The Secretary of State to the Chargé in Brazil ( Donnelly )
Sir: Reference is made to the Department’s instruction no. 6051 of June 19, 1944, the Embassy’s despatch no. 17171, of August 1, 1944,71 and related correspondence concerning (1) the measure adopted by the Bank of Brazil in April 1944, which requires that all applications for exchange for the payment of imports be approved by the Carteira de Exportação e Importação, and (2) the more recent measures which subject imports of white cement and raw and washed wool to a system of prior import permits.
With respect to the first of these measures, the Department approves the Embassy’s present procedure of making oral representations to the appropriate authorities of the Bank of Brazil as individual cases occur in which the Carteira refuses approval of exchange applications to cover purchases of United States merchandise. In this connection, consideration has been given to the fact that few applications have been refused approval to date, that only one case of refusal of approval has thus far failed of favorable reconsideration, and that the Director of the Carteira has given oral assurances that it is not the intention of the Bank of Brazil or the Brazilian Government to amplify the controls over letters of credit for purchases abroad, that the application of controls will be restricted and that the eventual use of the measure will be for statistical purposes.
The potentially restrictive nature of the measure continues to be a source of concern to the Department, however, and it is hoped that it will eventually be rescinded completely. In this connection, the Embassy should take advantage of appropriate opportunities to keep this Government’s views, as expressed in instruction no. 6051 before the appropriate authorities of the Bank of Brazil.
The Department has noted the Embassy’s comment in despatch no. 16868 of July 13, 1944 that the control measure is an internal regulation of the Bank of Brazil. The fact that it is an internal regulation of the Bank should not be permitted to lead to the implication that this Government has no direct concern in the matter. It is the Department’s view that, as an internal regulation which affects imports of United States origin, this Government has a definite and legitimate interest in the measure, and that representations in connection with aspects of the measure or its operations which are unfavorable to United States commerce are entirely justified.
The Department is concerned to learn from the Embassy’s despatch no. 17171, of August 1, 1944 and other recent despatches and reports, [Page 666] that a further control in the form of prior import permit systems has been instituted in the case of certain commodities, viz., raw or washed wool and white cement, aside from the requirement that exchange applications be accompanied by proof that the Carteira de Exportação e Importação is in accord with the importation for which the exchange is to be used. Protection of local industry appears to have been an important motive in the institution of the requirement that prior permits be obtained in the case of imports of these commodities, as well as a similar requirement some months ago with respect to imports of rough and cut synthetic stones.
The Department is concerned not only with the fact that the adoption of these import permit systems runs counter to the liberal trade policies to which this Government is endeavoring to obtain general adherence, but also, that in the case of white cement, a commodity which is included in Schedule I of the Reciprocal Trade Agreement between the United States and Brazil is directly affected.
In the latter connection, the Embassy’s despatches no. 17171 and no. 17183, both of August 1, 1944, indicate that, under the measure which requires approval by the Carteira de Exportação e Importação of applications for exchange, an application for exchange for a purchase of white cement from the United States was rejected by the Carteira. Refusal to approve the application appears to have been on the ground that white cement was “available in adequate quantities in Brazil” or that “stocks in Brazil were very heavy”. It also appears that the prospective importer has since applied for exchange and an import permit under the new regulation (Aviso no. 72) which subjects this commodity to a prior import permit system, but that no decision with respect to this subsequent application has been reached.
With respect to the measure whereby the Carteira de Exportação e Importação passes on exchange applications, the Department has already pointed out, in its instruction no. 6051, of June 19, 1944, that application of this measure in a restrictive fashion with respect to articles which are included in Schedule I of the reciprocal trade agreement between the United States and Brazil would impair the value of the concessions on these articles. With respect to Aviso no. 72, which subjects white cement to a prior import permit system, it will be recalled that Article II of the agreement72 contains undertakings not to impose quantitative restrictions or controls on products which appear in the schedules. None of the exceptions to these undertakings, which are set forth in paragraphs one and two of the Article, appears to be applicable in the case of white cement, nor does it appear that refusal to approve an exchange application or to grant an import [Page 667] permit for this commodity could be justified by the Brazilian Government as a measure of wartime necessity.
Unless the Embassy perceives serious objection, it should therefore bring to the attention of the appropriate Brazilian authorities the view of the Department that the imposition of an import permit system with respect to white cement, and the refusal of the Carteira de Exportação e Importação to approve an exchange application for this commodity, are contrary to Brazil’s undertakings in the trade agreement between the two countries. You may also express the disappointment of this Government that, at a time when every effort should be made to reduce trade barriers, with a view to a mutually necessary and advantageous post-war expansion of international trade, the Government of Brazil has seen fit to adopt restrictive measures which, as evidenced in the case of white cement, adversely affect such trade.
Very truly yours,