812.659/100
The Secretary of State to the Ambassador in Mexico (Messersmith)
Sir: Reference is made to the Embassy’s despatches no. 12649 and no. 12650, both of August 31, 1943,73 and enclosures, all with reference [Page 526] to negotiations with the Mexican Government concerning the reorganization of the vested drug and chemical firms in Mexico.
The Department has studied very carefully the exchange of memoranda between the Embassy and the Mexican Government. The Department is disturbed by the implication in paragraph 3 of the plan as proposed in the Embassy’s memorandum of August 1074 and reflected in paragraph 2 of the memorandum from the Mexican Government,75 that the contracts will be made with companies under the control of the Alien Property Custodian wherever these companies are adequately equipped to perform the services required by the Mexican holding company. The change in the basis of negotiations which excluded any participation by the United States Government or any instrumentality thereof, except in an advisory capacity, in the reorganization of the Mexican vested firms, should reduce trie Custodian’s companies to the level of private companies in competition with the other private companies. Both the Alien Property Custodian and the Department are unwilling to permit any arrangement which has the appearance of giving the Alien Property Custodian companies a competitive advantage in contracts which are to be negotiated on a purely commercial basis.
Although it is clear that Mr. Crowley intends to direct his companies to make contracts which will be advantageous to the Mexicans, nevertheless, the Department and the Alien Property Custodian may be subjected to severe criticism for having used the Custodian’s governmental position to advance the interests of companies which are in competition with other American firms. The Department believes that it is imperative that both our note to the Mexicans and their reply be rephrased so as to indicate that the commissioner appointed by the Alien Property Custodian acting in the capacity of a representative of this Government, will use his good offices to select that American company best able to render the assistance required by the Mexican holding company on terms satisfactory to the Mexicans.
The Department recognizes the difficulty involved in incorporating this change into notes which have already been delivered. Nevertheless, in view of the unfortunate implication that is contained in the present phrasing of the notes, you are requested to place before the Mexicans this Government’s desire that the notes be amended to conform with the ideas expressed above. The Department is confident that the Mexicans will themselves appreciate the difficulties that might flow from a publication of the note in its present form. Representatives of the Department have had an informal conference with Mr. Mahoney of the Office of the Alien Property Custodian since his [Page 527] return from Mexico and understand that this point has been reexamined by the Embassy and that remedial steps along the lines suggested above are being taken.
With further reference to the note transmitted by the Mexicans, the Department notes that the Mexican Government will study the desirability of adopting the trade-mark policy urged in the Embassy’s memorandum. As indicated in the Department’s circular instruction of July 17,76 the Department feels that the continued use of the Axis trade-marks is dangerous because of the possibility that it may facilitate the re-establishment of the private arrangements for allocation of markets that existed before the war. It is not intended by this to suggest that this Government is opposed to the re-establishment of trade relations with enemy countries after the war, but merely to emphasize the necessity for obstructing the return of German cartel domination. It would, of course, be highly desirable if the Mexicans could be persuaded to take a stronger line in their note—to indicate, for example, agreement in principle, with study to be devoted to the best means of carrying out the program. The Department realizes, of course, that you and Mr. Tucker are thoroughly conversant with the problem and have undoubtedly made every effort to gain the adoption of a trade-mark policy consistent with the Department’s view.
The Department and the Office of Economic Warfare are somewhat disturbed lest the Mexicans may be attaching a special significance to the fact that Mr. Crowley is Director of the Office of Economic Warfare. The Office of Economic Warfare has requested that it be made clear to the Mexicans that allocations of material to the vested properties must be made in accordance with the relevant statutory and administrative provisions and on an impartial basis in the light of war requirements and the requirements of the United Nations and of all the American republics. The Department concurs in the Office of Economic Warfare’s request.
It is noted that the exchange of notes makes no reference to the problem of the continued employment of Axis personnel. The Department is confident that the Mexicans are in agreement that undesirable personnel not discharged at the time the companies were deleted from the Proclaimed List should be eliminated as rapidly as suitable replacements can be found. If your discussions have not raised this point, however, it would be desirable to clarify this Government’s position on this matter in order to make sure that there is a common understanding of the economic warfare objective to be gained.
With reference to the informal memorandum which Mr. Tucker handed to the Mexicans at the conference on August 27,77 the Department [Page 528] is concerned by the suggestion that a merger might be arranged of the vested Bayer Company and the Sterling organization in Mexico. It is far from clear to the Department whether the proposal is to have Bayer acquire the Sterling interests or whether the converse is contemplated. The latter merger would be covered by the Sterling Representations, and, as a consequence, would require the approval of the Department, Treasury and the Department of Justice before it could be consummated. There are informal, but nonetheless definite indications, that permission for such a transaction would not be forthcoming. Moreover, it seems to the Department desirable, from a standpoint of policy, that the Sterling organization and Bayer, in view of the fact that they sell competing products, should not be merged but that their independence should be maintained.
It is the Department’s thought that the Embassy’s note of reply might refer to this Government’s gratification at the success of the negotiations between the Alien Property Custodian’s mission and the Government of Mexico, and continue by stating that, in accord with the commitments made in President Roosevelt’s letter to President Avila Camacho, this Government would be happy to implement any suggestions that the Mexicans might wish to make with reference to intergovernmental cooperation to supplement the arrangements already made.
The Department wishes to congratulate you, Mr. Tucker and the members of your staffs on your splendid handling of very difficult and intricate negotiations. The Department recognizes that there may arise many difficult problems in the implementation of the agreement that has been worked out. It is believed, however> that these difficulties can be readily overcome, and that arrangements within the framework which has been established will be beneficial to the economies both of this country and of Mexico, and conducive to the enduring friendship between our two republics.
Very truly yours,