Foreign Relations of the United States: Diplomatic Papers, 1944, The American Republics, Volume VII

823.24/9–2044

The Ambassador in Peru ( White ) to the Secretary of State

No. 1486

Lima , September 20, 1944.
[Received September 26.]

Sir: I have the honor to refer to the Department’s circular instruction of July 31, 1944,⁹⁹ file No. 810.24/7–3144, transmitting FEA’s request for estimates on Peru’s 1945 requirements of approximately 2,000 commodities; and to submit the following comments which, it is believed, will be of value to the Department in further considering the probable effect of this project on the immediate as well as the long-term trade and general relations with Peru.

Considering the number of commodities and the nature of the information sought, the request involves more work than the list of less than 200 items which evidently was deemed sufficient by BEW¹ during the most critical period of the emergency. Although it is stated no revision of previous recommendations is necessary, it is noted that the estimates are to be submitted for any commodity on the lists which the Peruvians specifically need. To obtain useful answers to the questions it would require investigations among most of the importers and manufacturers in the nation. Such a comprehensive investigation would have rendered it practically impossible to supply the data by September 15, November 1, and December 31, even if the instruction and lists had been received promptly after July 31. The lists arrived on September 15. In the case of lumber and forest products it is stated that requirements estimates received after November 1 cannot be assured consideration for 1945, at least for the first quarter, despite the fact that we have already transmitted comprehensive information concerning Peruvian lumber requirements. This provision would seem to mean that our exporters and foreign clients may be deprived of the trade they have developed during many years owing to the tardy transmission of rather impossible rules.

Even if we eliminate 500 items by arbitrary decision without consulting the traders, there still remain about 1,500 commodities on which we are requested to supply units of measurement; minimum essential requirements; quarterly demand; estimated effective demand on the United States; estimated domestic production; annual imports from sources of supply other than the United States; stock position; end use; and justification of essentiality.

As concerns agricultural supplies and equipment on which reports are to be submitted by December 1, the following additional studies are required: the effect on total production of what crops, the effect on production per acre, the effect on saving of food crops, the availability of skilled operators, servicing facilities and fuel supply; and any unusual circumstances requiring changes in practices with supporting research evidence of beneficial results and evidence that the changed practices will be adopted. In this same section under the heading “Fertilizers”, it is desired to know the short tons of material and percent of plant food content of numerous items including, for example, Florida Land Pebble—if our understanding of the request is correct. Another request under agricultural supplies is that a separate listing be made of the portion of passenger cars, parts and accessories, tires and tubes which will be required for agricultural uses.

All in all the request seems to approach unreasonableness as well as the impossible. There are dozens if not scores of items which have no perceptible relation to the war effort, or to the essential economy of any nation in the hemisphere, or to rational trade promotion, such as smoked poultry, prickly pears, watermelons, candied grapes and Christmas trees. Of course they can and will be ruled out automatically, but their inclusion in the list at all, together with the request for estimates of minimum essential requirements, effective demand, stock position, end use, and justification of essentiality, tends to throw the shadow of futility over the whole job,—not to mention other requirements such as the “supporting research evidence” just cited and the more serious aspects set forth as follows:

At the request of the Embassy, on behalf of FEA, the Peruvian Government at considerable expense set up a country agency for handling a very comprehensive system of licensing under the quota plan. It was to be a cooperative enterprise. Thereafter we requested that an exception for mine supplies and later for other materials brought in by the different agencies of the American Government be made by the Peruvians who, in their customary spirit of cooperation, acquiesced. Then the decentralization plan, which was very favorably accepted as an effective procedure for the control and distribution of essential requirements imported from the United States, was set up and gave good results. However, the Embassy, the Peruvian Government and the local businessmen were subsequently embarrassed when appreciable shipments of merchandise described as critically short were received in Peru by persons who had never imported before and after the Finance Ministry and the Embassy had seriously cut down on requests by long-term clients of good reputation. The Peruvian Government also overlooked that, knowing that errors would have to occur in a program of such vast proportions. Shortly thereafter press releases in the United States announced an easier supply situation and in due course the Embassy was requested to bring this condition to the attention of the Peruvian Government and make known to it that a large number of commodities were to be removed from the quota list. The businessmen were to forward their orders directly to their principals in the United States, and the merchandise would be shipped in due course as conditions permitted. This also was accepted by the Peruvian Government in view of our explanations that the American Government was exerting every effort to return to normal peace-time trade as rapidly as possible. But almost immediately we were requested to inform the Peruvian Government that the supply situation was not so free and that control had simply been transferred to Washington. This, of course, was in conflict with the spirit of the cooperative working arrangement which had been established, and the Peruvians took note thereof although little was said about it. Shortly thereafter the Finance Ministry decided to establish an overall import control system of its own. No one ever actually described this as a retaliatory measure but it amounted to as much. Nevertheless, in continuation of the policy of acquiescing in the desires of the Embassy as the only logical method of collaboration in a period of extreme crisis, Finance Minister East gave way to the arguments of the Department, the Embassy and businessmen, and discarded his control plan.

Secretary Hull personally congratulated Finance Minister East on his bold stand in favor of the free trade principles of the Atlantic Charter, and Mr. East replied to the Secretary in similar terms.

Now in the instruction referred to above we are informed that the supply situation in the United States does not yet warrant any relaxation in the controls, and we are requested to undertake the most comprehensive investigation so far known to have been devised.

On the other hand, FEA obviously is relaxing controls, and in some instances in an unnecessarily detrimental way. There is the illustration in airgram A–583, dated August 12 [9] 3:55 p.m., 1944,² in which it is stated: “It is not now nor ever has been the function of FEA to channel business to producers or dealers or to regulate the channels through which such transactions flow. FEA’s responsibility channels through which control is necessary on the quantity that moves without regard to the distribution channel through which it moves . . . .”³

It is interesting to consider the foregoing quotation in connection with: (1) the extremely onerous list of estimates now requested; (2) the list of commodities submitted under cover of the Department’s instructions No. 3465 of August 14, 1944, No. 3497 of August 28, 1944, and No. 3534 of September 9, 1944,⁴ showing the names of clients to whom export licenses have been granted.

The lists enclosed with the three instructions referred to include very appreciable amounts of chromic acid, metallic magnesium, ammonium nitrate, benzol, toluol, graphite electrodes, aniline salts, aniline oil, and other products for the Compañía Comercial Sud Americana S.A. The firm’s name was unknown to FEA, a few of these products only a short time ago had been on the critical list, and the requirements reports gave a fair idea of Peruvian consumption. Yet FEA actually licensed large quantities over and above any necessity in Peruvian industry. As was pointed out in the corresponding communications to the Department (refer to telegram No. 1150, September 8, 7 p.m.⁵), this merchandise was ordered for re-exportation to Argentina.

To foreign clients and collaborating governmental officials this confusing network of paths and passages—the most minute investigations, applications, fees, licenses, regulations, code numbers, claimant agencies, allocation boards, shipping rules, vigilance over end use, being denied the privilege of buying but getting it freely through Lend-Lease, the complications of the mine supply control system in a period when we are not encouraging mine production, at least in many lines, the importation and sale by the American Government of merchandise in competition with local firms, etc.,—looks like the most complicated trade control system in existence.

They may be right. It is felt that some person thoroughly familiar with all of the details could render a thoroughly useful service by drawing up a list of prerequisites for purchasing United States merchandise, with comparisons of conditions imposed by friendly as well as unfriendly competitors. Few, if any, of these foreign clients and official friends will long remember how we have sacrificed and divided our goods when others did not. In most cases they will simply continue to reiterate, as they have for months, that all other nations freely receive their orders directly, supply if they can; and if impossible, inform the Peruvian client tactfully that for emergency or other reasons the orders cannot be filled at the moment but that every effort will be made to do so as soon as the circumstances are right.

We believe it will be directly detrimental to the United States to revive the memory of this complex trade control plan, to risk the recurrence of reports already circulated too widely by enemy as well as friendly competitors that the United States is using the emergency regulations to gain possession of trade secrets throughout the world, at this time when the more influential public opinion has relegated the whole system of investigation, policing, intimate inquiries, etc. into the past labyrinth of emergency necessities. The perpetuation of control measures, especially those involving estimates of requirements and end uses of commodities which are in free supply, or will soon become so, is going to dissuade importers from placing orders in the United States if competitive sources of supply are available. This inclination has been forcefully expressed by many local importers.

Would it not be preferable, in view of the factors cited, to limit investigation and control to the shortest possible list of commodities highly important in the war effort and in Peruvian commerce?

Or, still better at this time, to carry the decentralization plan, the tapering off of controls, and the Hull-East ideas on the hasty reversion to unfettered trade practices a step forward instead of backward?

Could we not now suppress end-use investigations; “policing” control; and impertinent inquiries regarding confidential private inventories, our clients’ plans for trade with competitors, etc., and just sell as we are able, without attempting to supervise the affairs of our neighbors? It is believed every importer in Peru would prefer to submit his order and then, without unusual formalities, be told we are pleased to sell, or that we are unable to do so.

None of this applies to direct or indirect trade with enemy or politically unfriendly firms.

It is not the Embassy’s desire to introduce controversial topics, but simply to inform. Every effort will be made to apply the instructions and regulations as methodically as is possible—in the way they have been applied in the past in this country where the requirements work has been frequently described as exceptionally smooth and effective. But we do not believe the present instruction can be complied with.

Pending an expression of the Department’s views and instructions regarding the problems cited, efforts will be centered on estimates of such 1945 requirements as are urgently needed in Peruvian trade and industry, in harmony with the statement made in the last paragraph on page 4 of the instructions (of July 31). However, we believe it to be impractical in the majority of instances adequately to supply the data requested under columns 9, 12, 13 and 14.

Respectfully yours,

For the Ambassador:

Julian Greenup

Counselor for Economic Affairs

99. Not printed.
1. Board of Economic Warfare, a predecessor agency of the Foreign Economic Administration.
2. Not printed.
3. Omission indicated in the original despatch.
4. None printed.
5. Not printed; it indicated that the Compañía Comercial Sud Americana S.A. was applying a comprehensive system of supplying Argentina (740.23112A/9–844).