacture of the United States of America or of the United Mexican States, included and described on Schedules I and II respectively, on which, upon their importation into one country from the other, ad valorem import duties or duties based on value or in any way governed thereby, are imposed or might be imposed, it is understood and agreed that the bases and methods for determining the value at which the duty and the conversion of currencies are applied shall not be less favorable to the importers than the bases and methods established by the laws and regulations of the United States of America and of the United Mexican States respectively, in force on the day of the signing of this Treaty.”

V

After studying the schedule of Mexican articles proposed by the Department of State, the Government of Mexico believes that those specified in Appendix 326 of this Memorandum should be excluded, since it must reserve the liberty of changing the tariffs thereon, with a view to the needs of the national industry.

VI

The Government of Mexico wishes to point out that, in examining the schedule of American articles which was submitted to it by the Department of State, it has interpreted the numbers of the items included thereon as being those which must be taken into consideration for the negotiations and that, in cases where the wording of the item on the schedule does not concur with wording of the official tariff, it is to be understood that the negotiations will embrace the whole item and not only part thereof.

Furthermore, the Government of Mexico would like to have accepted an elastic interpretation of some items, which list certain articles in a limited way, in order that it might be able to include within them other similar articles which are not expressly mentioned in the said items.

VII

Mexico desires an increase in the quota at present in force for the importation into the United States of certain products which have a preponderant place in Mexico’s economy and which will be discussed in detail in the course of the negotiations. Among such products [Page 504] is, first of all, oil,—of which at present the United States imports from Mexico, on a low quota, only the amount of 3,592,103 barrels. The said amount is included in the very low allotment of 3.8 percent of the 5 percent of American consumption which is the quota allotted to “miscellaneous countries.”

The Government of Mexico considers that both the huge increase in consumption of fuels resulting from the war and the prime necessity therefor which the United States now has, for the application of its policy of defense of the Continent and the Democracies, as well as the radical changes which have recently occurred in the distribution of the oil-producing territories of the world justify and demand, indeed to the advantage of the United States itself, a considerable increase in the quota at present in force. Mexico would, accordingly, like the said quota to be enlarged so as to admit the amount of 31,000,000 barrels, which is the amount which it can annually furnish the United States of America.

  1. Not printed.
  2. 38 Stat. 114.
  3. 30 Stat. 151.
  4. 13 Stat. 202.
  5. 42 Stat. 858.
  6. 46 Stat. 590.
  7. Not printed.
  8. Not printed.
  9. For correspondence concerning the oil and claims questions, see Foreign Relations, 1941, vol. vii, pp. 371 ff.; for citations to agreements, see bracketed note, ibid., p. 396.
  10. Not printed.
  11. Not printed.